THE INCOME-TAX ACT, 1961 
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ARRANGEMENT OF SECTIONS 
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CHAPTER I 
PRELIMINARY 

SECTIONS 

1.  Short title, extent and commencement. 
2.  Definitions. 
3.  “Previous year” defined. 

CHAPTER II 
BASIS OF CHARGE 

4.  Charge of income-tax. 
5.  Scope of total income. 
5A. Apportionment of income between spouses governed by Portuguese Civil Code. 
6.  Residence in India. 
7.  Income deemed to be received. 
8.  Dividend income. 
9.  Income deemed to accrue or arise in India. 
9A. Certain activities not to constitute business connection in India. 

CHAPTER III 

INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME 

10.  Incomes not included in total income. 
10A. Special provision in respect of newly established undertakings in free trade zone, etc. 
10AA. Special provisions in respect of newly established Units in Special Economic Zones. 
10B. Special provisions in respect of newly established hundred per cent. export-oriented undertakings. 
10BA. Special provisions in respect of export of certain articles or things. 
10BB. Meaning of computer programmes in certain cases. 
10C. Special provision in respect of certain industrial undertakings in North-Eastern Region. 
11.  Income from property held for charitable or religious purposes. 
12.  Income of trusts or institutions from contributions. 
12A. Conditions for applicability of sections 11 and 12. 
12AA. Procedure for registration. 
13.  Section 11 not to apply in certain cases. 
13A. Special provision relating to incomes of political parties. 
13B. Special provisions relating to voluntary contributions received by electoral trust. 

 Subject to verification and confirmation by the Department. 

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CHAPTER IV 

COMPUTATION OF TOTAL INCOME 

Heads of income 

SECTIONS 

14.  Heads of income. 
14A. Expenditure incurred in relation to income not includible in total income. 

A.—Salaries 

15.  Salaries. 
16.  Deductions from salaries. 
17.  “Salary”, “perquisite” and “profits in lieu of salary” defined. 

B.— [Omitted] 

18.  [Omitted.]. 
19.  [Omitted.]. 
20.  [Omitted.]. 
21.  [Omitted.]. 

C.—Income from house property 

22.  Income from house property. 
23.  Annual value how determined. 
24.  Deductions from income from house property. 
25.  Amounts not deductible from income from house property. 
25A. Special provision for arrears of rent and unrealised rent received subsequently. 
26.  Property owned by co-owners. 
27.  “Owner of house property”, “annual charge”, etc., defined. 

D.—Profits and gains of business or profession 

28.  Profits and gains of business or profession. 
29.  Income from profits and gains of business or profession, how computed. 
30.  Rent, rates, taxes, repairs and insurance for buildings. 
31.  Repairs and insurance of machinery, plant and furniture. 
32.  Depreciation. 
32A. Investment allowance. 
32AB. Investment deposit account. 
32AC. Investment in new plant or machinery. 
32AD. Investment in new plant or machinery in notified backward areas in certain States. 
33.  Development rebate. 
33A. Development allowance. 
33AB. Tea development account, coffee development account and rubber development account. 

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SECTIONS 

33ABA. Site Restoration Fund. 
33AC. Reserves for shipping business. 
33B. Rehabilitation allowance. 
34.  Conditions for depreciation allowance and development rebate. 
34A. Restriction on unabsorbed depreciation and unabsorbed investment allowance for limited period 

in case of certain domestic companies. 

35.  Expenditure on scientific research. 
35A. Expenditure on acquisition of patent rights or copyrights. 
35AB. Expenditure on know-how. 
35ABA. Expenditure for obtaining right to use spectrum for telecommunication services. 
35ABB. Expenditure for obtaining licence to operate telecommunication services. 
35AC. Expenditure on eligible projects or schemes. 
35AD. Deduction in respect of expenditure on specified business. 
35B. [Omitted.]. 
35C. [Omitted.]. 
35CC. [Omitted.]. 
35CCA.  Expenditure  by  way  of  payment  to  associations  and  institutions  for  carrying  out  rural 

development programmes. 

35CCB. Expenditure by way of payment to associations and institutions for carrying out programmes of 

conservation of natural resources. 

35CCC. Expenditure on agricultural extension project. 
35CCD. Expenditure on skill development project. 
35D. Amortisation of certain preliminary expenses. 
35DD. Amortisation of expenditure in case of amalgamation or demerger. 
35DDA. Amortisation of expenditure incurred under voluntary retirement scheme. 
35E. Deduction for expenditure on prospecting, etc., for certain minerals. 
36.  Other deductions. 
37.  General. 
38.  Building, etc., partly used for business, etc., or not exclusively so used. 
39.  [Omitted.]. 
40.  Amounts not deductible. 
40A. Expenses or payments not deductible in certain circumstances. 
41.  Profits chargeable to tax. 
42.  Special provision for deductions in the case of business for prospecting, etc., for mineral oil. 
43.  Definitions of certain terms relevant to income from profits and gains of business or profession. 
43A. Special provisions consequential to changes in rate of exchange of currency. 
43AA. Taxation of foreign exchange fluctuation. 
43B. Certain deductions to be only on actual payment. 
43C. Special provision for computation of cost of acquisition of certain assets. 
43CA. Special provision for full value of consideration for transfer of assets other than capital assets 

in certain cases. 

43CB. Computation of income from construction and service contracts. 
43D. Special provision in case of income of public financial institutions,  public companies, etc. 
44. Insurance business. 
44A. Special provision for deduction in the case of trade, professional or similar  association. 
44AA. Maintenance of accounts by certain persons carrying on profession or business. 
44AB. Audit of accounts of certain persons carrying on business or profession. 

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SECTIONS 

44AC. [Omitted.]. 
44AD. Special provision for computing profits and gains of business on presumptive basis. 
44ADA. Special provision for computing profits and gains of profession on presumptive basis. 

44AE. Special provision for computing profits and gains of business of plying, hiring or leasing goods 

carriages. 

44AF. Special provisions for computing profits and gains of retail business. 

44B.  Special  provision  for  computing  profits  and  gains  of  shipping  business  in  the  case  of  non-

residents. 

44BB. Special provision for computing profits and gains in connection with the business of exploration, 

etc., of mineral oils. 

44BBA. Special provision for computing profits and gains of the business of operation of aircraft in 

the case of non-residents. 

44BBB. Special provision for computing profits and gains of foreign companies engaged in the business 

of civil construction, etc., in certain turnkey power projects. 

44C. Deduction of head office expenditure in the case of non-residents. 

44D.  Special  provisions  for  computing  income  by  way  of  royalties,  etc.,  in  the  case  of  foreign 

companies. 

44DA. Special provision for computing income by way of royalties, etc., in the case of non- residents. 

44DB.  Special  provision  for  computing  deductions  in  the  case  of  business  reorganisation  of                

co-operative banks. 

E.—Capital gains 

45.  Capital gains. 
46.  Capital gains on distribution of assets by companies in liquidation. 
46A. Capital gains on purchase by company of its own shares or other specified securities. 
47.  Transactions not regarded as transfer. 
47A. Withdrawal of exemption in certain cases. 
48.  Mode of computation. 
49.  Cost with reference to certain modes of acquisition. 
50.  Special provision for computation of capital gains in case of depreciable assets. 
50A. Special provision for cost of acquisition in case of depreciable asset. 
50B. Special provision for computation of capital gains in case of slump sale. 
50C. Special provision for full value of consideration in certain cases. 
50CA. Special provision for full value of consideration for transfer of share other than quoted share. 
50D. Fair market value deemed to be full value of consideration in certain cases. 
51.  Advance money received. 
52.  [Omitted.]. 
53.  [Omitted.]. 
54.  Profit on sale of property used for residence. 
54A. [Omitted.]. 
54B. Capital gain on transfer of land used for agricultural purposes not to be charged in certain cases. 
54C. [Omitted.]. 
54D. Capital gain on compulsory acquisition of lands and buildings not to be charged in certain cases. 
54E. Capital gain on transfer of capital assets not to be charged in certain cases. 

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SECTIONS 

54EA. Capital gain on transfer of long-term capital assets not to be charged in the case of investment 

in specified securities.  

54EB. Capital gain on transfer of long-term capital assets not to be charged in certain cases. 
54EC. Capital gain not to be charged on investment in certain bonds. 
54ED. Capital gain on transfer of certain listed securities or unit not to be charged in certain cases. 
54EE. Capital gain not to be charged on investment in units of a specified fund. 
54F. Capital gain on transfer of certain capital assets not to be charged in case of  investment in 

residential house. 

54G. Exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking 

from urban area. 

54GA. Exemption capital gains on transfer of assets in cases of shifting of industrial undertaking 

from urban area to any Special Economic Zone. 

54GB. Capital gain on transfer of residential property not to be charged in certain cases. 
54H. Extension of time for acquiring new asset or depositing or investing amount of capital gain. 
55.  Meaning of “adjusted”, “cost of improvement” and “cost of acquisition”. 
55A. Reference to Valuation Officer. 

F.—Income from other sources 

56.  Income from other sources. 
57.  Deductions. 
58.  Amounts not deductible. 
59.  Profits chargeable to tax. 

CHAPTER V 
INCOME OF OTHER PERSONS, INCLUDED IN ASSESSEE’S TOTAL INCOME 

60.  Transfer of income where there is no transfer of assets. 
61.  Revocable transfer of assets. 
62.  Transfer irrevocable for a specified period. 
63.  “Transfer” and “revocable transfer” defined. 
64.  Income of individual to include income of spouse, minor child, etc. 
65.  Liability of person in respect of income included in the income of another person. 

CHAPTER VI 
AGGREGATION OF INCOME AND SET OFF OR CARRY FORWARD OF LOSS 

Aggregation of income 

66.  Total income. 
67.  [Omitted.]. 
67A. Method of computing a member’s share in income of association of persons or body of individuals. 
68.  Cash credits. 
69.  Unexplained investments. 
69A. Unexplained money, etc. 
69B. Amount of investments, etc., not fully disclosed in books of account. 
69C. Unexplained expenditure, etc. 
69D. Amount borrowed or repaid on hundi. 

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SECTIONS 

Set off, or carry forward and set off 

70.  Set  off  of  loss  from  one  source  against  income  from  another  source  under  the  same  head  of 

income. 

71. Set off of loss from one head against income from another. 
71A. Transitional provisions for set off of loss under the head “Income from house property”. 
71B. Carry forward and set off of loss from house property. 
72.  Carry forward and set off of business losses. 
72A. Provisions relating to carry forward and set-off of accumulated loss and unabsorbed depreciation 

allowance in amalgamation or demerger, etc. 

72AA. Provisions relating to carry forward and set-off of accumulated loss and unabsorbed 

depreciation allowance in scheme of amalgamation of banking company in certain cases. 
72AB. Provisions relating to carry forward and set-off of accumulated loss and unabsorbed 

depreciation allowance in business reorganisation of co-operative banks. 

73.  Losses in speculation business. 
73A. Carry forward and set off of losses by specified business. 
74.  Losses under the head “Capital gains”. 
74A. Losses from certain specified sources falling under the head “Income from other sources”. 
75.  Losses of firms. 
78.  Carry forward and set off of losses in case of change in constitution of firm or on succession. 
79.  Carry forward and set off of losses in case of certain companies. 
80.  Submission of return for losses. 

CHAPTER VI-A 

DEDUCTIONS TO BE MADE IN COMPUTING  

TOTAL INCOME 

A.—General 

80A. Deductions to be made in computing total income. 
80AA. [Omitted.]. 
80AB. Deductions to be made with reference to the income included in the gross total income. 
80AC. Deduction not to be allowed unless return furnished. 
80B. Definitions. 

B.—Deductions in respect of certain payments 
80C. Deduction in respect of life insurance premia, deferred annuity, contributions to provident fund, 

subscription to certain equity shares or debentures, etc. 

80CC. [Omitted.]. 
80CCA. Deduction in respect of deposits under National Savings Scheme or payment to a deferred 

annuity plan. 

80CCB. Deduction in respect of investment made under Equity Linked Savings Scheme. 

80CCC. Deduction in respect of contribution to certain pension funds. 

80CCD. Deduction in respect of contribution to pension scheme of Central Government. 

80CCE. Limit on deductions under sections 80C, 80CCC and 80CCD. 

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SECTIONS 

80CCF. Deduction in respect of subscription to long-term infrastructure bonds. 

80CCG. Deduction in respect of investment made under an equity savings scheme. 

80D. Deduction in respect of health insurance premia. 

80DD.  Deduction  in  respect  of  maintenance  including  medical  treatment  of  a  dependant  who  is  a 

person with disability. 

80DDB. Deduction in respect of medical treatment, etc. 

80E. Deduction in respect of interest on loan taken for higher education. 

80EE. Deduction in respect of interest on loan taken for residential house property. 

80F. [Omitted.]. 

80FF. [Omitted.]. 

80G. Deduction in respect of donations to certain funds, charitable institutions, etc. 

80GG. Deductions in respect of rents paid. 

80GGA. Deduction in respect of certain donations for scientific research or rural development. 

80GGB. Deduction in respect of contributions given by companies to political parties. 

80GGC. Deduction in respect of contributions given by any person to political parties. 

C.-Deductions in respect of certain incomes 

80H. [Omitted.]. 

80HH.  Deduction  in  respect  of  profits  and  gains  from  newly  established  industrial  undertakings  or 

hotel business in backward areas. 

80HHA.  Deduction  in  respect  of  profits  and  gains  from  newly  established  small-scale  industrial 

undertakings in certain areas. 

80HHB. Deduction in respect of profits and gains from projects outside India. 

80HHBA. Deduction in respect of profits and gains from housing projects in certain cases. 

80HHC. Deduction in respect of profits retained for export business. 

80HHD. Deduction in respect of earnings in convertible foreign exchange. 

80HHE. Deduction in respect of profits from export of computer software, etc. 

80HHF. Deduction in respect of profits and gains from export or transfer of film software, etc. 

80-I. Deduction in respect of profits and gains from industrial undertakings after a certain date, etc. 

80-IA. Deductions in respect of profits and gains from industrial undertakings or enterprises engaged 

in infrastructure development, etc. 

80-IAB.  Deductions  in  respect  of  profits  and  gains  by  an  undertaking  or  enterprise  engaged  in 

development of Special Economic Zone. 

80-IAC. Special provision in respect of specified business. 

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SECTIONS 

80-IB.  Deduction  in  respect  of  profits  and  gains  from  certain  industrial  undertakings  other  than 

infrastructure development undertakings. 

80-IBA. Deductions in respect of profits and gains from housing projects. 

80-IC. Special provisions in respect of certain undertakings or enterprises in certain special category 

States. 

80-ID.  Deduction  in  respect  of  profits  and  gains from  business  of  hotels  and  convention  centres  in 

specified area. 

80-IE. Special provisions in respect of certain undertakings in North-Eastern States. 

80J. [Omitted.]. 

80JJ. [Omitted.]. 

80JJA.  Deduction  in  respect  of  profits  and  gains  from  business  of  collecting  and  processing  of  

bio-degradable waste. 

80JJAA. Deduction in respect of employment of new workmen. 

80K. [Omitted.]. 

80L. [Omitted.]. 

80LA.  Deductions  in  respect  of  certain  incomes  of  Offshore  Banking  Units  and  International 

Financial Services Centre. 

80M. [Omitted.]. 

80MM. [Omitted.]. 

80N. [Omitted.]. 

80-O. Deduction in respect of royalties, etc., from certain foreign enterprises. 

80P. Deduction in respect of income of co-operative societies. 

80PA. Deduction in respect of certain income of Producer Companies. 

80Q. Deduction in respect of profits and gains from the business of publication of books. 

80QQ. [Omitted.]. 

80QQA. Deduction in respect of professional income of authors of text books in Indian languages. 

80QQB.  Deduction  in  respect  of  royalty  income,  etc.,  of  authors  of  certain  books  other  than             

text-books. 

80R.  Deduction  in  respect  of  remuneration  from  certain  foreign  sources  in  the  case  of  professors, 

teachers, etc. 

80RR. Deduction in respect of professional income from foreign sources in certain cases. 

80RRA. Deduction in respect of remuneration received for services rendered outside India. 

80RRB. Deduction in respect of royalty on patents. 

80S. [Omitted.]. 

80T. [Omitted.]. 

80TT. [Omitted.]. 

CA.—Deductions in respect of other incomes 

80TTA. Deduction in respect of interest on deposits in savings account. 

80TTB. Deduction in respect of interest on deposits in case of senior citizens. 

80U. Deduction in case of a person with disability. 

D.—Other deductions 

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SECTIONS 

80V. [Omitted.]. 

80VV. [Omitted.]. 

RESTRICTION ON CERTAIN DEDUCTIONS IN THE CASE OF COMPANIES 

CHAPTER VI-B 

80VVA. [Omitted.]. 

CHAPTER VII 
INCOMES FORMING PART OF TOTAL INCOME  
ON WHICH NO INCOME-TAX IS PAYABLE 

81.   [Omitted.]. 
82.  [Omitted.]. 
83.  [Omitted.]. 
84.  [Omitted.]. 
85.  [Omitted.]. 
85A. [Omitted.]. 
85B. [Omitted.]. 
85C. [Omitted.]. 
86.  Share of member of an association of persons or body of individuals in the income of the 

association or body. 

86A. [Omitted.]. 

CHAPTER VIII 
REBATES AND RELIEFS 
A.—Rebate of income-tax 

87.  Rebate to be allowed in computing income-tax. 
87A. Rebate of income-tax in case of certain individuals. 
88.  Rebate on life insurance premia, contribution to provident fund, etc. 
88A. [Omitted.]. 
88B. [Omitted.]. 
88C. [Omitted.]. 
88D. [Omitted.]. 
88E. Rebate in respect of securities transaction tax. 

89.  Relief when salary, etc., is paid in arrears or in advance. 
89A. [Omitted.]. 

B.—Relief for income-tax 

CHAPTER IX 
DOUBLE TAXATION RELIEF 

90.  Agreement with foreign countries or specified territories. 
90A. Adoption by Central Government of agreement between specified associations for double 

taxation relief. 

91.  Countries with which no agreement exists. 

CHAPTER X 
SPECIAL PROVISIONS RELATING TO AVOIDANCE OF TAX 

92.  Computation of income from international transaction having regard to arm’s length price. 
92A. Meaning of associated enterprise. 
92B. Meaning of international transaction. 

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SECTIONS 

92BA. Meaning of specified domestic transaction. 
92C. Computation of arm’s length price. 
92CA. Reference to Transfer Pricing Officer. 
92CB. Power of Board to make safe harbour rules. 
92CC. Advance pricing agreement. 
92CD. Effect to advance pricing agreement. 
92CE. Secondary adjustment in certain cases. 
92D. Maintenance and keeping of information and document by persons entering into an international 

transaction or specified domestic transaction. 

92E. Report from an accountant to be furnished by persons entering into international transaction or 

specified domestic transaction. 

92F. Definitions of certain terms relevant to computation of arm’s length price, etc. 
93.  Avoidance of income-tax by transactions resulting in transfer of income to non- residents. 
94.  Avoidance of tax by certain transactions in securities. 
94A. Special measures in respect of transactions with persons located in notified  jurisdictional 

area. 

94B. Limitation on interest deduction in certain cases. 

CHAPTER XA 
GENERAL ANTI-AVOIDANCE RULE 

95.  Applicability of General Anti-Avoidance Rule. 
96.  Impermissible avoidance arrangement. 
97.  Arrangement to lack commercial substance. 
98.  Consequences of impermissible avoidance arrangement. 
99.  Treatment of connected person and accommodating party. 
100. Application of this Chapter. 
101. Framing of guidelines. 
102. Definitions. 

CHAPTER XI  
ADDITIONAL INCOME-TAX ON UNDISTRIBUTED PROFITS 

103. [Omitted.]. 
104. [Omitted.]. 
105. [Omitted.]. 
106. [Omitted.]. 
107. [Omitted.]. 
107A. [Omitted.]. 
108. [Omitted.]. 
109. [Omitted.]. 

 CHAPTER XII 

DETERMINATION OF TAX IN CERTAIN SPECIAL CASES 

110. Determination of tax where total income includes income on which no tax is payable. 

111. Tax on accumulated balance of recognised provident fund. 

111A. Tax on short-term capital gains in certain cases. 

112. Tax on long-term capital gains. 

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SECTIONS 

112A. Tax on long-term capital gains in certain cases.  

113. Tax in the case of block assessment of search cases. 

114. [Omitted.].  

115. [Omitted.]. 

115A. Tax on dividends, royalty and technical service fees in the case of foreign  Companies. 

115AB.  Tax  on  income  from  units  purchased  in  foreign  currency  or  capital  gains  arising  from  their 

transfer. 

115AC. Tax on income from bonds or Global Depository Receipts purchased in foreign  currency or 

capital gains arising from their transfer. 

115ACA.  Tax  on  income  from  Global  Depository  Receipts  purchased  in  foreign  currency  or  capital 

gains arising from their transfer. 

115AD. Tax on income of Foreign Institutional Investors from securities or capital gains arising from 

their transfer. 

115B. Tax on profits and gains of life insurance business. 

115BA. Tax on income of certain domestic companies. 

115BB. Tax on  winnings from lotteries, crossword  puzzles, races including  horse races, card  games 
and other games of any sort or gambling or betting of any form or nature whatsoever.  

115BBA. Tax on non-resident sportsmen or sports associations. 

115BBB. Tax on income from units of an open-ended equity oriented fund of the Unit Trust of India 

or of Mutual Funds. 

115BBC. Anonymous donations to be taxed in certain cases. 

115BBD. Tax on certain dividends received from foreign companies. 

115BBDA. Tax on certain dividends received from domestic companies. 

115BBE.  Tax  on  income  referred  to  in  section  68  or  section  69  or  section  69A  or  section  69B  or  

section 69C or section 69D. 

115BBF. Tax on income from patent. 

115BBG. Tax on income from transfer of carbon credits. 

CHAPTER XIIA 

SPECIAL PROVIONS RELATING TO CERTAIN INCOMES OF NON-RESIDENTS 

115C. Definitions.  

115D. Special provision for computation of total income of non-residents. 

115E. Tax on investment income and long-term capital gains. 

115F. Capital gains on transfer of foreign exchange assets not to be charged in certain cases. 

115G. Return of income not to be filed in certain cases. 

115H. Benefit under Chapter to be available in certain cases even after the assessee become resident.   

115-I. Chapter not to apply if the assessee so chooses. 

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CHAPTER XII-B 

 SPECIAL PROVISIONS RELATING TO CERTAIN COMPANIES 

SECTIONS 

115J. Special provisions relating to certain companies. 

115JA. Deemed income relating to certain companies. 

115JAA. Tax credit in respect of tax paid on deemed income relating to certain c ompanies. 

115JB. Special provision for payment of tax by certain companies. 

CHAPTER XII-BA 

SPECIAL PROVISIONS RELATING TO CERTAIN PERSONS OTHER THAN A COMPANY 

115JC. Special provisions for payment of tax by certain persons other than a company. 

115JD. Tax credit for alternate minimum tax. 

115JE. Application of other provisions of this Act. 

115JEE. Application of this Chapter to certain persons. 

115JF. Interpretation in this Chapter. 

CHAPTER XII-BB 

SPECIAL PROVISIONS RELATING TO CONVERSION OF INIDAN BRANCH OF A 

FOREIGN BANK INTO A SUBSIDIARY COMPANY 

115JG. Conversion of an Indian branch of foreign company into subsidiary Indian company. 

CHAPTER XII-BC 

SPECIAL PROVISIONS RELATING TO FOREIGN COMPANY SAID TO 

 BE RESIDENT IN INIDA 

115JH. Foreign company said to be resident in india. 

CHAPTER XII-C 

SPECIAL PROVISIONS RELATING TO RETAIL TRADE, ETC. 

115K. [Omitted.].  

115L. [Omitted.].  

115M. [Omitted.]. 

115N. [Omitted.].  

CHAPTER XII-D 

SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED  

PROFITS OF DOMESTIC COMPANIES 

115-O. Tax on distributed profits of domestic companies. 

115P. Interest payable for non-payment of tax by domestic companies. 

115Q. When company is deemed to be in default. 

CHAPTER XII-DA 

SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED INCOME OF DOMESTIC  

115QA. Tax on distributed income to shareholders. 

COMPANY FOR BUY-BACK OF SHARES 

12 

SECTIONS 

115QB. Interest payable for non-payment of tax by company. 

115QC. When company is deemed to be assessee in default. 

SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED INCOME 

CHAPTER XII-E 

115R. Tax on distributed income to unit holders. 

115S. Interest payable for non-payment of tax. 

115T. Unit trust of India or mutual fund to be an assessee in default. 

CHAPTER XII-EA 

SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED INCOME BY 

 SECURITISATION TRUSTS  

115TA. Tax on distributed income to investors. 

115TB. Interest payable for non-payment of tax. 

115TC. Securitisation trust to be assessee in default. 

115TCA. Tax on income from securitization trusts. 

CHAPTER XII-EB 

SPECIAL PROVISIONS RELATING TO TAX ON ACCRETED INCOME 

OF CERTAIN TRUSTS AND INSTITUTIONS 

115TD. Tax on accreted income. 

115TE. Interest payable for non-payment of tax by trust or institution. 

115TF. When trust or institution is deemed to be assessee in default. 

CHAPTER XII-F 

SPECIAL PROVISIONS RELATING TO TAX ON INCOME RECEIVED FROM VENTURE CAPTIAL 

COMPANIES AND VENTURE CAPTIAL FUNDS 

115U. Tax on income in certain cases. 

CHAPTER XII-FA 

SPECIAL PROVISIONS RELATING TO BUSINESS TRUSTS 

115UA. Tax on income of unit holder and business trust. 

CHAPTER XII-FB 

SPECIAL PROVISIONS RELATING TO TAX ON INCOME OF INVESTMENT FUNDS AND INCOME  
RECEIVED FROM SUCH FUNDS 

115UB. Tax on income of investment fund and its unit holders. 

CHAPTER XII-G 

SPECIAL PROVISIONS RELATING TO INCOME OF SHIPPING COMPANIES 

A. — Meaning  of certain expressions 

115V. Definitions. 

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B.—Computation of tonnage income from business of  
operating qualifying ships 

SECTIONS 

115VA. Computation of profits and gains from the business of operating qualifying ships. 
115VB. Operating ships. 
115VC. Qualifying company. 
115VD. Qualifying ship. 
115VE. Manner of computation of income under tonnage tax scheme. 
115VF. Tonnage income. 
115VG. Computation of tonnage income. 
115VH. Calculation in case of joint operation, etc. 
115V-I. Relevant shipping income. 
115VJ. Treatment of common costs. 
115VK. Depreciation. 
115VL. General exclusion of deduction and set off, etc. 
115VM. Exclusion of loss. 
115VN. Chargeable gains from transfer of tonnage tax assets. 
115V-O. Exclusion from provisions of section 115JB. 

C.—Procedure for option of tonnage tax scheme 

115VP. Method and time of opting for tonnage tax scheme. 
115VQ. Period for which tonnage tax option to remain in force. 
115VR. Renewal of tonnage tax scheme. 
115VS. Prohibition to opt for tonnage tax scheme in certain cases. 

D.—Conditions for applicability of tonnage tax scheme 

115VT. Transfer of profits to Tonnage Tax Reserve Account. 
115VU. Minimum training requirement for tonnage tax company. 
115VV. Limit for charter in of tonnage. 
115VW. Maintenance and audit of accounts. 
115VX. Determination of tonnage. 

E.—Amalgamation and demerger of shipping companies 

115VY. Amalgamation. 
115VZ. Demerger. 

115VZA. Effect of temporarily ceasing to operate qualifying ships. 

G.—Provisions of this chapter not to apply in certain cases 

F.— Miscellaneous 

115VZB. Avoidance of tax. 
115VZC. Exclusion from tonnage tax scheme. 

115W. Definitions. 

CHAPTER XII-H 
INCOME-TAX OF FRINGE BENEFITS 
A. — Meaning of certain expressions 

14 

B. —Basis of charge 

SECTIONS 

115WA. Charge of fringe benefit tax. 

115WB. Fringe benefits. 

115WC. Value of fringe benefits. 

C.—Procedure for filing of return in respect of fringe benefits, assessment and  

payment of tax in respect thereof 

115WD.  Return of fringe benefits. 

115WE. Assessment. 

115WF. Best judgment assessment. 

115WG. Fringe benefits escaping assessment. 

115WH. Issue of notice where fringe benefits have escaped assessment. 

115WI. Payment of fringe benefit tax. 

115WJ. Advance tax in respect of fringe benefits. 

115WK. Interest for default in furnishing return of fringe benefits. 

115WKA. Recovery of fringe benefit tax by the employer from the employee. 

115WKB. Deemed payment of tax by employee. 

115WL. Application of other provisions of this Act. 

115WM. Chapter XII-H not to apply after a certain date. 

CHAPTER XIII 

INCOME-TAX AUTHORITIES 

A. —Appointment and control 

116. Income-tax authorities. 
117. Appointment of income-tax authorities. 
118. Control of income-tax authorities. 
119. Instructions to subordinate authorities. 

B.—Jurisdiction 

120. Jurisdiction of income-tax authorities. 
121. [Omitted.]. 

121A. [Omitted.]. 

122. [Omitted.]. 
123. [Omitted.]. 
124. Jurisdiction of Assessing Officers. 
125. [Omitted.]. 

125A. [Omitted.]. 

126. [Omitted.]. 
127. Power to transfer cases. 
128. [Omitted.]. 
129. Change of incumbent of an office. 
130. [Omitted.].  

130A. [Omitted.]. 

15 

SECTIONS 

131. Power regarding discovery, production of evidence, etc. 
132. Search and seizure. 

C.—Powers 

132A. Powers to requisition books of account, etc. 
132B. Application of seized or requisitioned assets. 
133. Power to call for information. 
133A. Power of survey. 
133B. Power to collect certain information. 
133C. Power to call for information by prescribed income-tax authority. 
134. Power to inspect registers of companies. 
135. Power  of  Principal  Director  General  or  Director  General  or  Principal  Director  or  Director, 

Principal  Chief  Commissioner  or  Chief  Commissioner  or  Principal  Commissioner  or             
Commissioner and Joint Commissioner. 

136. Proceedings before income-tax authorities to be judicial proceedings. 

137. [Omitted.].  
138. Disclosure of information respecting assessees. 

D. —Disclosure of information 

CHAPTER XIV 
PROCEDURE FOR ASSESSMENT 

139. Return of income. 

139A. Permanent account number. 
139AA. Quoting of Aadhaar number. 
139B. Scheme for submission of returns through Tax Return Preparers. 
139C. Power of Board to dispense with furnishing documents, etc., with return. 
139D. Filing of return in electronic form. 
140. Return by whom to be verified. 

140A. Self-assessment. 
141. [Omitted.]. 

141A. [Omitted.]. 
142. Inquiry before assessment. 

142A. Estimation of value of assets by Valuation Officer. 
143. Assessment. 
144. Best judgment assessment. 

144A. Power of Joint Commissioner to issue directions in certain cases. 
144B. [Omitted.]. 
144BA. Reference to Principal Commissioner or Commissioner in certain cases. 
144C. Reference to dispute resolution panel. 
145. Method of accounting. 

145A. Method of accounting in certain cases. 
145B. Taxability of certain income. 
146. [Omitted.]. 
147. Income escaping assessment. 

16 

SECTIONS 

148. Issue of notice where income has escaped assessment. 
149. Time limit for notice. 
150. Provision for cases where assessment is in pursuance of an order on appeal, etc. 
151. Sanction for issue of notice. 
152. Other provisions. 
153. Time limit for completion of assessments, reassessments and recomputation. 

153A. Assessment in case of search or requisition. 

153B. Time-limit for completion of assessment under section 153A. 

153C. Assessment of income of any other person. 

153D. Prior approval necessary for assessment in cases of search or requisition. 

154. Rectification of mistake. 
155. Other amendments. 
156. Notice of demand. 
157. Intimation of loss. 
158. Intimation of assessment of firm. 

CHAPTER XIV-A 

SPECIAL PROVISION FOR AVOIDING REPETITIVE APPEALS 

158A.  Procedure  when  assessee  claims  identical  question  of  law  is  pending  before  High  Court  or 

Supreme Court. 

158AA.  Procedure  when  in  an  appeal  by  revenue  an  identical  question  of  law  is  pending  before 

Supreme Court. 

CHAPTER XIV-B 

SPECIAL PROCEDURE FOR ASSESSMENT OF SEARCH CASES 

158B. Definitions. 

158BA. Assessment of undisclosed income as a result of search. 

158BB. Computation of undisclosed income of the block period. 

158BC. Procedure for block assessment. 

158BD. Undisclosed income of any other person. 

158BE. Time limit for completion of block assessment. 

158BF. Certain interests and penalties not to be levied or imposed. 

158BFA. Levy of interest and penalty in certain cases. 

158BG. Authority competent to make the block assessment. 

158BH. Application of other provisions of this Act. 

158BI. Chapter not to apply after certain date. 

CHAPTER XV 

LIABILITY IN SPECIAL CASES 

A.—Legal representatives 

159. Legal representatives. 

B.—Representative assesses – General provisions 

160. Representative assessee. 
161. Liability of representative assessee. 
162. Right of representative assessee to recover tax paid. 

163. Who may be regarded as agent. 

C.—Representative assesses- Special cases 

17 

SECTIONS 

164. Charge of tax where share of beneficiaries unknown. 

164A. Charge of tax in case of oral trust. 

165. Case where part of trust income is chargeable. 

D.—Representative assesses-Miscellaneous provisions 

166. Direct assessment or recovery not barred. 
167. Remedies against property in cases of representative assessees. 

DD.—Firms, association of persons and body of individuals 

167A. Charge of tax in the case of a firm. 

167B. Charge of tax where shares of members in association of persons or body of individuals 

unknown, etc. 

167C. Liability of partners of limited liability partnership in liquidation. 

168. Executors. 
169. Right of executor to recover tax paid. 

E.—Executors 

F.—Succession to business or profession 

170. Succession to business otherwise than on death. 

171. Assessment after partition of a Hindu undivided family. 

G.—Partition  

H.—Profits of non-residents from occasional shipping business 

172. Shipping business of non-residents. 

173. Recovery of tax in respect of non-resident from his assets. 

I.— Recovery of tax in respect of non-residents. 

174. Assessment of persons leaving India. 

J.—Persons leaving India 

JA.—Association of persons or body of individuals or artificial juridical person 

 formed for a particular event or purpose 

174A. Assessment of association of persons or body of individuals or artificial juridical person formed 

for a particular event or purpose. 

175. Assessment of persons likely to transfer property to avoid tax. 

K.—Persons trying to alienate their assets 

L.—Discontinuance of business, or dissolution 

176. Discontinued business. 
177. Association dissolved or business discontinued. 
178. Company in liquidation. 

179. Liability of directors of private company in liquidation. 

M.—Private companies 

N.—Special provisions for certain kinds of income 

180. Royalties or copyright fees for literary or artistic work. 

180A. Consideration for know-how. 

18 

SECTIONS 

181. [Omitted.]. 

O.—[Omitted] 

CHAPTER XVI 

SPECIAL PROVISIONS APPLICABLE TO FIRMS 

A.—Assessment of firms 

182. [Omitted.]. 
183. [Omitted.]. 
184. Assessment as a firm. 
185. Assessment when section 184 not complied with. 

C.—Changes in constitution, succession and dissolution 

187. Change in constitution of a firm. 
188. Succession of one firm by another firm. 

188A. Joint and several liability of partners for tax payable by firm. 

189. Firm dissolved or business discontinued. 

189A. Provisions applicable to past assessments of firms. 

CHAPTER XVII 

COLLECTION AND RECOVERY OF TAX 

A.—General 

190. Deduction at source and advance payment. 
191. Direct payment. 

B.—Deduction at source 

192. Salary. 

192A. Payment of accumulated balance due to an employee. 

193. Interest on securities. 
194. Dividends. 

194A. Interest other than “Interest on securities”. 

194B. Winnings from lottery or crossword puzzle. 

194BB.Winnings from horse race. 

194C. Payments to contractors. 

194D. Insurance commission. 

194DA. Payment in respect of life insurance policy. 

194E. Payments to non-resident sportsmen or sports associations. 

194EE. Payments in respect of deposits under National Savings Scheme, etc. 

194F. Payments on account of repurchase of units by Mutual Fund or Unit Trust of India. 

194G. Commission, etc., on the sale of lottery tickets. 

194H. Commission or brokerage. 

194-I. Rent. 

194-IA. Payment on transfer of certain immovable property other than agricultural land. 

19 

SECTIONS 

194-IB. Payment of rent by certain individuals or Hindu undivided family. 

194-IC. Payment under specified agreement. 

194J. Fees for professional or technical services. 

194K. [Omitted.]. 

194L. [Omitted.]. 

194LA. Payment of compensation on acquisition of certain immovable property. 

194LB. Income by way of interest from infrastructure debt fund. 

194LBA. Certain income from units of a business trust. 

194LBB. Income in respect of units of investment fund. 

194LBC. Income in respect of investment in securitization trust. 

194LC. Income by way of interest from Indian company. 

194LD. Income by way of interest on certain bonds and Government securities. 

195. Other sums. 
195A. Income payable net of tax. 
196.  Interest or dividend or other sums payable to Government, Reserve Bank or certain Corporations. 
196A. Income in respect of units of non-residents. 
196B. Income from units. 

196C. Income from foreign currency bonds or shares of Indian company. 

196D. Income of Foreign Institutional Investors from securities. 

197.  Certificate for deduction at lower rate. 
197A. No deduction to be made in certain cases. 
198. Tax deducted is income received. 
199. Credit for tax deducted. 
200. Duty of person deducting tax. 
200A. Processing of statements of tax deducted at source. 
201. Consequences of failure to deduct or pay. 
202. Deduction only one mode of recovery. 
203. Certificate for tax deducted. 

203A.Tax deduction and collection account number. 

203AA. Furnishing of statement of tax deducted. 

204. Meaning of “person responsible for paying”. 
205. Bar against direct demand on assessee. 
206. Persons deducting tax to furnish prescribed returns. 
206A.  Furnishing  of  quarterly  return  in  respect  of  payment  of  interest  to  residents  without 

deduction of tax. 

206AA. Requirement to furnish Permanent Account Number. 

206B. [Omitted.]. 

BB.—Collection at source 

206C. Profits and gains from the business of trading in alcoholic liquor, forest produce, scrap, etc. 

206CA. Tax collection account number. 

20 

SECTIONS 

206CB. Processing of statements of tax collected at source. 
206CC. Requirement to furnish Permanent Account Number by collectee. 

C.—Advance payment of tax 

207. Liability for payment of advance tax. 
208. Conditions of liability to pay advance tax. 
209. Computation of advance tax. 
209A. [Omitted.]. 
210.  Payment of advance tax by the assessee of his own accord or in pursuance of order of Assessing 

Officer. 

211. Instalments of advance tax and due dates. 
212. [Omitted.]. 
213. [Omitted.]. 
214. Interest payable by Government. 
215. Interest payable by assessee. 
216. Interest payable by assessee in case of under-estimate, etc. 
217. Interest payable by assessee when no estimate made. 
218. When assessee deemed to be in default. 
219. Credit for advance tax. 

D.—Collection and recovery 

220. When tax payable and when assessee deemed in default. 
221. Penalty payable when tax in default. 
222. Certificate to Tax Recovery Officer. 
223. Tax Recovery Officer by whom recovery is to be effected. 
224. Validity of certificate and cancellation or amendment thereof. 
225. Stay of proceedings in pursuance of certificate and amendment or cancellation thereof. 
226. Other modes of recovery. 
227. Recovery through State Government. 
228. [Omitted.]. 
228A. Recovery of tax in pursuance of agreements with foreign countries. 
229. Recovery of penalties, fine, interest and other sums. 
230. Tax clearance certificate. 
230A. [Omitted.]. 
231. [Omitted.]. 
232. Recovery by suit or under other law not affected. 

E.—Tax payable under provisional assessment 

233. [Omitted.]. 
234. [Omitted.]. 

F.—Interest chargeable in certain cases 

234A. Interest for defaults in furnishing return of income. 
234B. Interest for defaults in payment of advance tax. 
234C. Interest for deferment of advance tax. 

234D. Interest on excess refund. 

G.—Levy of fee in certain cases 

234E. Fee for default in furnishing statements. 

234F. Fee for default in furnishing return of income. 

21 

CHAPTER XVIII 

RELIEF RESPECTING TAX ON DIVIDENDS IN CERTAIN CASES 

SECTIONS 

235. [Omitted.]. 
236. Relief to company in respect of dividend paid out of past taxed profits. 
236A. Relief to certain charitable institutions or funds in respect of certain dividends. 

CHAPTER XIX 
REFUNDS 

237. Refunds. 
238. Person entitled to claim refund in certain special cases. 
239. Form of claim for refund and limitation. 
240. Refund on appeal, etc. 
241. [Omitted.]. 
241A. Withholding of refund in certain cases. 
242. Correctness of assessment not to be questioned. 
243. Interest on delayed refunds. 
244. Interest on refund where no claim is needed. 

244A. Interest on refunds. 

245. Set off of refunds against tax remaining payable. 

CHAPTER XIXA 

SETTLEMENT OF CASES 

245A. Definitions. 

245B. Income-tax Settlement Commission. 

245BA. Jurisdiction and powers of Settlement Commission. 

245BB. Vice-Chairman to act as Chairman or to discharge his functions in certain circumstances. 

245BC. Power of Chairman to transfer cases from one Bench to another. 

245BD. Decision to be by majority. 

245C. Application for settlement of cases. 

245D. Procedure on receipt of an application under section 245C. 

245DD. Power of Settlement Commission to order provisional attachment to protect revenue. 

245E. Power of Settlement Commission to reopen completed proceedings. 

245F. Powers and procedure of Settlement Commission. 

245G. Inspection, etc., of reports. 

245H. Power of Settlement Commission to grant immunity from prosecution and penalty. 

245HA. Abatement of proceeding before Settlement Commission. 

245HAA. Credit for tax paid in case of abatement of proceedings. 

245-I. Order of settlement to be conclusive. 

245J. Recovery of sums due under order of settlement. 

245K. Bar on subsequent application for settlement. 

245L. Proceedings before Settlement Commission to be judicial proceedings. 

22 

SECTIONS 

245M. [Omitted.]. 

CHAPTER XIX-B 

ADVANCE RULINGS 

245N. Definitions. 

245-O. Authority for Advance Rulings. 

245P. Vacancies, etc., not to invalidate proceedings. 

245Q. Application for advance ruling. 

245R. Procedure on receipt of application. 

245RR. Appellate authority not to proceed in certain cases. 

245S. Applicability of advance ruling. 

245T. Advance ruling to be void in certain circumstances. 

245U. Powers of the Authority. 

245V. Procedure of Authority. 

CHAPTER XX 

APPEALS AND REVISION 

A.—Appleas to the Deputy Commissioner (Appeals) and commissioner (Appeals) 

246. Appealable orders. 

246A. Appealable orders before Commissioner (Appeals). 

247. [Omitted.]. 
248. Appeal by a person denying liability to deduct tax in certain cases. 
249. Form of appeal and limitation. 
250. Procedure in appeal. 
251. Powers of the Commissioner (Appeals). 

B. Appeals to the Appellate Tribunal 

252. Appellate Tribunal. 

252A. Qualifications, terms and conditions of service of President, Vice-President and Member. 

253. Appeals to the Appellate Tribunal. 
254. Orders of Appellate Tribunal. 
255. Procedure of Appellate Tribunal. 

C.—Reference to High Court 

256. Statement of case to the High Court. 
257. Statement of case to Supreme Court in certain cases. 
258. Power of High Court or Supreme Court to require statement to be amended. 
259. Case before High Court to be heard by not less than two judges. 
260. Decision of High Court or Supreme Court on the case stated. 

CC.—Appeals to High Court 

260A. Appeal to High Court. 

260B. Case before High Court to be heard by not less than two Judges. 

23 

D.—Appeals to the Supreme Court 

SECTIONS 

261. Appeal to Supreme Court. 
262. Hearing before Supreme Court. 

E.—Revision by the Principal Commissioner or Commissioner 

263. Revision of orders prejudicial to revenue. 
264. Revision of other orders. 

F.—General 

265. Tax to be paid notwithstanding reference, etc. 
266. Execution for costs awarded by Supreme Court. 
267. Amendment of assessment on appeal. 
268. Exclusion of time taken for copy. 
268A. Filing of appeal or application for reference by income-tax authority. 
269. Definition of “High Court”. 

CHAPTER XXA 

ACQUISITION OF IMMOVABLE PROPERTIES IN  
CERTAIN CASES OF TRANSFER TO COUNTERACT EVASION OF TAX 

269A. Definitions. 

269AB. Registration of certain transactions. 

269B. Competent authority. 

269C. Immovable property in respect of which proceedings for acquisition may be taken. 

269D. Preliminary notice. 

269E.Objections. 

269F. Hearing of objections. 

269G. Appeal against order for acquisition. 

269H. Appeal to High Court. 

269I. Vesting of property in Central Government. 

269J. Compensation. 

269K. Payment or deposit of compensation. 

269L. Assistance by Valuation Officers. 

269M. Powers of competent authority. 

269N. Rectification of mistakes. 

269-O. Appearance by authorised representative or registered valuer. 

269P. Statement to be furnished in respect of transfers of immovable property. 

269Q. Chapter not to apply to transfers to relatives. 

269R. Properties liable for acquisition under this Chapter not to be acquired under other laws. 

269RR. Chapter not to apply where transfer of immovable property made after a certain date. 

269S. Chapter not to extend to State of Jammu and Kashmir. 

24 

CHAPTER XXB 
REQUIREMENT AS TO MODE OF ACCEPTANCE, PAYMENT  
OR REPAYMENT IN CERTAIN CASES TO COUNTERACT EVASION OF TAX 

SECTIONS 

269SS. Mode of taking or accepting certain loans, deposits and specified sum. 

269ST. Mode of undertaking transactions. 

269T. Mode of repayment of certain loans or deposits. 

269TT. Mode of repayment of Special Bearer Bonds, 1991. 

CHAPTER XXC  
PURCHASE BY CENTRAL GOVERNMENT OF IMMOVABLE  
PROPERTIES IN CERTAIN CASES OF TRANSFER 

269U. Commencement of Chapter. 

269UA. Definitions. 

269UB. Appropriate authority. 

269UC. Restrictions on transfer of immovable property. 

269UD.  Order  by  appropriate  authority  for  purchase  by  Central  Government  of  immovable      

property. 

269UE. Vesting of property in Central Government. 

269UF. Consideration for purchase of immovable property by Central Government. 

269UG. Payment or deposit of consideration. 

269UH. Re-vesting of property in the transferor on failure of payment or deposit of consideration. 

269UI. Powers of the appropriate authority. 

269UJ. Rectification of mistakes. 

269UK. Restrictions on revocation or alteration of certain agreements for the transfer of  immovable 

property or on transfer of certain immovable property. 

269UL.  Restrictions  on  registration,  etc.,  of  documents  in  respect  of  transfer  of  immovable 

property. 

269UM. Immunity to transferor against claims of transferee for transfer. 

269UN. Order of appropriate authority to be final and conclusive. 

269UO. Chapter not to apply to certain transfers. 

269UP. Chapter not to apply where transfer of immovable property effected after certain date. 

CHAPTER XXI 
PENALTIES IMPOSABLE 

270. [Omitted.]. 
270A. Penalty for under reporting and misreporting of income. 
270AA. Immunity from imposition of penalty, etc. 
271. Failure to furnish returns, comply with notices, concealment of income, etc. 

271A. Failure to keep, maintain or retain books of account, documents, etc. 

271AA. Penalty for failure to keep and maintain information and document, etc., in respect of 

certain transactions. 

25 

SECTIONS 

271AAA. Penalty where search has been initiated. 
271AAB. Penalty where search has been initiated. 
271AAC. Penalty in respect of certain income. 
271B. Failure to get accounts audited. 
271BA. Penalty for failure to furnish report under section 92E. 
271BB. Failure to subscribe to the eligible issue of capital. 
271C. Penalty for failure to deduct tax at source. 
271CA. Penalty for failure to collect tax at source. 
271D. Penalty for failure to comply with the provisions of section 269SS. 
271DA. Penalty for failiure to comply with provisions of section 269ST. 
271E. Penalty for failure to comply with the provisions of section 269T. 
271F. Penalty for failure to furnish return of income. 
271FA. Penalty for failure to furnish statement of financial transaction or reportable income. 
271FAA.  Penalty  for  furnishing  inaccurate  statement  of  financial  transaction  or  reportable 

account. 

271FAB.  Penalty  for  failure  to  furnishing  statement  or  information  or  document  by  an  eligible 

investment fund. 

271FB. Penalty for failure to furnish return of fringe benefits. 
 271G. Penalty for failure to furnish information or document under section 92D. 
271GA. Penalty for failure to furnish information or document under section 285A. 
271GB. Penalty for failure to furnish report or for furnishing inaccurate report under section 286. 
271H. Penalty for failure to furnish statements, etc. 
271-I.  Penalty  for  failure  to  furnish  information  or  furnishing  inaccurate  information  under               

section 195. 

271J. Penalty for furnishing incorrect information in reports or certificates. 
272. [Omitted.]. 
272A.  Penalty  for  failure  to  answer  questions,  sign  statements,  furnish  information,  returns  or 

statements, allow inspections, etc. 

272AA. Penalty for failure to comply with the provisions of section 133B. 
272B. Penalty for failure to comply with the provisions of section 139A. 
272BB. Penalty for failure to comply with the provisions of section 203A. 
272BBB. Penalty for failure to comply with the provisions of section 206CA. 
273. False estimate of, or failure to pay, advance tax. 

273A. Power to reduce or waive penalty, etc., in certain cases. 

273AA. Power of Principal Commissioner or Commissioner to grant immunity from penalty. 

273B. Penalty not to be imposed in certain cases. 

274. Procedure. 
275. Bar of limitation for imposing penalties. 

CHAPTER XXII 
OFFENCES AND PROSECUTIONS 

275A. Contravention of order made under sub-section (3) of section 132. 

275B. Failure to comply with the provisions of clause (iib) of sub-section (1) of section 132. 

276. Removal, concealment, transfer or delivery of property to thwart tax recovery. 
276A. Failure to comply with the provisions of sub-sections (1) and (3) of section 178. 
276AA. [Omitted.]. 

26 

SECTIONS 

276AB. Failure to comply with the provisions of sections 269UC, 269UE and 269UL. 
276B. Failure to pay tax to the credit of Central Government under Chapter XII-D or XVII-B.  
276BB. Failure to pay the tax collected at source. 
276C. Wilful attempt to evade tax, etc. 
276CC. Failure to furnish returns of income. 
276CCC. Failure to furnish return of income in search cases. 
276D. Failure to produce accounts and documents. 
276DD. [Omitted.]. 
276E. [Omitted.]. 
277. False statement in verification, etc. 

277A. Falsification of books of account or document, etc. 

278. Abetment of false return, etc. 
278A. Punishment for second and subsequent offences. 
278AA. Punishment not to be imposed in certain cases. 
278AB. Power of Principal Commissioner or Commissioner to grant immunity from prosecution. 
278B. Offences by companies. 
278C. Offences by Hindu undivided families. 
278D. Presumption as to assets, books of account, etc., in certain cases. 
278E. Presumption as to culpable mental state. 
279. Prosecution  to  be  at  instance  of  Principal  Chief  Commissioner  or  Chief   Commissioner 

or Principal Commissioner or Commissioner. 

279A. Certain offences to be non-cognizable. 
279B. Proof of entries in records or documents. 
280. Disclosure of particulars by public servants. 
280A. Special Courts. 
280B. Offences triable by Special Court. 
280C.Trial of offences as summons case. 
280D. Application of Code of Criminal Procedure, 1973 to proceedings before Special Court.  

CHAPTER XXII-A 

ANNUITY DEPOSITS 

280E. [Omitted.]. 

280F. [Omitted.]. 

280G. [Omitted.]. 

280H. [Omitted.]. 

280-I. [Omitted.]. 

280J. [Omitted.]. 

280K. [Omitted.]. 

280L. [Omitted.]. 

27 

SECTIONS 

280M. [Omitted.]. 
280N. [Omitted.]. 
280-O. [Omitted.]. 
280P. [Omitted.]. 
280Q. [Omitted.]. 
280R. [Omitted.]. 
280S. [Omitted.]. 
280T. [Omitted.]. 
280U. [Omitted.]. 
280V. [Omitted.]. 
280W. [Omitted.]. 
280X. [Omitted.]. 

280Y. [Omitted.]. 
280Z. [Omitted.]. 
280ZA. [Omitted.]. 
280ZB. [Omitted.]. 
280ZC. [Omitted.]. 
280ZD. [Omitted.]. 
280ZE. [Omitted.]. 

CHAPTER XXII-B 
TAX CREDIT CERTIFICATES 

CHAPTER XXIII 
MISCELLANEOUS 

281. Certain transfers to be void. 
281A. [Repealed.]. 
281B. Provisional attachment to protect revenue in certain cases. 
282. Service of notice generally. 
282A. Authentication of notices and other documents. 
282B. [Omitted.]. 
283. Service of notice when family is disrupted or firm, etc., is dissolved. 
284. Service of notice in the case of discontinued business. 
285. Submission of statement by a non-resident having liaison office. 
285A. Furnishing of information or documents by an Indian concern in certain cases. 
285B. Submission of statements by producers of cinematograph films. 
285BA. Obligation to furnish statement of financial transaction or reportable account. 
286. Furnishing of report in respect of international group. 
287. Publication of information respecting assessees in certain cases. 
287A. Appearance by registered valuer in certain matters. 
288. Appearance by authorised representative. 
288A. Rounding off of income. 
288B. Rounding off amount payable and refund due. 
289. Receipt to be given. 
290. Indemnity. 

28 

SECTIONS 

291. Power to tender immunity from prosecution. 

292. Cognizance of offences. 

292A.  Section  360  of  the  Code  of  Criminal  Procedure,  1973,  and  the  Probation  of  Offenders     

Act, 1958, not to apply. 

292B. Return of income, etc., not to be invalid on certain grounds. 

292BB. Notice deemed to be valid in certain circumstances. 

292C. Presumption as to assets, books of account, etc. 

292CC. Authorisation and assessment in case of search or requisition. 

293. Bar of suits in civil courts. 

293A. Power to make exemption, etc., in relation to participation in the business of prospecting for, 

extraction, etc., of mineral oils. 

293B. Power of Central Government or Board to condone delays in obtaining approval. 

293C. Power to withdraw approval. 

294. Act to have effect pending legislative provision for charge of tax. 

294A. Power to make exemption, etc., in relation to certain Union territories. 

295. Power to make rules. 
296. Rules and certain notifications to be placed before Parliament. 
297. Repeals and savings. 
298. Power to remove difficulties. 

THE FIRST SCHEDULE. 

THE SECOND SCHEDULE. 

THE THIRD SCHEDULE. 

THE FOURTH SCHEDULE. 

THE FIFTH SCHEDULE. 

THE SIXTH SCHEDULE—[Omitted.]. 

THE SEVENTH SCHEDULE. 

THE EIGHTH SCHEDULE. 

THE NINTH SCHEDULE. 

THE TENTH SCHEDULE. 

THE ELEVENTH SCHUDULE. 

THE TWELFTH SCHUDELE. 

THE THIRTEENTH SCHEDULE. 

 THE FOURTEENTH SCHEDULE. 

29 

THE INCOME-TAX ACT, 1961 

ACT NO. 43 OF 1961 

[13th September, 1961.] 

An Act to consolidate and amend the law relating to income-tax and super-tax. 

BE it enacted by Parliament in the Twelfth Year of the Republic of India as follows:— 

CHAPTER I 

PRELIMINARY 

1. Short title, extent and commencement.—(1) This Act may be called the Income-tax Act, 1961. 

(2) It extends to the whole of India. 

(3) Save as otherwise provided in this Act, it shall come into force on the 1st day of April, 1962. 

2. Definitions.—In this Act, unless the context otherwise requires,— 

1[(1) “advance  tax”  means  the  advance  tax  payable  in  accordance  with  the  provisions  of               

Chapter XVII-C;] 

2[(1A)] “agricultural income” means— 

3[(a)  any  rent  or  revenue  derived  from  land  which  is  situated  in  India  and  is  used  for 

agricultural purposes;] 

(b) any income derived from such land by— 

(i)  agriculture; or 

(ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily 
employed by a cultivator or receiver of rent-in-kind to render the produce raised or received 
by him fit to be taken to market; or 

(iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received 
by him, in respect of which no process has been performed other than a process of the nature 
described in paragraph (ii) of this sub-clause ; 

(c) any income derived from any building owned and occupied by the receiver of the rent or 
revenue of any such land, or occupied by the cultivator or the receiver of rent-in-kind, of any land 
with respect to which, or the produce of which, any process mentioned in paragraphs (ii) and (iii) 
of sub-clause (b) is carried on: 

4[Provided that— 

(i) the building is on or in the immediate vicinity of the land, and is a building which the 
receiver of the rent or revenue or the cultivator, or the receiver of rent-in-kind, by reason of 
his connection with the land, requires as a dwelling house, or as a store-house, or other out-
building, and 

(ii) the land is either assessed to land revenue in India or is subject to a local rate assessed 
and collected by officers of the Government as such or where the land is not so assessed to 
land revenue or subject to a local rate, it is not situated— 

 Subject to verification and confirmation by the Department. 
1. Ins. by Act 4 of 1988, s. 3 (w.e.f. 1-4-1989). 
2. Clause (1) renumbered as clause (1A), ibid., s. 3 (w.e.f. 1-4-1989). 
3. Subs. by Act 42 of 1970, s. 2, for sub-clause (a) (w.e.f. 1-4-1962). 
4. Subs. by s. 2, ibid., for the proviso (w.e.f. 1-4-1962). 

30 

                                                           
(A)  in  any  area  which  is  comprised  within  the  jurisdiction  of  a  municipality 
(whether  known  as  a  municipality,  municipal  corporation,  notified  area  committee, 
town area committee, town committee or by any other name) or a cantonment board 
and which has a population of not less than ten thousand 1***; or 

2[(B) in any area within the distance, measured aerially,— 

 (I)  not  being  more  than  two  kilometres,  from  the  local  limits  of  any 
municipality  or  cantonment  board  referred  to  in  item  (A)  and  which  has  a 
population of more than ten thousand but not exceeding one lakh; or 

(II)  not  being  more  than  six  kilometres,  from  the  local  limits  of  any 
municipality  or  cantonment  board  referred  to  in  item  (A)  and  which  has  a 
population of more than one lakh but not exceeding ten lakh; or 

(III)  not  being  more  than  eight  kilometres,  from  the  local  limits  of  any 
municipality  or  cantonment  board  referred  to  in  item  (A)  and  which  has  a 
population of more than ten lakh.] 

3[Explanation  4[1.]—For  the  removal  of  doubts,  it  is  hereby  declared  that  revenue  derived 
from land shall not include and shall be deemed never to have included any income arising from 
the transfer of any land referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of this 
section.] 

5[Explanation 2.—For the removal of doubts, it is hereby declared that income derived from 
any building or land referred to in sub-clause (c) arising from the use of such building or land for 
any  purpose  (including  letting  for  residential  purpose  or  for  the  purpose  of  any  business  or 
profession)  other  than  agriculture  falling  under  sub-clause  (a)  or  sub-clause  (b)  shall  not  be 
agricultural income.] 

6[Explanation  3.—For  the  purposes  of  this  clause,  any  income  derived  from  saplings  or 

seedlings grown in a nursery shall be deemed to be agricultural income.] 

7[Explanation  4.—For  the  purposes  of  clause  (ii)  of  the  proviso  to  sub-clause  (c), 
“population” means the population according to the last preceding census of which the relevant 
figures have been published before the first day of the previous year;] 

8[9[(1B)] “amalgamation”, in relation to companies, means the merger of one or more companies 
with another company or the merger of two or more companies to form one company (the company 
or companies which so merge being referred to as the amalgamating company or companies and the 
company with which they merge or which is formed as a result of the merger, as the amalgamated 
company) in such a manner that— 

 (i)  all  the  property  of  the  amalgamating  company  or  companies  immediately  before  the 
amalgamation becomes the property of the amalgamated company by virtue of the amalgamation; 

(ii)  all  the  liabilities  of  the  amalgamating  company  or  companies  immediately  before  the 
amalgamation become the liabilities of the amalgamated company by virtue of the amalgamation; 

1. Certain words omitted by Act 17 of 2013, s. 3 (w.e.f. 1-4-2014).  
2. Subs. by s. 3, ibid., for item (B) (w.e.f. 1-4-2014). 
3. Ins. by Act 13 of 1989, s. 3 (w.e.f. 1-4-1970). 
4. Explanation renumbered as Explanation 1 thereof by Act 10 of 2000, s. 3 (w.e.f. 1-4-2001). 
5. Ins. by s. 3, ibid. (w.e.f. 1-4-2001).  
6. Ins. by Act 18 of 2008, s. 3 (w.e.f. 1-4-2009).  
7. Ins. by Act 17 of 2013, s. 3 (w.e.f. 1-4-2014). 
8. Ins. by Act 20 of 1967, s. 4 (w.e.f. 1-4-1967).  
9. Clause (1A) renumbered as clause (1B) thereof by Act 4 of 1988, s. 3 (w.e.f. 1-4-1989). 

31 

                                                           
(iii)  shareholders  holding  not  less  than  1[three-fourths]  in  value  of  the  shares  in  the 
amalgamating company or companies (other than shares already held therein immediately before 
the amalgamation by, or by a nominee for, the amalgamated company or its subsidiary) become 
shareholders of the amalgamated company by virtue of the amalgamation, 

otherwise  than  as  a  result  of  the  acquisition  of  the  property  of  one  company  by  another  company 
pursuant to the purchase of such property by the other company or as a result of the distribution of 
such property to the other company after the winding up of the first-mentioned company;] 

2[(1C) “Additional Commissioner” means a person appointed to be an Additional Commissioner 

of Income-tax under sub-section (1) of section 117; 

(1D) “Additional Director” means a person appointed to be an Additional Director of Income-tax 

under sub-section (1) of section 117;] 

(2)  “annual  value”,  in  relation  to  any  property,  means  its  annual  value  as  determined 

under section 23 ; 

3* 

* 

* 

* 

* 

(4) “Appellate Tribunal” means the Appellate Tribunal constituted under section 252; 

(5) “approved gratuity fund” means a gratuity fund which has been and continues to be approved 
by  the 4[5[Principal  Chief  Commissioner  or  Chief  Commissioner]  or 6[Principal  Commissioner  or 
Commissioner]] in accordance with the rules contained in Part C of the Fourth Schedule ; 

(6) “approved superannuation fund” means a superannuation fund or any part of a superannuation 
fund which has been and continues to be approved by the 4[5[Principal Chief Commissioner or Chief 
Commissioner]  or 6[Principal  Commissioner  or  Commissioner]]  in  accordance  with  the  rules 
contained in Part B of the Fourth Schedule; 

(7) “assesse” means a person by whom  7[any tax] or any other sum of money is payable under 

this Act, and includes— 

(a)  every  person  in  respect  of  whom  any  proceeding  under this  Act  has  been  taken  for  the 
8[assessment of his income or assessment of fringe benefits] or of the income of any other person 
in respect of which he is assessable, or of the loss sustained by him or by such other person, or of 
the amount of refund due to him or to such other person; 

(b) every person who is deemed to be an assessee under any provision of this Act; 

(c) every person who is deemed to be an assessee in default under any provision of this Act; 

9[(7A) “Assessing Officer” means the 10[11[Assistant Commissioner or Deputy Commissioner] or 
12[Assistant Director or Deputy Director]] or the Income-tax Officer who is vested with the relevant 
jurisdiction  by  virtue  of  directions  or  orders  issued  under  sub-section  (1)  orsub-section  (2)  of              
section  120 or  any  other  provision  of  this  Act,  and  the  2[Additional  Commissioner  or]          

1. Subs. by Act 27 of 1999, s. 3, for “nine-tenth” (w.e.f. 1-4-2000).  
2. Ins. by Act 22 of 2007, s. 3 (w.e.f. 1-6-1994).  
3. Sub-section (3) omitted by Act 4 of 1988, s. 126 (w.e.f. 1-4-1988). 
4. Subs. by s. 2, ibid., for “Commissioner” (w.e.f. 1-4-1988). 
5. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). 
6. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 
7. Subs. by Act 10 of 1965, s. 4, for “income-tax or super tax” (w.e.f. 1-4-1965). 
8. Subs. by Act 18 of 2005, s. 3, for “assessment of his income” (w.e.f. 1-4-2006). 
9. Ins. by Act 4 of 1988, s. 3 (w.e.f. 1-4-1988). 
10. Subs. by Act 33 of 1996, s. 3, for “Assistant Commissioner” (w.e.f. 1-10-1996). 
11. Subs. by Act 21 of 1998, s. 3, for “Assistant Commissioner” (w.e.f. 1-10-1998). 
12. Subs. by s. 3, ibid., for “Assistant Director” (w.e.f. 1-10-1998). 

32 

 
 
 
 
 
 
 
                                                           
1[Additional Director or] 2[Joint Commissioner or Joint Director] who is directed under clause (b) of 
sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred 
on, or assigned to, an Assessing Officer under this Act;] 

(8) “assessment” includes reassessment; 

(9)  “assessment  year”  means  the period  of  twelve  months  commencing  on  the 1st day  of  April 

every year; 

3[(9A) “Assistant Commissioner” means a person appointed to be an Assistant Commissioner of 

Income-tax 4[or a Deputy Commissioner of Income-tax] under sub-section (1) of section 117;] 

5[(9B) “Assistant Director” means a person appointed to be an Assistant Director of Income-tax 

under sub-section (1) of section 117;] 

(10) “average rate of income-tax” means the rate arrived at by dividing the amount of income-tax 

calculated on the total income, by such total income; 

6[(11) “block of assets” means a group of assets falling within a class of assets comprising— 

(a) tangible assets, being buildings, machinery, plant or furniture; 

(b) intangible assets, being know-how, patents, copyrights, trade-marks, licences, franchises 

or any other business or commercial rights of similar nature, 

in respect of which the same percentage of depreciation is prescribed;] 

(12) “Board” means the 7[Central Board of Direct Taxes constituted under the Central Boards of 

Revenue Act, 1963 (54 of 1963)]; 

8[(12A) “books or books of account” includes ledgers, day-books, cash books, account-books and 
other books, whether kept in the written form or as print-outs of data stored in a floppy, disc, tape or 
any other form of electro-magnetic data storage device;] 

(13) “business” includes any trade, commerce or manufacture or any adventure or concern in the 

nature of trade, commerce or manufacture; 

9[(13A) “business trust” means a trust registered as,— 

 (i)   an  Infrastructure  Investment  Trust  under  the  Securities  and  Exchange  Board  of  India 
(Infrastructure  Investment  Trusts)  Regulations,  2014  made  under  the  Securities  and  Exchange 
Board of India Act, 1992 (15 of 1992); or 

(ii)  a Real Estate Investment Trust under the Securities and Exchange Board of India (Real 
Estate Investment Trusts) Regulations, 2014 made under the Securities and Exchange Board of 
India Act, 1992 (15 of 1992), and 

the  units  of  which  are  required  to  be  listed  on  recognised  stock  exchange  in  accordance  with  the 
aforesaid regulations;] 

1. Ins. by Act 22 of 2007, s. 3 (w.e.f. 1-10-1996). 
2. Subs. by Act 21 of 1998, s. 4, for “Deputy Commissioner or Deputy Director” (w.e.f. 1-10-1998).  
3. Ins. by Act 4 of 1988, s. 3 (w.e.f. 1-4-1988). 
4. Ins. by Act 21 of 1998, s. 4 (w.e.f. 1-10-1998).  
5. Ins. by Act 22 of 2007, s. 3 (w.e.f. 1-4-1988). 
6. Subs. by Act 21 of 1998, s. 4, for clause (11) (w.e.f. 1-4-1999). 
7.  Subs.  by  Act  54  of  1963,  s.  5,  for  “Central  Board  of  Revenue  constituted  under  the  Central  Board  of  Revenue                       

Act, 1924 (4 of 1924)” (w.e.f. 1-1-1964).   
8. Ins. by Act 14 of 2001, s. 3 (w.e.f. 1-6-2001).  
9. Subs. by Act 20 of 2015, s. 3, for clause (13A) (w.e.f. 1-4-2016). 

33 

                                                           
(14) 1[“capital asset” means— 

(a) property of any kind held by an assessee, whether or not connected with his business or 

profession; 

(b)  any  securities  held  by  a  Foreign  Institutional  Investor  which  has  invested  in  such 
securities in accordance with the regulations made under the Securities and Exchange Board of 
India Act, 1992 (15 of 1992), 

but does not include— 

 (i)  any  stock-in-trade  [other  than  the  securities  referred  to  in  sub-clause  (b)]],  consumable 

stores or raw materials held for the purposes of his business or profession; 

2[(ii)  personal  effects,  that  is  to  say,  movable  property  (including  wearing  apparel  and 
furniture) held for personal use by the assessee or any member of his family dependant on him, 
but excludes— 

(a)  jewellery; 

(b)  archaeological collections; 

(c)  drawings; 

(d)  paintings; 

(e)  sculptures; or 

(f)  any work of art. 

Explanation 3[1].—For the purposes of this sub-clause, “jewellery” includes— 

(a) ornaments made of gold, silver, platinum or any other precious metal or any alloy 
containing one or more of such precious metals, whether or not containing any precious 
or semi-precious stone, and whether or not worked or sewn into any wearing apparel; 

(b)  precious  or  semi-precious  stones,  whether  or  not  set  in  any  furniture,  utensil  or 

other article or worked or sewn into any wearing apparel.] 

4[Explanation 2.—For the purposes of this clause— 

(a) the expression “Foreign Institutional Investor” shall have the meaning assigned to 

it in clause (a) of the Explanation to section 115AD; 

(b) the expression “securities” shall have the meaning assigned to it in clause (h) of 

section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);] 

5[(iii) agricultural land in India, not being land situate— 

(a)  in  any  area  which  is  comprised  within  the  jurisdiction  of  a  municipality  (whether 
known  as  a  municipality,  municipal  corporation,  notified  area  committee,  town  area 
committee, town committee, or by any other name) or a cantonment board and which has a 
population of not less than ten thousand 6*** ; or 

1. Subs. by Act 25 of 2014, s. 3, for certain words (w.e.f. 1-4-2015).  
2. Subs. by Act 22 of 2007, s. 3, for clause (ii) (w.e.f. 1-4-2008).  
3. Explanation renumbered as Explanation1 thereof by Act 25 of 2014, s. 3 (w.e.f. 1-4-2015).  
4. Ins. by s. 3, ibid. (w.e.f. 1-4-2015). 
5. Subs. by Act 19 of 1970, s. 3, for sub-clause (iii) (w.e.f. 1-4-1970). 
6. The words “according to the last preceding census of which the relevant figures have been published before the first day 

of the previous year” omitted by Act 17 of 2013, s. 3 (w.e.f. 1-4-2014). 

34 

                                                           
1[(b) in any area within the distance, measured aerially,— 

(I)  not being more than two kilometres, from the local limits of any municipality or 
cantonment  board  referred  to  in  item  (a)  and  which  has  a  population  of  more  than  ten 
thousand but not exceeding one lakh; or 

(II) not being more than six kilometres, from the local limits of any municipality or 
cantonment  board  referred  to  in  item  (a)  and  which  has  a  population  of  more  than  one 
lakh but not exceeding ten lakh; or 

(III) not being more than eight kilometres, from the local limits of any municipality 
or cantonment board referred to in item (a) and which has a population of more than ten 
lakh. 

Explanation.—For  the  purposes  of  this  sub-clause,  “population”  means  the  population 
according to the last preceding census of which the relevant figures have been published before 
the first day of the previous year;]] 

2[(iv) 6½ per cent.. Gold Bonds, 1977, 3[or 7 per cent.. Gold Bonds, 1980], 4[or National Defence 

Gold Bonds, 1980], issued by the Central Government;] 

5[(v) Special Bearer Bonds, 1991, issued by the Central Government;] 

6[(vi) Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 7[or deposit certificates 

issued under the Gold Monetisation Scheme, 2015] notified by the Central Government.] 

8[Explanation.—For the removal of doubts, it is hereby clarified that “property” includes and 
shall  be  deemed  to  have  always  included  any  rights  in  or  in  relation  to  an  Indian  company, 
including rights of management or control or any other rights whatsoever;] 

9[(15)  “charitable  purpose”includes  relief  of  the  poor,  education, 10[yoga,]  medical  relief, 
11[preservation  of  environment  (including  watersheds,  forests  and  wildlife)  and  preservation  of 
monuments  or  places  or  objects  of  artistic  or  historic  interest,]  and  the  advancement  of  any  other 
object of general public utility: 

12[Provided that  the  advancement  of  any  other  object  of  general  public  utility  shall  not  be  a 
charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or 
business, or any activity of rendering any service in relation to any trade, commerce or business, for a 
cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of 
the income from such activity, unless— 

(i)  such activity is undertaken in the course of actual carrying out of such advancement of 

any other object of general public utility; and 

(ii)  the  aggregate  receipts  from  such  activity  or  activities  during  the  previous  year,  do  not 
exceed twenty per cent. of the total receipts, of the trust or institution undertaking such activity or 
activities, of that previous year;]] 

1. Subs. by Act 17 of 2013, s. 3, for item (b) (w.e.f. 1-4-2014). 
2. Ins. by Act 54 of 1962, s. 2 (w.e.f.13-12-1962). 
3. Ins. by Act 15 of 1965, s. 2 (w.e.f. 1-4-1965). 
4. Ins. by Act 41 of 1965, s. 2 (w.e.f. 4-12-1965). 
5. Ins. by Act 7 of 1981, s. 5 (w.e.f. 12-1-1981). 
6. Ins. by Act 27 of 1999, s. 3 (w.e.f. 1-4-2000). 
7. Ins. by Act 28 of 2016, s. 3 (w.e.f. 1-4-2016) 
8. Ins. by Act 23 of 2012, s. 3 (w.e.f. 1-4-1962). 
9. Subs. by Act 18 of 2008, s. 3, for clause (15) (w.e.f. 1-4-2009). 
10. Ins. by Act 20 of 2015, s. 3 (w.e.f. 1-4-2016). 
11. Ins. by Act 33 of 2009, s. 3 (w.e.f. 1-4-2009). 
12. Subs. by Act 20 of 2015, s. 3, for the proviso (w.e.f. 1-4-2016). 

35 

                                                           
1[(15A) “Chief Commissioner” means a person appointed to be a Chief Commissioner of Income-

tax or a Principal Chief Commissioner of Income-tax under sub-section (1) of section 117;] 

2[3[(15B)] “child”, in relation to an individual, includes a step-child and an adopted child of that 

individual;] 

4[(16)  “Commissioner”  means  a  person  appointed  to  be  a  Commissioner  of  Income-tax  or  a 
Director  of  Income-tax  or  a  Principal  Commissioner  of  Income-tax  or  a  Principal  Director  of  
Income-tax under sub-section (1) of section 117;] 

5[(16A) “Commissioner (Appeals)” means a person appointed to be a Commissioner of Income-

tax (Appeals) under sub-section (1) of section 117;] 

6[(17) “company” means— 

(i)  any Indian company, or 

(ii)  any body corporate incorporated by or under the laws of a country outside India, or 

(iii)  any  institution,  association  or  body  which  is  or  was  assessable  or  was  assessed  as  a 
company for any assessment year under the Indian Income-tax Act, 1922 (11 of 1922), or which 
is  or  was  assessable  or  was  assessed  under  this  Act  as  a  company  for  any  assessment  year 
commencing on or before the 1st day of April, 1970, or 

(iv) any institution, association or body, whether incorporated or not and whether Indian or 

non-Indian, which is declared by general or special order of the Board to be a company: 

Provided that such institution, association or body shall be deemed to be a company only for such 
assessment year or assessment years (whether commencing before the 1st day of April, 1971, or on or 
after that date) as may be specified in the declaration;] 

(18)  “company  in  which  the  public  are  substantially  interested”—a  company  is  said  to  be  a 

company in which the public are substantially interested— 

7[(a) if it is a company owned by the Government or the Reserve Bank of India or in which 
not  less  than  forty  per  cent..  of  the  shares  are  held  (whether  singly  or  taken  together)  by  the 
Government or the Reserve Bank of India or a corporation owned by that bank; or] 

8[(aa) if  it  is  a  company  which  is  registered  under  section  25  of  the  Companies                           

Act, 1956 (1 of 1956); or] 

(ab) if it is a company having no share capital and if, having regard to its objects, the nature 
and composition of its membership and  other relevant considerations, it is declared by order of 
the Board to be a company in which the public are substantially interested: 

Provided that  such  company  shall  be  deemed  to  be  a  company  in  which  the  public  are 
substantially interested only for such assessment year or assessment years (whether commencing 
before the 1st day of April, 1971, or on or after that date) as may be specified in the declaration; 
or] 

1. Subs. by Act 25 of 2014, s. 3, for clause (15A) (w.e.f. 1-6-2013). 
2. Ins. by Act 41 of 1975, s. 2 (w.e.f. 1-4-1976). 
3. Clause (15A) renumbered as clause (15B) thereof by Act 4 of 1988, s. 3 (w.e.f. 1-4-1988).  
4. Subs. by Act 25 of 2014, s. 3, for clause (16) (w.e.f. 1-6-2013). 
5. Ins. by the Act 29 of 1977, s. 39 and the Fifth Schedule (w.e.f. 10-7-1978). 
6. Subs. by Act 32 of 1971, s. 3, for clause (17) (w.e.f. 1-4-1971). 
7. Subs. by Act 5 of 1964, s. 4, for sub-clause (a) (w.e.f. 1-4-1964).  
8. Ins. by Act 32 of 1971, s. 3 (w.e.f. 1-4-1971). 

36 

                                                           
1[(ac) if it is a mutual benefit finance company, that is to say, a company which carries on, as 
its  principal  business,  the  business  of  acceptance  of  deposits  from  its  members  and  which  is 
declared by the Central Government under section 620A of the Companies Act, 1956 (1 of 1956), 
to be a Nidhi or Mutual Benefit Society; or] 

2[(ad) if it is a company, wherein shares (not being shares entitled to a fixed rate of dividend 
whether  with  or  without  a further  right to  participate in  profits)  carrying  not  less  than fifty  per 
cent.. of the voting power have been allotted unconditionally to, or acquired unconditionally by, 
and  were  throughout  the  relevant  previous  year  beneficially  held  by,  one  or  more  co-operative 
societies;] 

3[(b)   if  it  is  a  company  which  is  not  a  private  company  as  defined  in  the  Companies  Act, 
1956  (1  of  1956),  and  the  conditions  specified  either  in  item  (A)  or  in  item  (B)  are  fulfilled, 
namely:— 

(A) shares in the company (not being shares entitled to a fixed rate of dividend whether 
with or without a further right to participate in profits) were, as on the last day of the relevant 
previous year, listed in a recognised stock exchange in India in accordance with the Securities 
Contracts (Regulation) Act, 1956 (42 of 1956), and any rules made thereunder; 

4[(B) shares in the company (not being shares entitled to a fixed rate of dividend whether 
with or without a further right to participate in profits) carrying not less than fifty per cent.. of 
the voting power have been allotted unconditionally to, or acquired unconditionally by, and 
were throughout the relevant previous year beneficially held by— 

(a) the Government, or 

(b) a corporation established by a Central, State or Provincial Act, or 

(c) any  company  to  which  this  clause  applies  or  any  subsidiary  company  of  such 
company 5[if the whole of the share capital of such subsidiary company has been held by 
the parent company or by its nominees throughout the previous year]. 

Explanation.—In  its  application  to  an  Indian  company  whose  business  consists  mainly  in  the 
construction of ships or in the manufacture or processing of goods or in mining or in the generation or 
distribution of electricity or any other form of power, item (B) shall have effect as if for the words 
“not less than fifty per cent.”, the words “not less than forty per cent.” had been substituted;]] 

(19)  “co-operative  society”  means  a  co-operative  society  registered  under  the  Co-operative 
Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the 
registration of co-operative societies; 

6[(19A)  “Deputy  Commissioner”  means  a  person  appointed  to  be  a  Deputy  Commissioner  of 

Income-tax 7*** under sub-section (1) of section 117; 

8[(19AA)  “demerger”,  in  relation  to  companies,  means  the  transfer,  pursuant  to  a  scheme  of 
arrangement  under  sections  391  to  394  of  the  Companies  Act,  1956  (1  of  1956),  by  a  demerged 
company of its one or more undertakings to any resulting company in such a manner that— 

(i) all  the  property  of  the  undertaking,  being  transferred  by  the  demerged  company, 
immediately before the demerger, becomes the property of the resulting company by virtue of the 
demerger; 

1. Ins. by Act 32 of 1985, s. 3 (w.e.f. 1-4-1984). 
2. Ins. by Act 18 of 1992, s. 3 (w.e.f. 1-4-1993). 
3. Subs. by Act 14 of 1969, s. 3, for sub-clause (b) (w.e.f. 1-4-1970). 
4. Subs. by Act 11 of 1983, s. 3, for item (B) (w.e.f. 2-4-1983). 
5.  Subs.  by  Act  11  of  1987,  s.  74,  for  “where  such  subsidiary  company  fulfils  the  conditions  laid  down  in  clause  (b)  of 

section 108” (w.e.f. 1-4-1988). 

6. Ins. by Act 4 of 1988, s. 3 (w.e.f. 1-4-1988). 
7. The words “or an Additional Commissioner of Income-tax” omitted by Act 21 of 1998, s. 4 (w.e.f. 1-10-1998). 
8. Ins. by Act 27 of 1999, s. 3 (w.e.f. 1-4-2000). 

37 

                                                           
(ii) all the liabilities relatable to the undertaking, being transferred by the demerged company, 
immediately before the demerger, become the liabilities of the resulting company by virtue of the 
demerger; 

(iii) the property and the liabilities of the undertaking or undertakings being transferred by the 
demerged company are transferred at values appearing in its books of account immediately before 
the demerger; 

(iv)  the  resulting  company  issues,  in  consideration  of  the  demerger,  its  shares  to  the 
shareholders  of  the  demerged  company  on  a  1[proportionate  basis  except  where  the  resulting 
company itself is a shareholder of the demerged company]; 

(v) the shareholders holding not less than three-fourths in value of the shares in the demerged 
company  (other  than  shares  already  held  therein  immediately  before  the  demerger,  or  by  a 
nominee  for,  the  resulting  company  or,  its  subsidiary)  become  share-holders  of  the  resulting 
company or companies by virtue of the demerger, 

otherwise than as a result of the acquisition of the property or assets of the demerged company or any 
undertaking thereof by the resulting company; 

(vi) the transfer of the undertaking is on a going concern basis; 

(vii) the demerger is in accordance with the conditions, if any, notified under sub-section (5) 

of section 72A by the Central Government in this behalf. 

Explanation  1.—For  the  purposes  of  this  clause,  “undertaking”  shall  include  any  part  of  an 
undertaking, or a unit or division of an undertaking or a business activity taken as a whole, but does 
not  include  individual  assets  or  liabilities  or  any  combination  thereof  not  constituting  a  business 
activity. 

Explanation 2.—For the purposes of this clause, the liabilities referred to in sub-clause (ii), shall 

include— 

(a) the liabilities which arise out of the activities or operations of the undertaking; 

(b) the specific loans or borrowings (including debentures) raised, incurred and utilised solely 

for the activities or operations of the undertaking; and 

(c) in cases, other than those referred to in clause (a) or clause (b), so much of the amounts of 
general  or  multipurpose  borrowings,  if  any,  of  the  demerged  company  as  stand  in  the  same 
proportion which the value of the assets transferred in a demerger bears to the total value of the 
assets of such demerged company immediately before the demerger. 

Explanation  3.—For  determining  the  value  of  the  property  referred  to  in  sub-clause  (iii),  any 

change in the value of assets consequent to their revaluation shall be ignored. 

Explanation  4.—For  the  purposes  of  this  clause,  the  splitting  up  or  the  reconstruction  of  any 
authority  or  a  body  constituted  or  established  under  a  Central,  State  or  Provincial  Act,  or  a  local 
authority  or  a  public  sector  company,  into  separate  authorities  or  bodies  or  local  authorities  or 

1. Subs. by Act 23 of 2012, s. 3, for “proportionate basis” (w.e.f. 1-4-2013). 

38 

                                                           
companies, as the case may be, shall be deemed to be a demerger if such split up or reconstruction 
fulfils 1[such conditions as may be notified in the Official Gazette, by the Central Government;] 

2[Explanation 5.—For the purposes of this clause, the reconstruction or splitting up of a company, 
which  ceased  to  be  a  public  sector  company  as  a  result  of  transfer  of  its  shares  by  the  Central 
Government,  into  separate  companies,  shall  be  deemed  to  be  a  demerger,  if  such  reconstruction  or 
splitting up has been made to give effect to any condition attached to the said transfer of shares and 
also  fulfils  such  other  conditions  as  may  be  notified  by  the  Central  Government  in  the  Official 
Gazette.] 

(19AAA) “demerged company” means the company whose undertaking is transferred, pursuant to 

a demerger, to a resulting company;] 

(19B)  “Deputy  Commissioner  (Appeals)”  means  a  person  appointed  to  be  a  Deputy 
Commissioner of Income-tax (Appeals)  3[or an Additional Commissioner of Income-tax (Appeals)] 
under sub-section (1) of section 117;] 

3[(19C) “Deputy Director” means a person appointed to be a Deputy Director of Income-tax 4*** 

under sub-section (1) of section 117;] 

(20) “director”, “manager” and “managing agent”, in relation to a company, have the meanings 

respectively assigned to them in the Companies Act, 1956 (1 of 1956); 

5[(21)  “Director  General  or  Director”  means  a  person  appointed  to  be  a  Director  General  of 
Income-tax  or  a  Principal  Director  General  of  Income-tax  or,  as  the  case  may  be,  a  Director  of 
Income-tax or a Principal Director of Income-tax, under sub-section (1) of section 117, and includes a 
person  appointed  under  that  sub-section  to  be  an  Additional  Director  of  Income-tax  or  a  Joint 
Director of Income-tax or an Assistant Director or Deputy Director of Income-tax;] 

(22) “dividend” includes— 

(a) any distribution by a company of accumulated profits, whether capitalised or not, if such 
distribution entails the release by the company to its shareholders of all or any part of the assets 
of the company; 

(b)  any  distribution  to  its  shareholders  by  a  company  of  debentures,  debenture-stock,  or 
deposit  certificates  in  any  form,  whether  with  or  without  interest,  and  any  distribution  to  its 
preference shareholders of shares by way of bonus, to the extent to which the company possesses 
accumulated profits, whether capitalised or not; 

(c) any distribution made to the shareholders of a company on its liquidation, to the extent to 
which  the  distribution  is  attributable  to  the  accumulated  profits  of  the  company  immediately 
before its liquidation, whether capitalised or not; 

(d)  any  distribution  to its  shareholders  by  a  company  on  the  reduction  of  its  capital,  to the 
extent  to  which  the  company  possesses  accumulated  profits  which  arose  after  the  end  of  the 
previous  year  ending  next  before  the  1st  day  of  April,  1933,  whether  such  accumulated  profits 
have been capitalised or not; 

1.  Subs.  by  Act  10  of  2000,  s.  3,  for  “the  conditions  specified  in  sub-clauses  (i)  to  (vii)  of  this  clause,  to  the  extent 

applicable” (w.e.f. 1-4-2000). 

2. Ins. by Act 47 of 2016, s. 2 (w.e.f. 1-4-2017). 
3. Ins. by Act 32 of 1994, s. 3 (w.e.f. 1-6-1994). 
4. The words “or an Additional Director of Income-tax” omitted by Act 21 of 1998, s. 4 (w.e.f. 1-10-1998). 
5. Subs. by Act 25 of 2014, s. 3, for clause (21) (w.e.f. 1-6-2013). 

39 

                                                           
(e)  any  payment  by  a  company,  not  being  a  company  in  which  the  public  are substantially 
interested, of any sum (whether as representing a part of the assets of the company or otherwise) 
1[made  after  the  31st  day  of  May,  1987,  by  way  of  advance  or  loan  to  a  shareholder,  being  a 
person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend 
whether with or without a right to participate in profits) holding not less than ten per cent. of the 
voting power, or to any concern in which such shareholder is a member or a partner and in which 
he  has  a  substantial  interest  (hereafter  in  this  clause  referred  to  as  the  said  concern)]  or  any 
payment by any such company on behalf, or for the individual benefit, of any such shareholder, to 
the extent to which the company in either case possesses accumulated profits; 

but “dividend” does not include— 

 (i)  a distribution made in accordance with sub-clause (c) or sub-clause (d) in respect of any 
share issued for full cash consideration, where the holder of the share is not entitled in the event 
of liquidation to participate in the surplus assets; 

2[(ia) a distribution made in accordance with sub-clause (c) or sub-clause (d) in so far as such 
distribution  is  attributable  to  the  capitalised  profits  of  the  company  representing  bonus  shares 
allotted to its equity shareholders after the 31st day of March, 1964  3[and before the 1st day of 
April, 1965];] 

(ii)  any  advance  or loan  made  to  a shareholder  4[or the  said concern]  by  a  company  in  the 
ordinary course of its business, where the lending of money is a substantial part of the business of 
the company; 

(iii) any dividend paid by a company which is set off by the company against the whole or 
any part of any sum previously paid by it and treated as a dividend within the meaning of sub-
clause (e), to the extent to which it is so set off; 

5[(iv) any payment made by a company on purchase of its own shares from a shareholder in 

accordance with the provisions of section 77A of the Companies Act, 1956 (1 of 1956); 

(v) any  distribution  of  shares  pursuant  to  a  demerger  by  the  resulting  company  to  the 
shareholders  of  the  demerged  company  (whether  or  not  there  is  a  reduction  of  capital  in  the 
demerged company).] 

Explanation  1.—The  expression  “accumulated  profits”,  wherever  it  occurs  in  this  clause,  shall 
not  include  capital  gains  arising  before  the  1st  day  of  April,  1946,  or  after  the  31st  day  of  March, 
1948, and before the 1st day of April, 1956. 

Explanation 2.—The expression “accumulated profits” in sub-clauses (a), (b), (d) and (e), shall 
include all profits of the company up to the date of distribution or payment referred to in those sub-
clauses,  and  in  sub-clause  (c)  shall  include  all  profits  of  the  company  up  to  the  date  of 
liquidation,6[but  shall  not, where  the  liquidation  is  consequent  on the  compulsory  acquisition  of its 
undertaking by the Government or a corporation owned or controlled by the Government under any 
law for the time being in force, include any profits of the company prior to three successive previous 
years immediately preceding the previous year in which such acquisition took place]. 

7[Explanation  2A.––In  the  case  of  an  amalgamated  company,  the  accumulated  profits,  whether 
capitalised or not, or loss, as the case may be, shall be increased by the accumulated profits, whether 
capitalised or not, of the amalgamating company on the date of amalgamation.] 

1.  Subs. by  Act  11  of  1987,  s.  3,  for  “by  way  of  advance  or  loan  to  a  shareholder,  being  a  person  who  has  a  substantial 

interest in the company,” (w.e.f. 1-4-1988). 
2. Ins. by Act 10 of 1965, s. 4 (w.e.f. 1-4-1965). 
3. Ins. by Act 13 of 1966, s. 4 (w.e.f. 1-4-1966).  
4. Ins. by Act 11 of 1987, s. 3 (w.e.f. 1-4-1988). 
5. Ins. by Act 27 of 1999, s. 3 (w.e.f. 1-4-2000). 
6. Ins. by Act 31 of 1964, s. 2 (w.e.f. 1-4-1962). 
7. Ins. by Act 13 of 2018, s. 3 (w.e.f. 1-4-2018). 

40 

                                                           
1[Explanation 3.—For the purposes of this clause,— 

(a) “concern” means a Hindu undivided family, or a  firm or an association of persons or a 

body of individuals or a company; 

(b) a person shall be deemed to have a substantial interest in a concern, other than a company, 
if he is, at any time during the previous year, beneficially entitled to not less than twenty per cent. 
of the income of such concern;] 

2[(22A) “domestic company” means an Indian company, or any other company which, in respect 
of its income liable to tax under this Act, has made the prescribed arrangements for the declaration 
and payment, within India, of the dividends (including dividends on preference shares) payable out of 
such income;] 

3[(22AA) “document” includes an electronic record as defined in clause (t) of sub-section (1) of 

section 2 of the Information Technology Act, 2000 (21 of 2000);] 

4[(22AAA) “electoral  trust”  means  a  trust  so  approved  by  the  Board  in  accordance  with  the 

scheme made in this regard by the Central Government;] 

5[6[(22B)] “fair market value”, in relation to a capital asset, means— 

(i) the  price  that  the  capital  asset  would  ordinarily  fetch  on  sale  in  the  open  market  on  the 

relevant date; and 

(ii) where  the  price  referred  to  in  sub-clause  (i)  is  not  ascertainable,  such  price  as  may  be 

determined in accordance with the rules made under this Act; 

7[(23)  (i)  “firm”  shall  have 

the  meaning  assigned 
Act,  1932  (9  of  1932),  and  shall  include  a  limited  liability  partnership  as  defined  in  the  Limited 
Liability Partnership Act, 2008 (6 of 2009); 

to 

in 

it 

the  Indian  Partnership                         

(ii)  “partner”  shall  have 

the  meaning  assigned 

to 

it 

in 

the 

Indian  Partnership                                      

Act, 1932 (9 of 1932), and shall include,— 

(a) any person who, being a minor, has been admitted to the benefits of partnership; and 

(b) a partner of a limited liability partnership as defined in the Limited Liability Partnership 

Act, 2008 (6 of 2009); 

(iii)  “partnership”  shall  have 

the  meaning  assigned 
Act,  1932  (9  of  1932),  and  shall  include  a  limited  liability  partnership  as  defined  in  the  Limited 
Liability Partnership Act, 2008 (6 of 2009); 

to 

in 

it 

the  Indian  Partnership                       

2[(23A) “foreign company” means a company which is not a domestic company;] 

8[(23B) “fringe benefits” means any fringe benefits referred to in section 115WB;] 

1. Ins. by Act 11 of 1987, s. 3 (w.e.f. 1-4-1988). 
2. Ins. by Act 4 of 1988, s. 3 (w.e.f. 1-4-1989. 
3. Ins. by Act 14 of 2001, s. 3 (w.e.f. 1-6-2001). 
4. Ins. by Act 33 of 2009, s. 3 (w.e.f. 1-4-2010). 
5. Ins. by Act 5 of 1964, s. 4 (w.e.f. 1-4-1964). 
6. Clause (22A) renumbered as clause (22B) thereof by Act 4 of 1988, s. 3 (w.e.f. 1-4-1989).  
7. Subs. by Act 33 of 2009, s. 3, for clause (23) (w.e.f. 1-4-2010). 
8. Ins. by Act 18 of 2005, s. 3 (w.e.f. 1-4-2006). 

41 

                                                           
1[(23C) “hearing” includes communication of data and documents through electronic mode;] 

(24) “income” includes— 

(i)  profits and gains; 

(ii)  dividend; 

2[(iia)  voluntary  contributions  received  by  a  trust  created  wholly  or  partly  for  charitable  or 
religious purposes or by an institution established wholly or partly for such purposes  3[or by an 
association  or  institution  referred  to  in  clause  (21)  or  clause  (23),  or  by  a  fund  or  trust  or 
institution  referred  to  in  sub-clause  (iv)  or  sub-clause  (v)  4[or  by  any  university  or  other 
educational  institution  referred  to  in  sub-clause  (iiiad)  or  sub-clause  (vi)  or  by  any  hospital  or 
other  institution  referred  to  in  sub-clause  (iiiae)  or  sub-clause  (via)]  of  clause  (23C),  of        
section 10] 5[or by an electoral trust].] 

Explanation.—For the purposes of this sub-clause, “trust” includes any other legal obligation;] 

(iii)  the  value  of any  perquisite  or  profit in  lieu  of  salary  taxable  under  clauses  (2)  and  (3) 

of section 17; 

6[(iiia) any special allowance or benefit, other than perquisite included under sub-clause (iii), 
specifically granted to the assessee to meet expenses wholly, necessarily and exclusively for the 
performance of the duties of an office or employment of profit; 

(iiib) any allowance granted to the assessee either to meet his personal expenses at the place 
where the  duties  of  his  office  or  employment  of  profit  are  ordinarily  performed  by  him  or  at  a 
place where he ordinarily resides or to compensate him for the increased cost of living;] 

(iv) the  value  of  any  benefit or  perquisite,  whether  convertible  into  money  or  not,  obtained 
from a company either by a director or by a person who has a substantial interest in the company, 
or by a relative of the director or such person, and any sum paid by any such company in respect 
of any obligation which, but for such payment, would have been payable by the director or other 
person aforesaid; 

7[(iva) the value of any benefit or perquisite, whether convertible into money or not, obtained 
by any representative assessee mentioned in clause (iii) or clause (iv) of sub-section (1) of section 
160 or  by  any  person  on  whose  behalf  or  for  whose  benefit  any  income  is  receivable  by  the 
representative  assessee  (such  person  being  hereafter  in  this  sub-clause  referred  to  as  the 
“beneficiary”)  and  any  sum  paid  by  the  representative  assessee  in  respect  of  any  obligation 
which, but for such payment, would have been payable by the beneficiary;] 

(v)  any  sum  chargeable  to  income-tax  under  clauses  (ii)  and  (iii)  of section  28 or           

section 41 or section 59; 

8[(va) any sum chargeable to income-tax under clause (iiia) of section 28;] 

1. Ins. by Act 28 of 2016, s. 3 (w.e.f. 1-6-2016). 
2. Ins. by Act 16 of 1972, s. 3 (w.e.f. 1-4-1973).  
3.  Subs.  by  Act  3  of  1989,  s.  2,  for  “or  by  a  trust  or  institution  of  national  importance  referred  to  in  clause  (d)  of                    

sub-section (1) of section 80F” (w.e.f. 1-4-1989). 

4.  Subs.  by  Act  21  of  2006,  s.  3,  for  certain  words,  brackets,  figures  and  letters  (w.e.f.  1-4-2007).  Earlier  certain  words 

inserted by s. 3, ibid. (w.e.f. 1-4-1999). 

5. Ins. by Act 33 of 2009, s. 3 (w.e.f. 1-4-2010). 
6. Ins. by Act 3 of 1989, s. 2 (w.e.f. 1-4-1962). 
7. Ins. by Act 44 of 1980, s. 3 (w.e.f. 1-4-1980).  
8. Ins. by Act 12 of 1990, s. 3 (w.e.f. 1-4- 1962). 

42 

                                                           
1[(vb) any sum chargeable to income-tax under clause (iiib) of section 28;] 

2[(vc) any sum chargeable to income-tax under clause (iiic) of section 28;] 

3[(vd)] the value of any benefit or perquisite taxable under clause (iv) of section 28; 

4[(ve) any sum chargeable to income-tax under clause (v) of section 28;] 

(vi) any capital gains chargeable under section 45; 

(vii)  the  profits  and  gains  of  any  business  of  insurance  carried  on  by  a  mutual  insurance 
company  or  by  a  co-operative  society,  computed  in  accordance  with section  44 or  any  surplus 
taken to be such profits and gains by virtue of provisions contained in the First Schedule; 

5[(viia) the profits and gains of any business of banking (including providing credit facilities) 

carried on by a co-operative society with its members;] 

6* 

* 

* 

* 

* 

7[(ix) any winnings from lotteries, crossword puzzles, races including horse races, card games 

and other games of any sort or from gambling or betting of any form or nature whatsoever.] 

8[Explanation.—For the purposes of this sub-clause,— 

(i) “lottery” includes winnings from prizes awarded to any person by draw of lots or by 
chance  or  in  any  other  manner  whatsoever,  under  any  scheme  or  arrangement  by  whatever 
name called; 

(ii) “card game and other game of any sort” includes any game show, an entertainment 
programme on television or electronic mode, in which people compete to win prizes or any 
other similar game;] 

9[(x) any sum received by the assessee from his employees as contributions to any provident 
fund  or  superannuation  fund  or  any  fund  set  up  under  the  provisions  of  the  Employees’  State 
Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees;] 

10[(xi)  any  sum  received  under  a  Keyman  insurance  policy  including  the  sum  allocated  by 

way of bonus on such policy. 

Explanation.—For  the  purposes  of  this  clause,  the  expression  “Keyman  insurance  policy” 

shall have the meaning assigned to it in the Explanation to clause (10D) ofsection 10;] 

11[(xii) any sum referred to in 12[clause (va) of section 28;] 

13[(xiia) the fair market value of inventory referred to in clause (via) of section 28;] 

14[(xiii) any sum referred to in clause (v) of sub-section (2) of section 56;] 

1. Ins. by Act 12 of 1990, s. 3 (w.r.e.f. 1-4-1967). 
2. Ins. by s. 3, ibid. (w.r.e.f. 1-4-1972). 
3. Clause (va) renumbered as clause (vd) by s. 3, ibid. (w.r.e.f. 1-4-1962). 
4. Ins. by Act 18 of 1992, s. 3 (w.e.f. 1-4-1993). 
5. Ins. by Act 21 of 2006, s. 3 (w.e.f. 1-4-2007). 
6. Clause (viii) omitted by Act 26 of 1988, s. 54 (w.e.f. 1-4-1988). 
7. Ins. by Act 16 of 1972, s. 3 (w.e.f. 1-4-1972). 
8. Ins. by Act 14 of 2001, s. 3 (w.e.f. 1-4-2002). 
9. Ins. by Act 11 of 1987, s. 3 (w.e.f. 1-4-1988). 
10. Ins. by Act 33 of 1996, s. 3 (w.e.f. 1-10-1996). 
11. Ins. by Act 20 of 2002, s. 3 (w.e.f. 1-4-2003). 
12. Subs. by Act 32 of 2003, s. 3, for “clause (vii)” (w.e.f. 1-4-2003). 
13. Ins. by Act 13 of 2018, s. 3 (w.e.f. 1-4-2019). 
14. Ins. by Act 23 of 2004, s. 3 (w.e.f. 1-4-2005). 

43 

 
 
 
 
 
 
 
                                                           
1[(xiv) any sum referred to in clause (vi) of sub-section (2) of section 56;] 
2[(xv) any sum of money or value of property referred to in clause (vii) 3[or clause (viia)] of 

sub-section (2) of section 56;] 

4[(xvi) any consideration received for issue of shares as exceeds the fair market value of the 

shares referred to in clause (viib) of sub-section (2) of section 56;] 

5[(xvii) any sum of money referred to in clause (ix) of sub-section (2) of section 56;] 
6[(xviia) any sum of  money or value of property referred to in clause (x) of sub-section (2) 

section 56;] 

7[(xviib) any  compensation or  other  payment  referred to  in clause (xi)  of  sub-section (2) of 

section 56;] 

8[(xviii)  assistance  in  the  form  of  a  subsidy  or  grant  or  cash  incentive  or  duty  drawback  or 
waiver or concession or reimbursement (by whatever name called) by the Central Government or 
a  State  Government  or  any  authority  or  body  or  agency  in  cash  or  kind  to  the  assessee 9[other 
than,—  

(a) the subsidy or grant or reimbursement which is taken into account for determination 
of  the  actual  cost  of  the  asset  in  accordance  with  the  provisions  of Explanation  10 to          
clause (1) of section 43; or 

(b)  the  subsidy  or  grant  by  the  Central  Government  for  the  purpose  of  the  corpus  of  a 
trust  or  institution  established  by  the  Central  Government  or  a  State  Government,  as  the     
case may be];] 

(25)  “Income-tax  Officer”  means  a  person  appointed  to  be  an  Income-tax  Officer  under 

10*** section 117; 

11[(25A)  “India”  means  the  territory  of  India  as  referred  to  in  article  1  of  the  Constitution,  its 
territorial  waters,  seabed  and  subsoil  underlying  such  waters,  continental  shelf, exclusive  economic 
zone or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive 
Economic  Zone  and  other  Maritime  Zones  Act,  1976  (80  of  1976),  and  the  air  space  above  its 
territory and territorial waters;] 

(26) “Indian company” means a company formed and registered under the Companies Act, 1956 

(1 of 1956), and includes— 

(i)  a company formed and registered under any law relating to companies formerly in force 
in  any  part  of  India  12[other  than  the  State  of  Jammu  and  Kashmir  and  the  Union  territories 
specified in sub-clause (iii) of this clause]; 

13[(ia) a corporation established by or under a Central, State or Provincial Act; 

(ib)  any  institution,  association  or  body  which  is  declared  by  the  Board  to  be  a  company 

under clause (17);] 

1. Ins. by Act 22 of 2007, s. 3 (w.e.f. 1-4-2007). 
2. Ins. by Act 33 of 2009, s. 3 (w.e.f. 1-10-2009). 
3. Ins. by Act 14 of 2010, s. 3 (w.e.f. 1-6-2010). 
4. Ins. by Act 23 of 2012, s. 3 (w.e.f. 1-4-2013). 
5. Ins. by Act 25 of 2014, s. 3 (w.e.f. 1-4-2015). 
6. Ins. by Act 7 of 2017, s. 3 (w.e.f. 1-4-2017). 
7. Ins. by Act 13 of 2018, s. 3 (w.e.f. 1-4-2019). 
8.  Ins. by Act 20 of 2015, s. 3 (w.e.f. 1-4--2016). 
9.  Subs.  by  Act  28  of  2016,  s.  3,  for  “other  than  the  subsidy  or  grant  or  reimbursement  which  is  taken  into  account  for 

determination  of  the  actual  cost  of  the  asset  in  accordance  with  the  provisions  of  Explanation  10  to  clause  (1)  of        
section 43” by s. 3 (w.e.f. 1-4-2017). 

10. The words, brackets and figures “sub-section (1) of” omitted by Act 3 of 1989, s. 2 (w.e.f. 1-4-1988). 
11. Subs. by Act 22 of 2007, s. 3, for clause (25A) (w.e.f. 25-8-1976). 
12. Subs. by the Taxation Laws (Extension to Union Territories) Regulation, 1963 (Reg. 3 of 1963), s. 3, for “(other than the 

State of Jammu and Kashmir)” (w.e.f. 1-4-1963). 

13. Ins. by Act 32 of 1971, s. 3 (w.e.f. 01-4-1971). 

44 

                                                           
(ii) in the case of the State of Jammu and Kashmir, a company formed and registered under 

any law for the time being in force in that State; 

1[(iii) in the case of any of the Union territories of Dadra and Nagar Haveli, Goa, Daman and 
Diu, and Pondicherry, a company formed and registered under any law for the time being in force 
in that Union territory:] 

Provided that  the  2[registered  or,  as  the  case  may  be,  principal  office  of  the  company, 

corporation, institution, association or body] in all cases is in India; 

3[(26A) “infrastructure capital company” means such company which makes investments by way 
of acquiring shares or providing long-term finance to any enterprise or undertaking wholly engaged in 
the business referred to in sub-section (4) of section 80-IA or sub-section (1) of section 80-IAB or an 
undertaking  developing  and  building  a  housing  project  referred  to  in  sub-section  (10)  of                 
section 80-IB or a project for constructing a hotel of not less than three-star category as classified by 
the  Central  Government  or  a  project  for  constructing  a  hospital  with  at  least  one  hundred  beds  for 
patients; 

(26B) “infrastructure capital fund” means such fund operating under a trust deed registered under 
the provisions of the Registration Act, 1908 (16 of 1908) established to raise monies by the trustees 
for  investment  by  way  of  acquiring  shares  or  providing  long-term  finance  to  any  enterprise  or 
undertaking  wholly  engaged  in  the  business  referred  to  in  sub-section  (4)  of section  80-IA or         
sub-section  (1)  of section  80-IAB or  an  undertaking  developing  and  building  a  housing  project 
referred to in sub-section (10) of section 80-IB or a project for constructing a hotel of not less than 
three-star  category  as  classified  by  the  Central  Government  or  a  project  for  constructing  a  hospital 
with at least one hundred beds for patients;] 

4* 

* 

* 

* 

* 

(28) “Inspector of Income-tax” means a person appointed to be an Inspector of Income-tax under 

5[sub-section (1)] of section 117; 

6[(28A)  “interest”  means  interest  payable in  any  manner  in  respect of  any  moneys  borrowed  or 
debt incurred (including a deposit, claim or other similar right or obligation) and includes any service 
fee  or  other  charge  in  respect  of  the  moneys  borrowed  or  debt  incurred  or  in  respect  of  any  credit 
facility which has not been utilised; 

7[(28B) “interest on securities” means,— 

(i) interest on any security of the Central Government or a State Government; 

(ii) interest  on  debentures  or  other  securities  for  money  issued  by  or  on  behalf  of  a  local 

authority or a company or a corporation established by a Central, State or Provincial Act;] 

1. Ins. by the Taxation Laws (Extension to Union Territories) Regulation, 1963 (Reg. 3 of 1963), s. 3 (w.e.f. 1-4-1963). 
2. Subs. by Act 32 of 1971, s. 3, for “registered office of the company” (w.e.f. 1-4-1971). 
3. Ins. by Act 21 of 2006, s. 3 (w.e.f. 1-4-2006). 
4. Clause (27) omitted by Act 4 of 1988, s. 3 (w.e.f. 1-4-1988). 
5. Subs. by s. 3, ibid., for “sub-section (2)” (w.e.f. 1-4-1988). 
6. Ins. by Act 66 of 1976, s. 3 (w.e.f. 1-6-1976). 
7. Ins. by Act 26 of 1988, s. 3 (w.e.f. 1-4-1989). 

45 

 
 
 
 
 
 
 
                                                           
1[(28BB)  “insurer”  means  an  insurer,  being  an  Indian  insurance  company,  as  defined  under   
clause (7A) of section 2 of the Insurance Act, 1938 (4 of 1938), which has been granted a certificate 
of registration under section 3 of that Act;] 

2[(28C)  “Joint  Commissioner”  means  a  person  appointed  to  be  a  Joint  Commissioner  of      

Income-tax or an Additional Commissioner of Income-tax under sub-section (1) of section 117; 

(28D)  “Joint  Director”  means  a  person  appointed  to  be  a  Joint  Director  of  Income-tax  or  an 

Additional Director of Income-tax under sub-section (1) of section 117;] 

(29) “legal representative” has the meaning assigned to it in clause (11) of section 2 of the Code 

of Civil Procedure, 1908 (5 of 1908); 

3[(29A) “long-term capital asset” means a capital asset which is not a short-term capital asset; 

(29B) “long-term capital gain” means capital gain arising from the transfer of a long-term capital 

asset;] 

4[(29BA) “manufacture”, with its grammatical variations, means a change in a non-living physical 

object or article or thing,— 

(a) resulting in transformation of the object or article or thing into a new and distinct object 

or article or thing having a different name, character and use; or 

(b) bringing  into  existence  of  a  new  and  distinct  object  or  article  or  thing  with  a  different 

chemical composition or integral structure;] 

5[(29C)  “maximum  marginal  rate”  means  the  rate  of  income-tax  (including  surcharge  on 
income-tax, if any) applicable in relation to the highest slab of income in the case of an individual 
6[, association of persons or, as the case may be, body of individuals] as  specified in the Finance 
Act of the relevant year;] 

7[(29D) “National Tax Tribunal” means the National Tax Tribunal established under section 3 

of the National Tax Tribunal Act, 2005;] 

(30)  “non-resident”  means  a  person  who  is  not  a  “resident”  8[,  and  for  the  purposes  of     

sections 92, 93 9*** and 168, includes a person who is not ordinarily resident within the meaning of 
clause (6) of section 6; 

(31) “person” includes— 

 (i) an individual, 

(ii) a Hindu undivided family, 

1. Ins. by Act 14 of 2001, s. 3 (w.e.f. 1-4-2002). 
2. Ins. by Act 21 of 1998, s. 3 (w.e.f. 1-10-1998). 
3. Ins. by Act 11 of 1987, s. 3 (w.e.f. 1-4-1988). 
4. Ins. by Act 33 of 2009, s. 3 (w.r.e.f. 1-4-2009). 
5. Ins. by Act 4 of 1988, s. 3 (w.e.f. 1-4-1989). 
6.  Ins. by Act 49 of 1991, s. 3 (w.e.f. 1-4-1991). 
7.  Ins.  by  Act  49  of  2005,  s.  30  and  the  Schedule  (w.e.f.  28-12-2005).  This  amendment  has  been  struck  down  by  the 

Supreme Court’s order dated 25th September, 2014 in the Madras Bar Association Vs Union of India. 

8. Ins. by Act 27 of 1999, s. 3 (w.e.f. 1-4-1999). 
9. The figures “, 113” omitted by Act 10 of 1965, s. 4 (w.e.f. 1-4-1965). 

46 

                                                           
(iii) a company, 

(iv) a firm, 

(v) an association of persons or a body of individuals, whether incorporated or not, 

(vi) a local authority, and 

(vii) every artificial juridical person, not falling within any of the preceding sub-clauses. 

1[Explanation.—For  the  purposes  of  this  clause,  an  association  of  persons  or  a  body  of 
individuals  or  a  local  authority  or  an  artificial  juridical  person  shall  be  deemed  to  be  a  person, 
whether  or  not  such  person  or  body  or  authority  or  juridical  person  was  formed  or  established  or 
incorporated with the object of deriving income, profits or gains;] 

(32) “person who has a substantial interest in the company”, in relation to a company, means a 
person  who  is  the  beneficial  owner  of  shares,  not  being  shares  entitled  to  a  fixed  rate  of  dividend 
whether with or without a right to participate in profits, carrying not less than twenty per cent. of the 
voting power ; 

(33) “prescribed” means prescribed by rules made under this Act; 

(34) “previous year” means the previous year as defined in section 3; 

2[(34A)  “Principal  Chief  Commissioner  of  Income-tax” means  a  person  appointed  to  be  a 

Principal Chief Commissioner of Income-tax under sub-section (1) of section 117; 

(34B)  “Principal  Commissioner  of  Income-tax”  means  a  person  appointed  to  be  a  Principal 

Commissioner of Income-tax under sub-section (1) of section 117; 

(34C) “Principal Director of Income-tax” means a person appointed to be a Principal Director of 

Income-tax under sub-section (1) of section 117; 

(34D)  “Principal  Director  General  of  Income-tax”  means  a  person  appointed  to  be  a  Principal 

Director General of Income-tax under sub-section (1) of section 117;] 

(35) “principal officer”, used with reference to a local authority or a company or any other public 

body or any association of persons or any body of individuals, means— 

(a)  the secretary, treasurer, manager or agent of the authority, company, association or body, 

or 

(b)   any  person  connected  with  the  management  or  administration  of  the  local  authority, 
company,  association  or  body  upon  whom  the  3[Assessing  Officer]  has  served  a  notice  of  his 
intention of treating him as the principal officer thereof; 

(36) “profession” includes vocation; 

4[(36A)  “public  sector  company”  means  any  corporation  established  by  or  under  any  Central, 
State or Provincial Act or a Government company as defined in section 617 of the Companies Act, 
1956 (1 of 1956);] 

1. Ins. by Act 20 of 2002, s. 3 (w.e.f. 1-4-2002). 
2. Ins. by Act 25 of 2014, s. 3 (w.r.e.f. 1-6-2013). 
3. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
4. Ins. by Act 11 of 1987, s. 3 (w.e.f. 1-4-1987). 

47 

                                                           
(37)  “public  servant”  has  the  same  meaning  as  in  section  21  of  the  Indian  Penal  Code  (45  of 

1860); 

1[(37A) “rate or rates in force” or “rates in force”, in relation to an assessment year or financial 

year, means— 

tax”  payable  under  Chapter  XVIIC  4[in  a  case  not                  

the  “advance 

 (i)   for  the  purposes  of  calculating  income-tax  under  the  first  proviso  to  sub-section  (5) 
of section 132, or computing the income-tax chargeable under sub-section (4) of section 172 or 
sub-section  (2)  of section  174 or section  175 or  sub-section  (2)  of section  176 or  deducting 
income-tax  under section  192 from  income  chargeable  under  the  head  “Salaries”  2***  or 
3[computation  of 
falling  under section  115A or 5[section  115B 6[or section  115BB or section  115BBB or  section 
115E] or  section  164 or section  164A 7***  8[or section  167B]]],  the  rate  or  rates  of  income-tax 
specified  in  this  behalf  in  the  Finance  Act  of  the  relevant  year,  and  for  the  purposes  of 
computation of the “advance tax” payable under Chapter XVII-C 9[in a case falling under section 
115A or 10[section 
section  164 or section  164A 7***  8[or section  167B]],  the  rate  or  rates  specified  in section 
115A or 5[section  115B 6[or section  115BB or section  115BBB  or section  115E] or section  164 
or section 164A 7***  8[or section 167B], as the case may be,]] or the rate or rates of income-tax 
specified in this behalf in the Finance Act of the relevant year, whichever is applicable;]  

115B 6[or section 

115BBB or section 

115BB or section 

115E] or             

for 

(ii)  

under sections 
193, 194, 11[194A, 12[194B, 194BB] 13[and 194D], the rate or rates of income-tax specified in this 
behalf in the Finance Act of the relevant year;] 

deduction 

purposes 

the 

tax 

of 

of 

(iii)  for 

the  purposes  of  deduction  of 

tax  under 14[section  194LBA or] 15[section 
194LBB or section  194LBC or] section  195,  the  rate  or  rates  of  income-tax  specified  in  this 
behalf in the Finance Act of the relevant year or the rate or rates of income-tax specified in 16[an 
agreement entered into by the Central Government under section 90, or an agreement notified by 
the  Central  Government  under section  90A,  whichever is applicable  by  virtue of the provisions 
of section 90, or section 90A, as the case may be];] 

(38)  “recognised  provident  fund”  means  a  provident  fund  which  has  been  and  continues  to  be 
recognised  by  the 17[18[Principal  Chief  Commissioner  or  Chief  Commissioner]  or 18[Principal 
Commissioner  or  Commissioner]]  in  accordance  with  the  rules  contained  in  Part  A  of  the  Fourth 
Schedule,  and  includes  a  provident  fund  established  under  a  scheme  framed  under  the  Employees’ 
Provident Funds Act, 1952 (19 of 1952); 

1. Ins. by Act 20 of 1967, s. 4 (w.e.f. 1-4-1967). 
2. The words, brackets, figures and letters “or sub-section (9) of section 80E from any payment referred to therein” omitted 
by Act 4 of 1988, s. 3 (w.e.f. 1-4-1989). Earlier the quoted words were inserted by Act 19 of 1968, s. 4 (w.e.f. 1-4-1968). 
3. Subs. by Act 19 of 1970, s. 3, for “computation of the “advance tax” payable under Chapter XVII-C, the rate or rates of 

income-tax specified in this behalf in the Finance Act of the relevant year” (w.e.f. 1-4-1971). 
4. Subs. by Act 66 of 1976, s. 3, for “in a case not falling under section 164” (w.e.f. 1-6-1976). 
5. Subs. by Act 4 of 1988, s. 3, for “section 115B or section 164” (w.e.f 1-4-1988). 
6. Subs. by Act 20 of 2002, s. 3, for “or section 115BB or section 115E” (w.e.f. 1-4-2003). 
7. The words, figures and letters “or section 167A” omitted by Act 3 of 1989, s. 2 (w.e.f. 1-4-1989). 
8. Ins. by Act 4 of 1988, s. 2 (w.e.f. 1-4-1989). 
9. Subs.by Act 66 of 1976, s. 3, for “in a case falling under section 164, the rate specified in that section” (w.e.f. 1-6-1976). 
10. Subs. by Act 4 of 1988, s. 3, for “section 115B or, as the case may be, section 164” (w.e.f. 1-4-1988). 
11. Subs. by Act 16 of 1972, s. 3, for “194A” (w.e.f. 1-4-1972). 
12. Subs. by Act 19 of 1978, s. 32, for “194B,” (w.e.f. 1-4-1978). 
13. Subs. by Act 49 of 1991, s. 3, for “, 194D and 195” (w.e.f. 1-10-1991). 
14. Ins. by Act 20 of 2015, s. 3 (w.e.f. 1-4-2016). 
15. Ins. by Act 28 of 2016, s.3 (w.ef. 1-6-2016). 
16. Subs. by Act  21 of 2006, s. 3, for “an agreement entered into by the Central Government under section 90, whichever is 

applicable by virtue of the provisions of section 90” (w.e.f. 1-6-2006). 

17. Subs. by Act 4 of 1988, s. 2, for “Commissioner” (w.e.f. 1-4-1988). 
18. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.e.f. 1-6-2013). 

48 

                                                           
1* 

* 

* 

* 

* 

(40)  “regular  assessment”  means 

the  assessment  made  under 

2[sub-section 

(3)  of                      

section 143] or section 144; 

(41)  “relative”,  in  relation  to  an  individual,  means  the  husband,  wife,  brother  or  sister  or  any 

lineal ascendant or descendant of that individual; 

3[(41A) “resulting company” means one or more companies (including a wholly owned subsidiary 
thereof)  to  which  the  undertaking  of  the  demerged  company  is  transferred  in  a  demerger  and,  the 
resulting company in consideration of such transfer of undertaking, issues shares to the shareholders 
of  the  demerged  company  and  includes  any  authority  or  body  or  local  authority  or  public  sector 
company or a company established, constituted or formed as a result of demerger;] 

(42) “resident” means a person who is resident in India within the meaning of section 6; 
4[(42A)  5[“short-term capital asset” means a capital asset held by an assessee for not more than  

6[thirty-sixmonths] immediately preceding the date of its transfer:]] 

7[Provided that in the case of 8[a security (other than a unit) listed in a recognised stock exchange 
in India] 9[or a unit of the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 
of  1963)  or  10[a  unit  of  an  equity  oriented  fund]]  11[or  a  zero  coupon  bond],  the  provisions  of  this 
clause shall have effect as if for the words “thirty-six months”, the words “twelve months” had been 
substituted:] 

12[Provided further that in case of a share of a company (not being a share listed in a recognised 
stock  exchange)  or  a  unit  of  a  Mutual  Fund  specified  under  clause  (23D)  of  section  10,  which  is 
transferred during the period beginning on the 1st day of April, 2014 and ending on the 10th day of 
July, 2014, the provisions of this clause shall have effect as if for the words “thirty-six months”, the 
words “twelve months” had been substituted:] 

13[Provided also that in the case of a share of a company (not being a share listed in a recognised 
stock exchange in India), 14[or an immovable property, being land or building or both] the provisions 
of  this  clause  shall  have  effect  as  if  for  the  words  “thirty-six  months”,  the  words  “twenty-four 
months” had been substituted.] 

15[Explanation  1].—(i)  In  determining  the  period  for  which  any  capital  asset  is  held  by  the 

assessee— 

(a)  in the case of a share held in a company in liquidation, there shall be excluded the period 

subsequent to the date on which the company goes into liquidation; 

1.  Clause  (39)  omitted  by  Act  18  of  1992,  s.  3  (w.e.f.  1-4-1993).  Earlier  clause  (39)  substituted by  Act  36  of  1989,  s.  2  
(w.e.f. 1-4-1989) which was later omitted by Act 4 of 1988, s. 3 (w.e.f. 1-4-1989) and again restored by Act 3 of 1989, s. 
95 (w.e.f. 1-4-1989). 

2. Subs. by Act 12 of 1990, s. 3, for “section 143” (w.e.f. 1-4-1989). 
3. Ins. by Act 27 of 1999, s. 3 (w.e.f. 1-4-2000). 
4. Ins. by Act 20 of 1962, s. 3 (w.e.f. 1-4-1962). 
5. Subs. by Act 21 of 1973, s. 3, for certain words (w.e.f. 1-4-1974). 
6. Subs. by Act 29 of 1977, s. 3, for “sixty months” (w.e.f. 1-4-1978). 
7. Ins. by Act 11 of 1987, s. 3 (w.e.f. 1-4-1988). 
8. Subs. by Act 25 of 2014, s. 3, for “a share held in a company or any other security listed in a recognized stock  exchange 

in India” (w.e.f. 1-4-2015). 

9. Ins. by Act 32 of 1994, s. 3 (w.e.f. 1-4-1995). 
10. Subs. by Act 25 of 2014, s. 3, for “a unit of a Mutual Fund specified under clause (23D) of section 10” (w.e.f. 1-4-2015) 
11. Ins. by Act 18 of 2005, s. 3 (w.e.f. 1-4-2006). 
12. Ins. by Act 25 of 2014, s. 3 (w.e.f. 1-4-2015). 
13. Ins. by Act 28 of 2016, s. 3 (w.e.f. 1-4-2017). 
14. Ins. by Act 7 of 2017, s. 3 (we.f. 1-4-2018). 
15. Existing Explanation renumbered as Explanation 1 by Act 32 of 1994, s. 3 (w.e.f. 1-4-1995). 

49 

 
 
 
 
 
 
 
                                                           
(b)  in  the  case  of  a  capital  asset  which  becomes  the  property  of  the  assessee  in  the 
circumstances mentioned in 1[sub-section (1)] of section 49, there shall be included the period for 
which the asset was held by the previous owner referred to in the said section; 

2[(ba) in the case of a capital asset referred to in clause (via) of section 28, the period shall be 

reckoned from the date of its conversion or treatment;] 

3[(c)  in  the  case  of  a  capital  asset  being  a  share  or  shares  in  an  Indian  company,  which 
becomes  the  property  of  the  assessee  in  consideration  of  a  transfer  referred  to  in  clause  (vii) 
of section 47, there shall be included the period for which the share or shares in the amalgamating 
company were held by the assessee;] 

4[(d) in the case of a capital asset, being a share or any other security (hereafter in this clause 
referred  to  as  the  financial  asset)  subscribed  to  by  the  assessee  on  the  basis  of  his  right  to 
subscribe to such financial asset or subscribed to by the person in whose favour the assessee has 
renounced his right to subscribe to such financial asset, the period shall be reckoned from the date 
of allotment of such financial asset; 

(e) in the case of a capital asset, being the right to subscribe to any financial asset, which is 
renounced in favour of any other person, the period shall be reckoned from the date of the offer of 
such right by the company or institution, as the case may be, making such offer;] 

5[(f) in the case of a capital asset, being a financial asset, allotted without any payment and on 
the basis of holding of any other financial asset, the period shall be reckoned from the date of the 
allotment of such financial asset;] 

6[(g) in  the  case  of  a  capital  asset,  being  a  share  or  shares  in  an  Indian  company,  which 
becomes the property of the assessee in consideration of a demerger, there shall be included the 
period for which the share or shares held in the demerged company were held by the assessee;] 

7[(h) in  the  case  of  a  capital  asset,  being  trading  or  clearing  rights  of  a  recognised  stock 
exchange  in  India  acquired  by  a  person  pursuant  to  demutualisation  or  corporatisation  of  the 
recognised  stock  exchange  in  India  as  referred  to  in  clause  (xiii)  of section  47,  there  shall  be 
included the period for which the person was a member of the recognised stock exchange in India 
immediately prior to such demutualisation or corporatisation; 

(ha) in the case of a capital asset, being equity share or shares in a company allotted pursuant 
to  demutualisation  or  corporatisation  of  a  recognised  stock  exchange  in  India  as  referred  to  in 
clause (xiii) of section 47, there shall be included the period for which the person was a member 
of  the  recognised  stock  exchange  in  India  immediately  prior  to  such  demutualisation  or 
corporatisation;] 

1. Subs. by Act 20 of 1967, s. 4, for “clauses (i) to (iii)” (w.e.f. 1-4-1967). 

2. Ins. by Act 13 of 2018, s. 3 (w.e.f. 1-4-2019). 

3. Ins. by Act 20 of 1967, s. 4 (w.e.f. 1-4-1967). 

4. Ins. by Act 32 of 1994, s. 3 (w.e.f. 1-4-1995). 

5. Ins. by Act 22 of 1995, s. 3 (w.e.f. 1-4-1996). 

6. Ins. by Act 27 of 1999, s. 3 (w.e.f. 1-4-2000). 

7. Ins. by Act 32 of 2003, s. 3 (w.e.f. 1-4-2004). 

50 

                                                           
1[(hb)  in  the  case  of  a  capital  asset,  being  any  specified  security  or  sweat  equity  shares 
allotted or transferred, directly or indirectly, by the employer free of cost or at concessional rate 
to his employees (including former employee or employees), the period shall be reckoned from 
the date of allotment or transfer of such specified security or sweat equity shares;] 

2[(hc) in  the  case  of  a  capital  asset,  being  a  unit  of  a  business  trust,  allotted  pursuant  to 
transfer of share or shares as referred to in clause (xvii) of section 47, there shall be included the 
period for which the share or shares were held by the assessee;] 

3[(hd) in the case of a capital asset, being a unit or units, which becomes the  property of the 
assessee  in  consideration  of  a  transfer  referred  to  in  clause  (xviii) of section  47,  there  shall  be 
included  the  period  for  which  the  unit  or  units  in the  consolidating  scheme  of  the  mutual  fund 
were held by the assessee; 

(he) in the case of a capital asset, being share or shares of a company, which is acquired by 
the non-resident assessee on redemption of Global Depository Receipts referred to in clause (b) 
of sub-section (1) of section 115AC held by such assessee, the period shall be reckoned from the 
date on which a request for such redemption was made;] 

4[(hf)  in  the  case  of  a  capital  asset,  being  equity  shares  in  a  company,  which  becomes  the 
property of the assessee in consideration of a transfer referred to in clause (xb) of section 47, there 
shall be included the period for which the preference shares were held by the assessee;] 

5[(hg)  in  the  case  of  a  capital  asset,  being  a  unit  or  units,  which  becomes  the  property  of  the 
assessee in consideration of a transfer referred to in clause (xix) of section 47, there shall be included 
the period for which the unit or units in the consolidating plan of a mutual fund scheme were held by 
the assessee;] 

(ii) In respect of capital assets other than those mentioned in clause (i), the period for which any 
capital  asset  is  held  by  the  assessee  shall  be  determined  subject  to  any  ruleswhich  the  Board  may 
make in this behalf. 

6[Explanation  2.—For  the  purposes  of  this  clause,  the  expression  “security”  shall  have  the 
meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 
(42 of 1956).] 

1[Explanation 3.—For the purposes of this clause, the expressions “specified security” and “sweat 
equity shares” shall have the meanings respectively assigned to them in the Explanation to clause (d) 
of sub-section (1) of section 115WB.] 

1. Ins. by Act 22 of 2007, s. 3 (w.e.f. 1-4-2008). 

2. Ins. by Act 25 of 2014, s. 3 (w.e.f. 1-10-2014). 

3. Ins. by Act 20 of 2015, s. 3 (w.e.f. 1-4-2016). 

4. Ins. by Act 7 of 2017, s. 3 (w.e.f. 1-4-2018). 

5. Ins. by s. 3, ibid. (w.e.f. 1-4-2017). 

6. Ins. by Act 32 of 1994, s. 3 (w.e.f. 1-4-1995). 

51 

                                                           
1[Explanation  4.—For  the  purposes  of  this  clause,  the  expression  “equity  oriented  fund”  shall 

have the meaning assigned to it in 2[clause (a) of the Explanation to section 112A];] 

3[(42B)  “short-term  capital  gain”  means  capital  gain  arising  from  the  transfer  of  a  short-term 

capital asset;] 

4[(42C) “slump sale” means the transfer of one or more undertakings as a result of the sale for a 
lump sum consideration without values being assigned to the individual assets and liabilities in such 
sales. 

Explanation 1.—For the purposes of this clause, “undertaking” shall have the meaning assigned 

to it in Explanation 1 to clause (19AA). 

Explanation  2.—For  the  removal  of  doubts,  it  is  hereby  declared  that  the  determination  of  the 
value of an asset or liability for the sole purpose of payment of stamp duty, registration fees or other 
similar taxes or fees shall not be regarded as assignment of values to individual assets or liabilities;] 

5[(43) “tax” in relation to the assessment year commencing on the 1st day of April, 1965, and any 
subsequent  assessment  year  means  income-tax  chargeable  under  the  provisions  of  this  Act,  and  in 
relation  to  any  other  assessment  year  income-tax  and  super-tax  chargeable  under  the  provisions  of 
this Act prior to the aforesaid date 6[and in relation to the assessment year commencing on the 1st day 
of  April,  2006,  and  any  subsequent  assessment  year  includes  the  fringe  benefit  tax  payable 
under section 115WA]; 

(43A) “tax credit certificate” means a tax credit certificate granted to any person in accordance 

with the provisions of Chapter XXII-B and any scheme made thereunder;] 

7* 

* 

* 

* 

* 

8[(44)  “Tax  Recovery  Officer”  means  any  Income-tax  Officer  who  may  be  authorised  by  the 
9[Principal  Chief  Commissioner  or  Chief  Commissioner]  or  10[Principal  Commissioner  or 
Commissioner],  by  general  or  special  order  in  writing,  to  exercise  the  powers  of  a  Tax  Recovery 
Officer  11[and  also  to  exercise  or  perform  such  powers  and  functions  which  are  conferred  on,  or 
assigned to, an Assessing Officer under this Act and which may be prescribed];] 

1. Ins. by Act 25 of 2014, s. 3 (w.e.f. 1-4-2015). 

2. Subs. by Act 13 of 2018, s. 3, for “the Explanation to clause (38) of section 10” (w.e.f. 1-4-2019). 

3. Ins. by Act 11 of 1987, s. 3 (w.e.f. 1-4-1988). 

4. Ins. by Act 27 of 1999, s. 3 (w.e.f. 1-4-2000). 

5. Subs. by Act 10 of 1965, s. 4, for clause (43) (w.e.f. 1-4-1965). 

6. Subs. by Act 18 of 2005, s. 3, for “the aforesaid date” (w.e.f. 1-4-2006). 

7. Clause (43B) omitted by Act 4 of 1988, s. 3 (w.e.f. 1-4-1989). 

8. Subs. by s. 3, ibid., for clause (44) (w.e.f. 1-4-1989). 

9. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). 

10. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 

11. Ins. by Act 29 of 2006, s. 2 (w.e.f. 13-7-2006). 

52 

 
 
 
 
 
 
 
                                                           
(45) “total income” means the total amount of income referred to in section 5, computed in the 

manner laid down in this Act; 

1* 

* 

* 

* 

* 

2[(47) “transfer”, in relation to a capital asset, includes,— 

 (i)  the sale, exchange or relinquishme 

nt of the asset; or 

(ii)  the extinguishment of any rights therein; or 

(iii) the compulsory acquisition thereof under any law; or 

(iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, 

stock-in-trade of a business carried on by him, such conversion or treatment;] 3[or] 

4[(iva) the maturity or redemption of a zero coupon bond; or] 

3[(v) any transaction involving the allowing of the possession of any immovable property to 
be taken or retained in part performance of a contract of the nature referred to in section 53A of 
the Transfer of Property Act, 1882 (4 of 1882); or 

(vi)  any  transaction  (whether  by  way  of  becoming  a  member  of,  or  acquiring  shares  in,  a  
co-operative society, company or other association of persons or by way of any agreement or any 
arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling 
the enjoyment of, any immovable property. 

5[Explanation 1].—For the purposes of sub-clauses (v) and (vi), “immovable property” shall have 

the same meaning as in clause (d) of section 269UA.] 

6[Explanation  2.—For  the  removal  of  doubts,  it  is  hereby  clarified  that  “transfer”  includes  and 
shall be deemed to have always included disposing of or parting with an asset or any interest therein, 
or  creating  any  interest in any  asset  in  any  manner  whatsoever,  directly  or indirectly,  absolutely  or 
conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or 
outside  India)  or  otherwise,  notwithstanding  that  such  transfer  of  rights  has  been  characterised  as 
being  effected  or  dependent  upon  or  flowing  from  the  transfer  of  a  share  or  shares  of  a  company 
registered or incorporated outside India;] 

7[(48) “zero coupon bond” means a bond— 

(a) issued by any infrastructure capital company or infrastructure capital fund or public sector 

company 8[or scheduled bank] on or after the 1st day of June, 2005; 

(b) in respect of which no payment and benefit is received or receivable before maturity or 
redemption  from  infrastructure  capital  company  or  infrastructure  capital  fund  or  public  sector 
company 8[or scheduled bank]; and 

(c) which the Central Government may, by notification in the Official Gazette, specify in this 

behalf. 

1. Clause (46) omitted by Act 10 of 1965, s. 4 (w.e.f. 1-4-1965). 
2. Subs. by Act 67 of 1984, s. 2, for clause (47) (w.e.f. 1-4-1985). 
3. Ins. by Act 11 of 1987, s. 3 (w.e.f. 1-4-1988). 
4. Ins. by Act 18 of 2005, s. 3 (w.e.f. 1-4-2006). 
5. The Explanation renumbered as Explanation 1 by Act 23 of 2012, s. 3 (w.e.f. 1-4-1962). 
6. Ins. by s. 3, ibid. (w.e.f. 1-4-1962). 
7. Ins. by Act 18 of 2005, s. 3 (w.e.f. 1-4-2006). Earlier clause (48) omitted by Act 4 of 1988, s. 3 (w.e.f. 1-4-1989) and later 

restored by Act 3 of 1989, s. 95 (w.e.f. 1-4-1989) and again omitted by Act 18 of 1992, s. 2 (w.e.f. 1-4-1993). 

8. Ins. by Act 33 of 2009, s. 3 (w.e.f. 1-4-2009). 

53 

 
 
 
 
 
 
 
                                                           
1[Explanation.—For the purposes of this clause, the expression “scheduled bank” shall have the 
meaning  assigned  to  it  in  clause  (ii)  of  the Explanation to  sub-clause  (c)  of  clause  (viia)  of  
sub-section (1) of section 36.]] 

2[3. “Previous  year”  defined.—For  the  purposes  of  this  Act,  “previous  year”  means  the  financial 

year immediately preceding the assessment year: 

Provided that,  in  the  case  of  a  business  or  profession  newly  set  up,  or  a  source  of  income  newly 
coming into existence, in the said financial year, the previous year shall be the period beginning with the 
date of setting up of the business or profession or, as the case may be, the date on which the source of 
income newly comes into existence and ending with the said financial year.] 

CHAPTER II 

BASIS OF CHARGE 

4. Charge of income-tax.—(1) Where any Central Act enacts that income-tax shall be charged for 
any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that 
year in accordance with, and  3[subject to the provisions (including provisions for the levy of additional 
income-tax) of, this Act] in respect of the total income of the previous year 4***of every person: 

Provided that where by virtue of any provision of this Act income-tax is to be charged in respect of 

the income of a period other than the previous year, income-tax shall be charged accordingly. 

(2) In respect of income chargeable under sub-section (1), income-tax shall be deducted at the source 

or paid in advance, where it is so deductible or payable under any provision of this Act. 

5. Scope of total income.—(1) Subject to the provisions of this Act, the total income of any previous 

year of a person who is a resident includes all income from whatever source derived which— 

(a)  is received or is deemed to be received in India in such year by or on behalf of such person; 

or 

(b)  accrues or arises or is deemed to accrue or arise to him in India during such year; or 

(c)  accrues or arises to him outside India during such year: 

Provided that,  in  the  case  of  a  person  not  ordinarily  resident  in  India  within  the  meaning  of                 

sub-section (6) of section 6, the income which accrues or arises to him outside India shall not be so 
included unless it is derived from a business controlled in or a profession set up in India. 

(2) Subject to the provisions of this Act, the total income of any previous year of a person who is a 

non-resident includes all income from whatever source derived which— 

(a)   is  received  or  is  deemed  to  be  received  in  India  in  such  year  by  or  on  behalf  of  such       

person; or 

(b)  accrues or arises or is deemed to accrue or arise to him in India during such year. 

Explanation 1.—Income accruing or arising outside India shall not be deemed to be received in India 
within the meaning of this section by reason only of the fact that it is taken into account in a balance sheet 
prepared in India. 

Explanation  2.—For  the  removal  of  doubts,  it  is  hereby  declared  that  income  which  has  been 
included in the total income of a person on the basis that it has accrued or arisen or is deemed to have 
accrued or arisen to him shall not again be so included on the basis that it is received or deemed to be 
received by him in India. 

1. Ins. by Act 33 of 2009, s. 3 (w.e.f. 1-4-2009). 
2. Subs. by Act 27 of 1999, s. 4 (w.e.f. 1-4-2000). 
3. Subs. by Act 4 of 1988, s. 5, for “subject to the provisions of this Act” (w.e.f. 1-4-1989). 
4. The words “or previous years, as the case may be” omitted by s. 5, ibid. (w.e.f. 1-4-1989). 

54 

                                                           
1[5A. Apportionment  of  income  between  spouses  governed  by  Portuguese  Civil  Code.—(1) 
Where  the  husband  and  wife  are  governed  by  the  system  of  community  of  property  (known  under  the 
Portuguese Civil Code of 1860 as “COMMUNIAO DOS BENS”) in force in the State of Goa and in the 
Union territories of Dadra and Nagar Haveli and Daman and Diu, the income of the husband and of the 
wife  under  any  head  of  income  shall  not  be  assessed  as  that  of  such  community  of  property  (whether 
treated as an association of persons or a body of individuals), but such income of the husband and of the 
wife  under  each  head  of  income  (other  than  under  the  head  “Salaries”)  shall  be  apportioned  equally 
between the husband and the wife and the income so apportioned shall be included separately in the total 
income of the husband and of the wife respectively, and the remaining provisions of this Act shall apply 
accordingly. 

(2)  Where  the  husband  or,  as  the  case  may  be,  the  wife  governed  by  the  aforesaid  system  of 
community of property has any income under the head “Salaries”, such income shall be included in the 
total income of the spouse who has actually earned it.] 

6. Residence in India.—For the purposes of this Act,— 

(1)  An individual is said to be resident in India in any previous year, if he— 

(a)  is in India in that year for a period or periods amounting in all to one hundred and eighty-

two days or more; or 

2* 

* 

* 

* 

* 

(c)   having  within  the  four  years  preceding  that  year  been  in  India  for  a  period  or  periods 
amounting in all to three hundred and sixty-five days or more, is in India for a period or periods 
amounting in all to sixty days or more in that year. 

3[Explanation 4[1].—In the case of an individual,— 

 (a) being a citizen of India, who leaves India in any previous year 5[as a member of the crew 
of an Indian ship as defined in clause (18) of section 3 of the Merchant Shipping Act, 1958 (44 of 
1958),  or]  for  the  purposes  of  employment  outside  India,  the  provisions  of  sub-clause  (c)  shall 
apply in relation to that year as if for the words “sixty days”, occurring therein, the words “one 
hundred and eighty-two days” had been substituted; 

 (b) being a citizen of India, or a person of Indian origin within the meaning of Explanation to 
clause (e)  of section  115C,  who,  being  outside  India,  comes  on  a  visit  to  India in  any  previous 
year, the provisions of sub-clause (c) shall apply in relation to that year as if for the words “sixty 
days”, occurring therein, the words “one hundred and 6[eighty-two] days” had been substituted.] 

7[Explanation 2.—For the purposes of this clause, in the case of an individual, being a citizen of 
India and a member of the crew of a foreign bound ship leaving India, the period or periods of stay in 
India shall, in respect of such voyage, be determined in the manner and subject to such conditions as 
may be prescribed.] 

(2) A Hindu undivided family, firm or other association of persons is said to be resident in India 
in any previous year in every case except where during that year the control and management of its 
affairs is situated wholly outside India. 

1. Ins. by Act 32 of 1994, s. 4 (w.e.f. 1-4-1963). 
2. Sub-clause (b) omitted by Act 14 of 1982, s. 3 (w.e.f. 1-4-1983). 
3. Subs. by Act 36 of 1989, s. 3, for the “Explanation” (w.e.f. 1-4-1990). 
4. Explanation renumbered as Explanation1 thereof by Act 20 of 2015, s. 4 (w.e.f. 1-4-2015). 
5. Ins. by Act 12 of 1990, s. 4 (w.e.f. 1-4-1990). 
6. Subs. by Act 32 of 1994, s. 5 (w.e.f. 1-4-1995). 
7. Ins. by Act 20 of 2015, s. 4 (w.e.f. 1-4-2015). 

55 

 
 
 
 
 
 
 
                                                           
1[(3) A company is said to be a resident in India in any previous year, if— 

 (i)  it is an Indian company; or 

 (ii)  its place of effective management, in that year, is in India. 

Explanation.—For  the  purposes  of  this  clause  “place  of  effective  management”  means  a  place 
where key management and commercial decisions that are necessary for the conduct of business of an 
entity as a whole are, in substance made.] 

(4) Every other person is said to be resident in India in any previous year in every case, except 

where during that year the control and management of his affairs is situated wholly outside India. 

(5) If a person is resident in India in a previous year relevant to an assessment year in respect of 
any source of income, he shall be deemed to be resident in India in the previous year relevant to the 
assessment year in respect of each of his other sources of income. 

2[(6) A person is said to be “not ordinarily resident” in India in any previous year if such person 

is— 

(a)  an individual who has been a non-resident in India in nine out of the ten previous years 
preceding that year, or has during the seven previous years preceding that year been in India for a 
period of, or periods amounting in all to, seven hundred and twenty-nine days or less; or 

(b)  a Hindu undivided family whose manager has been a non-resident in India in nine out of 
the ten previous years preceding that year, or has during the seven previous years preceding that 
year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine 
days or less.] 

7. Income deemed to be received.—The following incomes shall be deemed to be received in the 

previous year:— 

 (i)  the  annual  accretion  in  the  previous  year  to  the  balance  at  the  credit  of  an  employee 
participating in a recognised provident fund, to the extent provided in rule 6 of Part A of the Fourth 
Schedule; 

(ii) the transferred balance in a recognised provident fund, to the extent provided in sub-rule (4) 

of rule 11 of Part A of the Fourth Schedule; 

3[(iii) the contribution made, by the Central Government 4[or any other employer] in the previous 

year, to the account of an employee under a pension scheme referred to in section 80CCD.] 

8. Dividend income.—5[For the purposes of inclusion in the total income of an assessee,— 

(a)  any  dividend]  declared  by  a  company  or  distributed  or  paid  by  it  within  the  meaning  of      

sub-clause (a)  or  sub-clause  (b)  or sub-clause (c)  or sub-clause  (d)  or  sub-clause  (e) of  clause (22) 
of section  2 shall  be  deemed  to  be  the  income  of  the  previous  year  in  which  it  is  so  declared, 
distributed or paid, as the case may be; 

6[(b)  any  interim  dividend  shall  be  deemed  to  be the income  of  the  previous  year  in  which the 
amount  of  such  dividend  is  unconditionally  made  available  by  the  company  to  the  member  who  is 
entitled to it.] 

1. Subs. by Act 28 of 2016, s. 4, for clause (3) (w.e.f. 1-4-2017). 
2. Subs. by Act 32 of 2003, s. 4, for certain words (w.e.f. 1-4-2004).  
3. Ins. by Act 23 of 2004, s. 4 (w.e.f. 1-4-2004). 
4. Subs. by Act 22 of 2007, s. 4 (w.e.f. 1-4-2004). 
5.  Subs.  by  Act  10  of  1965,  s.  5,  for  “For  the  purposes  of  inclusion  in  the  total  income  of  an  assessee,  any  dividend”          

(w.e.f. 1-4-1965). 

6. Ins. by s. 5, ibid. (w.e.f. 1-4-1965). 

56 

                                                           
9.  Income  deemed  to  accrue  or  arise  in  India.—(1)  The  following  incomes  shall  be  deemed  to 

accrue or arise in India:— 

(i)  all  income  accruing  or  arising,  whether  directly  or  indirectly,  through  or  from  any  business 
connection in India, or through or from any property in India, or through or from any asset or source 
of income in India, 1*** or through the transfer of a capital asset situate in India. 

Explanation 2[1].—For the purposes of this clause— 

(a)   in  the  case  of  a  business  of  which  all  the  operations  are  not  carried  out  in  India,  the 
income of the business deemed under this clause to accrue or arise in India shall be only such part 
of the income as is reasonably attributable to the operations carried out in India; 

(b)  in the case of a non-resident, no income shall be deemed to accrue or arise in India to him 
through or from operations which are confined to the purchase of goods in India for the purpose 
of export; 

3* 

* 

* 

* 

* 

4[(c)  in the case of a non-resident, being a person engaged in the business of running a news 
agency or of publishing newspapers, magazines or journals, no income shall be deemed to accrue 
or arise in India to him through or from activities which are confined to the collection of news 
and views in India for transmission out of India;] 

5[(d)  in the case of a non-resident, being— 

(1) an individual who is not a citizen of India; or 

(2) a firm which does not have any partner who is a citizen of India or who is resident in 

India; or 

(3) a company which does not have any shareholder who is a citizen of India or who is 

resident in India, 

no  income  shall  be  deemed  to  accrue  or  arise  in  India  to  such  individual,  firm  or  company 
through  or  from  operations  which  are  confined  to  the  shooting  of  any  cinematograph  film  in 
India;] 

6[(e)  in  the  case  of  a  foreign  company  engaged  in  the  business  of  mining  of  diamonds,  no 
income shall be deemed to accrue or arise in India to it through or from the activities which are 
confined  to  the  display  of  uncut  and  unassorted  diamond  in  any  special  zone  notified  by  the 
Central Government in the Official Gazette in this behalf.] 

7[Explanation  2.—For  the  removal  of  doubts,  it  is  hereby  declared  that  “business  connection” 
shall  include  any  business  activity  carried  out  through  a  person  who,  acting  on  behalf  of  the  non-
resident,— 

1.  The  words  “or  through  or  from  any  money  lent  at  interest  and  brought  into  India  in  cash  or  in  kind”  omitted  by                         

Act 66 of 1976, s. 4 (w.e.f. 1-6-1976).  

2. Explanation renumbered as Explanation 1 thereof by Act 32 of 2003, s. 5 (w.e.f. 1-4-2004). 
3. The proviso omitted by Act 5 of 1964, s. 5 (w.e.f. 1-4-1964). 
4. Ins. by Act 11 of 1983, s. 4 (w.e.f. 1-4-1962). 
5. Ins. by Act 67 of 1984, s. 3 (w.e.f. 1-4-1982). 
6. Ins. by Act 28 of 2016, s. 5 (w.e.f. 1-4-2016). 
7. Ins. by Act 32 of 2003, s. 5 (w.e.f. 1-4-2004). 

57 

 
 
 
 
 
 
 
                                                           
1[(a) has and habitually exercises in India, an authority to conclude contracts on behalf of the 
non-resident  or  habitually  concludes  contracts  or  habitually  plays  the  principal  role  leading  to 
conclusion of contracts by that non-resident and the contracts are–– 

(i) in the name of the non-resident; or 

(ii) for the transfer of the ownership of, or for the granting of the right to use, property 

owned by that non-resident or that non-resident has the right to use; or 

(iii) for the provision of services by the non-resident; or] 

(b)  has no such authority, but habitually maintains in India a stock of goods or merchandise 

from which he regularly delivers goods or merchandise on behalf of the non-resident; or 

(c)   habitually  secures  orders  in  India,  mainly  or  wholly  for  the  non-resident  or  for  that     

non-resident and other non-residents controlling, controlled by, or subject to the same common 
control, as that non-resident: 

Provided that  such  business  connection  shall  not  include  any  business  activity  carried  out 
through a broker, general commission agent or any other agent having an independent status, if 
such broker, general commission agent or any other agent having an independent status is acting 
in the ordinary course of his business: 

Provided further that where such broker, general commission agent or any other agent works 
mainly or wholly on behalf of a non-resident (hereafter in this proviso referred to as the principal 
non-resident) or on behalf of such non-resident and other non-residents which are controlled by 
the principal non-resident or have a controlling interest in the principal non-resident or are subject 
to the same common control as the principal non-resident, he shall not be deemed to be a broker, 
general commission agent or an agent of an independent status. 

2[Explanation 2A.––For the removal of doubts, it is hereby clarified that the significant economic 
presence  of  a  non-resident  in  India  shall  constitute  “business  connection”  in  India  and  “significant 
economic presence” for this purpose, shall mean–– 

(a) transaction in respect of any goods, services or property carried out by a non-resident in 
India including provision of download of data or software in India, if the aggregate of payments 
arising  from  such  transaction  or  transactions  during  the  previous  year  exceeds  such  amount  as 
may be prescribed; or 

(b) systematic and continuous soliciting of business activities or engaging in interaction with 

such number of users as may be prescribed, in India through digital means: 

Provided that the  transactions  or  activities shall  constitute  significant economic  presence in 

India, whether or not,— 

(i) the agreement for such transactions or activities is entered in India; 

(ii) the non-resident has a residence or place of business in India; or 

(iii) the non-resident renders services in India: 

Provided  further  that  only  so  much  of  income  as  is  attributable  to  the  transactions  or 

activities referred to in clause (a) or clause (b) shall be deemed to accrue or arise in India.] 

1. Subs. by Act 13 of 2018, s. 4, for clause (a) (w.e.f. 1-4-2019). 
2. Ins. by s. 4, ibid. (w.e.f. 1-4-2019). 

58 

                                                           
Explanation 3.—Where a business is carried on in India through a person referred to in clause (a) 
or  clause  (b)  or  clause  (c)  of Explanation  2,  only  so  much  of  income  as  is  attributable  to  the 
operations carried out in India shall be deemed to accrue or arise in India.] 

1[Explanation 4.—For the removal of doubts, it is hereby clarified that the expression “through” 
shall mean and include and shall be deemed to have always meant and included “by means of”, “in 
consequence of” or “by reason of”. 

Explanation 5.—For the removal of doubts, it is hereby clarified that an asset or a capital asset 
being  any  share  or interest  in  a company  or  entity  registered  or  incorporated outside  India  shall  be 
deemed  to  be  and  shall  always  be  deemed  to  have  been  situated  in  India,  if  the  share  or  interest 
derives, directly or indirectly, its value substantially from the assets located in India:] 

2[Provided that nothing contained in this Explanation shall apply to an asset or capital asset, which is 
held by a non-resident by way of investment, directly or indirectly, in a Foreign Institutional Investor as 
referred to in clause (a) of the Explanation to section 115AD for an assessment year commencing on or 
after the 1st day of April, 2012 but before the 1st day of April, 2015:] 

3[Provided further that nothing contained in this Explanation shall apply to an asset or capital asset, 
which is held by a non-resident by way of investment, directly or indirectly, in Category-I or Category-II 
foreign portfolio investor under the Securities and Exchange Board of India (Foreign Portfolio Investors) 
Regulations, 2014, made under the Securities and Exchange Board of India Act, 1992.] 

4[Explanation 6.—For the purposes of this clause, it is hereby declared that— 

 (a)  the  share  or  interest,  referred  to  in Explanation  5,  shall  be  deemed  to  derive  its  value 
substantially from the assets (whether tangible or intangible) located in India, if, on the specified 
date, the value of such assets— 

(i)  exceeds the amount of ten crore rupees; and 

(ii)  represents at least fifty per cent. of the value of all the assets owned by the company 

or entity, as the case may be; 

(b)  the value of an asset shall be the fair market value as on the specified date, of such asset 
without reduction of liabilities, if any, in respect of the asset, determined in such manner as may 
be prescribed; 

(c) “accounting  period”  means  each  period  of  twelve  months  ending  with  the  31st  day  of 

March: 

Provided that where a company or an entity, referred to in Explanation 5, regularly adopts a 

period of twelve months ending on a day other than the 31st day of March for the purpose of— 

 (i)   complying  with  the  provisions  of  the  tax  laws  of  the  territory,  of  which  it  is  a 

resident, for tax purposes; or 

1. Ins. by Act 23 of 2012, s. 4 (w.e.f. 1-4-1962). 
2. The proviso inserted by Act 7 of 2017, s. 4 (w.e.f. 1-4-2012). 
3. The proviso inserted by s. 4, ibid. (w.e.f. 1-4-2015). 
4. Ins. by Act 20 of 2015, s. 5 (w.e.f. 1-4-2016). 

59 

                                                           
(ii)  reporting to persons holding the share or interest, 

then,  the  period  of  twelve  months  ending  with  the  other  day  shall  be  the  accounting  period  of  the 
company or, as the case may be, the entity: 

Provided further that the first accounting period of the company or, as the case may be, the 
entity shall begin from the date of its registration or incorporation and end with the 31st day of 
March  or  such  other  day,  as  the  case  may  be,  following  the  date  of  such  registration  or 
incorporation, and the later accounting period shall be the successive periods of twelve months: 

Provided also that if the company or the entity ceases to exist before the end of accounting 
period, as aforesaid, then, the accounting period shall end immediately before the company or, as 
the case may be, the entity, ceases to exist; 

(d) “specified date” means the— 

 (i)  date on which the accounting period of the company or, as the case may be, the entity 

ends preceding the date of transfer of a share or an interest; or 

(ii)  date of transfer, if the book value of the assets of the company or, as the case may be, 
the entity on the date of transfer exceeds the book value of the assets as on the date referred to 
in sub-clause (i), by fifteen per cent. 

Explanation 7.—For the purposes of this clause,— 

(a)   no  income  shall  be  deemed  to  accrue  or  arise  to  a  non-resident  from  transfer,  outside 
India, of any share of, or interest in, a company or an entity, registered or incorporated outside 
India, referred to in the Explanation 5,— 

 (i)  if such company or entity directly owns the assets situated in India and the transferor 
(whether  individually  or  along  with  its  associated  enterprises),  at  any  time  in  the  twelve 
months  preceding  the  date  of  transfer,  neither  holds  the  right  of  management  or  control  in 
relation  to  such  company  or  entity,  nor  holds  voting  power  or  share  capital  or  interest 
exceeding five per cent. of the total voting power or total share capital or total interest, as the 
case may be, of such company or entity; or 

(ii)   if  such  company  or  entity  indirectly  owns  the  assets  situated  in  India  and  the 
transferor (whether  individually  or along  with  its  associated  enterprises),  at  any  time  in the 
twelve  months  preceding  the  date  of  transfer,  neither  holds  the  right  of  management  or 
control in relation to such company or entity, nor holds any right in, or in relation to, such 
company  or  entity  which  would  entitle  him  to  the  right  of  management  or  control  in  the 
company or entity that directly owns the assets situated in India, nor holds such percentage of 
voting power or share capital or interest in such company or entity which results in holding of 
(either individually  or along  with  associated enterprises) a  voting  power  or  share  capital  or 
interest  exceeding  five  per  cent.  of  the  total  voting  power  or  total  share  capital  or  total 
interest, as the case may be, of the company or entity that directly owns the assets situated in 
India; 

(b)  in a case where all the assets owned, directly or indirectly, by a company or, as the case 
may  be,  an  entity  referred  to  in  the Explanation  5, are  not  located  in  India,  the  income  of  the    
non-resident transferor, from transfer outside India of a share of, or interest in, such company or 
entity, deemed to accrue or arise in India under this clause, shall be only such part of the income 
as is reasonably attributable to assets located in India and determined in such manner as may be 
prescribed; 

(c) “associated enterprise” shall have the meaning assigned to it in section 92A;] 

(ii)  income which falls under the head “Salaries”, if it is earned in India. 
1[Explanation.—For  the  removal  of  doubts,  it  is  hereby  declared  that  the  income  of  the  nature 

referred to in this clause payable for— 

(a) service rendered in India; and 

1. Subs. by Act 27 of 1999, s. 5, for the Explanation (w.e.f. 1-4-2000). 

60 

                                                           
(b) the rest period or leave period which is preceded and succeeded by services rendered in 

India and forms part of the service contract of employment, 

shall be regarded as income earned in India;] 

(iii) income chargeable under the head “Salaries” payable by the Government to a citizen of India 

for service outside India; 

(iv) a dividend paid by an Indian company outside India; 

1[(v) income by way of interest payable by— 

(a) the Government; or 

(b)  a  person  who  is  a  resident,  except  where  the  interest  is  payable  in  respect  of  any  debt 
incurred, or moneys borrowed and used, for the purposes of a business or profession carried on 
by  such  person  outside  India  or  for  the  purposes  of  making  or  earning  any  income  from  any 
source outside India; or 

(c)  a  person  who  is  a  non-resident,  where  the  interest  is  payable  in  respect  of  any  debt 
incurred, or moneys borrowed and used, for the purposes of a business or profession carried on 
by such person in India ; 

2[Explanation.—For the purposes of this clause,— 

 (a)   it  is  hereby  declared  that  in  the  case  of  a  non-resident,  being  a  person  engaged  in  the 
business  of  banking,  any  interest  payable  by  the  permanent  establishment  in  India  of  such       
non-resident  to  the  head  office  or  any  permanent  establishment  or  any  other  part  of  such          
non-resident outside India shall be deemed to accrue or arise in India and shall be chargeable to 
tax  in  addition  to  any  income  attributable  to  the  permanent  establishment  in  India  and  the 
permanent establishment in India shall be deemed to be a person separate and independent of the 
non-resident  person  of  which  it  is  a  permanent  establishment  and  the  provisions  of  the  Act 
relating  to  computation  of  total  income,  determination  of  tax  and  collection  and  recovery  shall 
apply accordingly; 

 (b)  “permanent  establishment”  shall  have  the  meaning  assigned  to  it  in  clause  (iiia)  of                 

section 92F;] 

(vi) income by way of royalty payable by— 

(a) the Government; or 

(b) a  person  who  is  a  resident,  except  where  the  royalty  is  payable  in  respect  of  any  right, 
property  or  information  used  or  services  utilised  for  the  purposes  of  a  business  or  profession 
carried on by such person outside India or for the purposes of making or earning any income from 
any source outside India; or 

(c)  a  person  who  is  a  non-resident,  where  the  royalty  is  payable  in  respect  of  any  right, 
property  or  information  used  or  services  utilised  for  the  purposes  of  a  business  or  profession 
carried on by such person in India or for the purposes of making or earning any income from any 
source in India: 

Provided that nothing contained in this clause shall apply in relation to so much of the income 
by way of royalty as consists of lump sum consideration for the transfer outside India of, or the 
imparting  of  information  outside  India  in  respect  of,  any  data,  documentation,  drawing  or 
specification relating to any patent, invention, model, design, secret formula or process or trade 
mark or similar property, if such income is payable in pursuance of an agreement made before the 
1st day of April, 1976, and the agreement is approved by the Central Government: 

1. Ins. by Act 66 of 1976, s. 4 (w.e.f. 1-6-1976). 
2. Ins. by Act 20 of 2015, s. 5 (w.e.f. 1-4-2016). 

61 

 
                                                           
1[Provided further that nothing contained in this clause shall apply in relation to so much of the 
income by way of royalty as consists of lump sum payment made by a person, who is a resident, for 
the transfer of all or any rights (including the granting of a licence) in respect of computer software 
supplied by a non-resident manufacturer along with a computer or computer-based equipment under 
any  scheme  approved  under  the  Policy  on  Computer  Software  Export,  Software  Development  and 
Training, 1986 of the Government of India.] 

Explanation 1.—For the purposes of the  2[first proviso], an agreement made on or after the 1st 
day of April, 1976, shall be deemed to have been made before that date if the agreement is made in 
accordance with proposals approved by the Central Government before that date; so, however, that, 
where the recipient of the income by way of royalty is a foreign company, the agreement shall not be 
deemed to have been made before that date unless, before the expiry of the time allowed under sub-
section (1) or sub-section (2) of section 139 (whether fixed originally or on extension) for furnishing 
the  return  of  income  for  the  assessment  year  commencing  on  the  1st  day  of  April,  1977,  or  the 
assessment  year  in  respect  of  which  such  income  first  becomes  chargeable  to  tax  under  this  Act, 
whichever  assessment  year  is  later,  the  company  exercises  an  option  by  furnishing  a  declaration in 
writing  to  the  3[Assessing  Officer]  (such  option  being  final  for  that  assessment  year  and  for  every 
subsequent assessment year) that the agreement may be regarded as an agreement made before the 1st 
day of April, 1976. 

Explanation  2.—For  the  purposes  of  this  clause,  “royalty”  means  consideration  (including  any 
lump sum consideration but excluding any consideration which would be the income of the recipient 
chargeable under the head “Capital gains”) for— 

 (i)  the transfer of all or any rights (including the granting of a licence) in respect of a patent, 

invention, model, design, secret formula or process or trade mark or similar property; 

(ii)  the  imparting  of  any  information  concerning  the  working  of,  or  the  use  of,  a  patent, 

invention, model, design, secret formula or process or trade mark or similar property; 

(iii) the use of any patent, invention, model, design, secret formula or process or trade mark 

or similar property; 

(iv)  the  imparting  of  any  information  concerning  technical,  industrial,  commercial  or 

scientific knowledge, experience or skill; 

4[(iva)  the  use  or  right  to  use  any  industrial,  commercial  or  scientific  equipment  but  not 

including the amounts referred to in section 44BB;] 

(v)  the  transfer  of  all  or  any  rights  (including  the  granting  of  a  licence)  in  respect  of  any 
copyright, literary, artistic or scientific work including films or video tapes for use in connection 
with  television  or  tapes  for  use  in  connection  with  radio  broadcasting,  but  not  including 
consideration for the sale, distribution or exhibition of cinematographic films; or 

(vi) the rendering of any services in connection with the activities referred to in sub-clauses 

(i) to (iv), (iva) and (v). 

5[Explanation 3.—For the purposes of this clause, “computer software” means any computer 
programme recorded on any disc, tape, perforated media or other information storage device and 
includes any such programme or any customized electronic data.] 

6[Explanation 4.—For the removal of doubts, it is hereby clarified that the transfer of all or any 
rights in respect of any right, property or information includes and has always included transfer of all 

1. Ins. by Act 49 of 1991, s. 4 (w.e.f. 1-4-1991). 
2. Subs. by s. 4, ibid., for “foregoing proviso” (w.e.f. 1-4-1991). 
3. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
4. Ins. by Act 14 of 2001, s. 4 (w.e.f. 1-4-2002). 
5. Subs. by Act 10 of 2000, s. 4, for Explanation 3 (w.e.f. 1-4-2001). 
6. Ins. by Act 23 of 2012, s. 4 (w.e.f. 1-6-1976). 

62 

                                                           
or any right for use or right to use a computer software (including granting of a licence) irrespective 
of the medium through which such right is transferred. 

Explanation 5.—For the removal of doubts, it is hereby clarified that the royalty includes and has 

always included consideration in respect of any right, property or information, whether or not— 

(a)  the possession or control of such right, property or information is with the payer; 

(b)  such right, property or information is used directly by the payer; 

(c)  the location of such right, property or information is in India.] 

Explanation  6.—For  the  removal  of  doubts,  it  is  hereby  clarified  that  the  expression  “process” 
includes and shall be deemed to have always included transmission by satellite (including up-linking, 
amplification, conversion for down-linking of any signal), cable, optic fibre or by any other similar 
technology, whether or not such process is secret;] 

(vii) income by way of fees for technical services payable by— 

(a)  the Government; or 

(b)   a  person  who  is  a  resident,  except  where  the  fees  are  payable  in  respect  of  services 
utilised in a business or profession carried on by such person outside India or for the purposes of 
making or earning any income from any source outside India; or 

(c) a person who is a non-resident, where the fees are payable in respect of services utilised in 
a  business  or  profession  carried  on  by  such  person  in  India  or  for  the  purposes  of  making  or 
earning any income from any source in India: 
1[Provided that  nothing  contained  in  this  clause  shall  apply  in  relation  to  any  incomebyway  of 
fees for  technical services payable in pursuance of an agreement  made before the 1st day of April, 
1976, and approved by the Central Government.] 

2[Explanation 1.—For the purposes of the foregoing proviso, an agreement made on or after the 
1st day of April, 1976, shall be deemed to have been made before that date if the agreement is made 
in accordance with proposals approved by the Central Government before that date.] 

Explanation  3[2].—For  the  purposes  of  this  clause,  “fees  for  technical  services”  means  any 
consideration (including any lump sum consideration) for the rendering of any managerial, technical 
or consultancy services (including the provision of services of technical or other personnel) but does 
not  include  consideration  for  any  construction,  assembly,  mining  or  like  project  undertaken  by  the 
recipient  or  consideration  which  would  be  income  of  the  recipient  chargeable  under  the  head 
“Salaries”. 

(2) Notwithstanding anything contained in sub-section (1), any pension payable outside India to a 
person  residing  permanently  outside  India  shall  not  be  deemed  to  accrue  or  arise  in  India,  if  the 
pension is payable to a person referred to in article 314 of the Constitution or to a person who, having 
been appointed before the 15th day of August, 1947, to be a Judge of the Federal Court or of a High 
Court within the meaning of the Government of India Act, 1935, continues to serve on or after the 
commencement of the Constitution as a Judge in India. 

Explanation.—For  the  removal  of  doubts,  it  is  hereby  declared  that  for  the  purposes  of  this 
section, income of a non-resident shall be deemed to accrue or arise in India under clause (v) or clause 
(vi)  or  clause  (vii)  of  sub-section  (1)  and  shall  be  included  in  the  total  income  of  the  non-resident, 
whether or not,— 

 (i)  the non-resident has a residence or place of business or business connection in India; or 

(ii)  the non-resident has rendered services in India. 

1. The proviso ins. by Act 29 of 1977, s. 4 (w.e.f. 1-4-1977). 
2. Explanation ins. by s. 4, ibid. (w.e.f. 1-4-1977). 
3. Explanation renumbered as Explanation 2 thereof by s. 4, ibid. (w.e.f. 1-4-1977). 

63 

                                                           
1[9A.  Certain  activities  not  to  constitute  business  connection  in  India.—(1)  Notwithstanding 
anything contained in sub-section (1) of section 9 and subject to the provisions of this section, in the case 
of  an  eligible  investment  fund,  the  fund  management  activity  carried  out  through  an  eligible  fund 
manager acting on behalf of such fund shall not constitute business connection in India of the said fund. 

(2) Notwithstanding anything contained insection 6, an eligible investment fund shall not be said to 
be resident in India for the purpose of that section merely because the eligible fund manager, undertaking 
fund management activities on its behalf, is situated in India. 

(3)  The  eligible  investment  fund  referred  to  in  sub-section  (1),  means  a  fund  established  or 
incorporated or registered outside India, which collects funds from its members for investing it for their 
benefit and fulfils the following conditions, namely:— 

(a) the fund is not a person resident in India; 

(b) the fund is a resident of a country or a specified territory with which an agreement referred to 
in  sub-section  (1)  of  section  90  or  sub-section  (1)  ofsection  90A  has  been  entered  into 2[or  is 
established or incorporated or registered in a country or a specified territory notified by the Central 
Government in this behalf]; 

(c)  the  aggregate  participation  or  investment  in  the  fund,  directly  or  indirectly,  by  persons 

resident in India does not exceed five per cent. of the corpus of the fund; 

(d)  the  fund  and  its  activities  are  subject  to  applicable  investor  protection  regulations  in  the 

country or specified territory where it is established or incorporated or is a resident; 

(e) the fund has a minimum of twenty-five members who are, directly or indirectly, not connected 

persons; 

(f) any member of the fund along with connected persons shall not have any participation interest, 

directly or indirectly, in the fund exceeding ten per cent.; 

(g) the aggregate participation interest, directly or indirectly, of ten or less members along with 

their connected persons in the fund, shall be less than fifty per cent.; 

(h) the fund shall not invest more than twenty per cent. of its corpus in any entity; 

(i) the fund shall not make any investment in its associate entity; 

(j) the monthly average of the corpus of the fund shall not be less than one hundred crore rupees: 

Provided that if the fund has been established or incorporated in the previous year, the corpus of 

fund shall not be less than one hundred crore rupees at the end of such previous year: 

3[Provided  further  that  nothing  contained  in  this  clause  shall  apply  to  a  fund  which  has  been 

wound up in the previous year;] 

(k)  the  fund  shall  not  carry  on  or  control  and  manage,  directly  or  indirectly,  any  business  in 

India 4***; 

(l) the fund is neither engaged in any activity which constitutes a business connection in India nor 
has  any  person  acting  on  its  behalf  whose activities constitute  a  business  connection  in  India  other 
than the activities undertaken by the eligible fund manager on its behalf; 

(m) the remuneration paid by the fund to an eligible fund manager in respect of fund management 

activity undertaken by him on its behalf is not less than the arm’s length price of the said activity: 

1. Ins. by Act 20 of 2015, s. 6 (w.e.f. 1-4-2016). 
2. Ins. by Act 28 of 2016, s. 6 (w.e.f. 1-4-2017). 
3. The proviso inserted by Act 7 of 2017, s. 5 (w.e.f. 1-4-2016). 
4. The words “or from India” omitted by Act 28 of 2016, s. 6 (w.e.f. 1-4-2017). 

64 

                                                           
Provided that  the  conditions  specified  in  clauses  (e),  (f)  and  (g)  shall  not  apply  in  case  of  an 
investment fund set up by the Government or the Central Bank of a foreign State or a sovereign fund, or 
such  other  fund  as  the  Central  Government  may  subject  to  conditions,  if  any,  by  notification  in  the 
Official Gazette, specify in this behalf. 

(4) The  eligible  fund  manager,  in  respect of  an  eligible  investment  fund,  means  any  person  who  is 

engaged in the activity of fund management and fulfils the following conditions, namely:— 

(a) the  person  is  not  an employee  of  the  eligible investment  fund  or  a  connected  person  of the 

fund; 

(b) the person is registered as a fund manager or an investment advisor in accordance with the 

specified regulations; 

(c) the person is acting in the ordinary course of his business as a fund manager; 

(d)  the  person  along  with  his  connected  persons  shall  not  be  entitled,  directly  or  indirectly,  to 
more than twenty per cent. of the profits accruing or arising to the eligible investment fund from the 
transactions carried out by the fund through the fund manager. 

(5) Every eligible investment fund shall, in respect of its activities in a financial year, furnish within 
ninety  days  from  the  end  of  the  financial  year,  a  statement  in  the  prescribed  form,  to  the  prescribed 
income-tax authority containing information relating to the fulfilment of the conditions specified in this 
section and also provide such other relevant information or documents as may be prescribed. 

(6) Nothing contained in this section shall apply to exclude any income from the total income of the 
eligible investment fund, which would have been so included irrespective of whether the activity of the 
eligible fund manager constituted the business connection in India of such fund or not. 

(7)  Nothing  contained  in  this  section  shall  have  any  effect  on  the  scope  of  total  income  or 

determination of total income in the case of the eligible fund manager. 

(8)  The  provisions  of  this  section  shall  be  applied  in  accordance  with  such  guidelines  and  in  such 

manner as the Board may prescribe in this behalf. 

(9) For the purposes of this section,— 

(a) “associate” means an entity in which a director or a trustee or a partner or a member or a fund 
manager  of  the  investment  fund  or  a  director  or  a  trustee  or  a  partner  or  a  member  of  the  fund 
manager  of  such  fund,  holds,  either  individually  or  collectively,  share  or  interest,  being  more  than 
fifteen per cent. of its share capital or interest, as the case may be; 

(b) “connected person” shall have the meaning assigned to it in clause (4) of section 102; 

(c) “corpus” means the total amount of funds raised for the purpose of investment by the eligible 

investment fund as on a particular date; 

(d) “entity” means any entity in which an eligible investment fund makes an investment; 

(e)  “specified  regulations”  means  the  Securities  and  Exchange  Board  of  India  (Portfolio 
Managers) Regulations, 1993 or the Securities and Exchange Board of India (Investment Advisers) 
Regulations, 2013, or such other regulations made under the Securities and Exchange Board of India 
Act, 1992 (15 of 1992), which may be notified by the Central Government under this clause.] 

CHAPTER III 

INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME 

10. Incomes not included in total income.—In computing the total income of a previous year of any 

person, any income falling within any of the following clauses shall not be included— 

  (1) agricultural income; 

65 

(2) 1[subject to the provisions of sub-section (2) of section 64,] any sum received by an individual 
as a member of a Hindu undivided family, where such sum has been paid out of the income of the 
family, or, in the case of any impartible estate, where such sum has been paid out of the income of the 
estate belonging to the family; 

2[(2A) in the case of a person being a partner of a firm which is separately assessed as such, his 

share in the total income of the firm. 

Explanation.—For the purposes of this clause, the share of a partner in the total income of a firm 
separately assessed as such shall, notwithstanding anything contained in any other law, be an amount 
which  bears  to  the  total  income  of  the  firm  the  same  proportion  as  the  amount  of  his  share  in  the 
profits of the firm in accordance with the partnership deed bears to such profits;]  

* 

3* 
* 
4[(4) (i) in the case of a non-resident, any income by way of interest on such securities or bonds as 
the Central Government may, by notification in the Official Gazette, specify in this behalf, including 
income by way of premium on the redemption of such bonds: 

*  

* 

5[Provided that the Central Government shall not specify, for the purposes of this sub-clause, such 

securities or bonds on or after the 1st day of June, 2002;] 

6[(ii) in the case of an individual, any income by way of interest on moneys standing to his credit 
in  a  Non-Resident  (External)  Account  in  any  bank  in  India  in  accordance  with  7[the  Foreign 
Exchange Management Act, 1999 (42 of 1999)], and the rules made thereunder: 

Provided that  such  individual  is  a  person  resident  outside  India  as  defined  in  8[clause  (w)] 
ofsection  2of  the  said  Act  or  is  a  person  who  has  been  permitted  by  the  Reserve  Bank  of  India  to 
maintain the aforesaid Account;]] 

9* 

* 

* 

* 

* 

10[(4B) in the case of an individual, being a citizen of India or a person of Indian origin, who is a 
non-resident,  any  income  from  interest  on  such  11[savings  certificates  issued  before  the  1st  day  of 
June,  2002]  by  the  Central  Government  as  that  Government  may,  by  notification  in  the  Official 
Gazette, specify in this behalf: 

Provided that  the  individual  has  subscribed  to  such  certificates  in  convertible  foreign  exchange 
remitted  from  a  country  outside  India in accordance with the  provisions  of  7[the  Foreign  Exchange 
Management Act, 1999 (42 of 1999)], and any rules made thereunder. 

Explanation.—For the purposes of this clause,— 

 (a) a person shall be deemed to be of Indian origin if he, or either of his parents or any of his 

grandparents, was born in undivided India; 

1. Ins. by Act 42 of 1970, s. 3 (w.e.f. 1-4-1971). 
2. Ins. by Act 18 of 1992, s. 4 (w.e.f. 1-4-1993). Earliar inserted by Act 4 of 1988, s. 6 and omitted by Act 3 of 1989, s. 95     

(w.e.f. 1-4-1989). 

3. Clause (3) omitted by Act 20 of 2002, s. 4 (w.e.f. 1-4-2003). 
4. Subs. by Act 4 of 1988, s. 6, for clauses (4) and (4A) (w.e.f. 1-4-1989). 
5. Ins. by Act 20 of 2002, s. 4 (w.e.f. 1-4-2003). 
6. Subs. by Act 49 of 1991, s. 5, for sub-clause (ii) (w.e.f. 1-4-1991). 
7. Subs. by Act 17 of 2013, s. 4, for “the Foreign Exchange Regulation Act, 1973 (46 of 1973)” (w.e.f. 1-4-2013). 
8. Subs. by Act 7 of 2017, s. 6, for “clause (q)” (w.e.f. 1-4-2013). 
9. The Second proviso omitted by Act 18 of 2005, s. 4 (w.e.f. 1-4-2006). 
10. Ins. by Act 14 of 1982, s. 4 (w.e.f. 1-4-1983). 
11. Subs. by Act 20 of 2002, s. 4, for “savings certificates issued” (w.e.f. 1-4-2003). 

66 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
(b)  “convertible  foreign  exchange”  means  foreign  exchange  which  is  for  the  time  being 
treated  by  the  Reserve  Bank  of  India  as  convertible foreign  exchange  for  the  purposes  of  1[the 
Foreign Exchange Management Act, 1999 (42 of 1999)], and any rules made thereunder;] 

  2[(5) in the case of an individual, the value of any travel concession or assistance received by, or 

due to, him,— 

 (a) from his employer for himself and his family, in connection with his proceeding on leave 

to any place in India; 

(b) from his employer or former employer for himself and his family, in connection with his 
proceeding  to  any  place  in  India  after  retirement  from  service  or  after  the  termination  of  his 
service, 

subject  to  such conditions as  may  be  prescribed(including  conditions  as to number of journeys and 
the  amount  which  shall  be  exempt  per  head)  having  regard  to  the  travel  concession  or  assistance 
granted to the employees of the Central Government: 

Provided that  the  amount  exempt  under  this  clause  shall  in  no  case  exceed  the  amount  of 

expenses actually incurred for the purpose of such travel. 

Explanation.—For the purposes of this clause, “family”, in relation to an individual, means— 

(i) the spouse and children of the individual ; and 

 (ii)  the  parents,  brothers  and  sisters  of  the  individual  or  any  of  them,  wholly  or  mainly 

dependent on the individual;] 

3* 

4* 

* 

* 

* 

* 

(6) in the case of an individual who is not a citizen of India,— 

5* 

* 

* 

* 

* 

* 

* 

* 

* 

6[(ii)  the  remuneration  received  by  him  as  an  official,  by  whatever  name  called,  of  an 
embassy,  high  commission,  legation,  commission,  consulate  or  the  trade  representation  of  a 
foreign State, or as a member of the staff of any of these officials, for service in such capacity: 

Provided that  the  remuneration  received  by  him  as  a  trade  commissioner  or  other  official 
representative  in  India  of  the  Government  of  a  foreign  State  (not  holding  office  as  such  in  an 
honorary capacity), or as a member of the staff of any of those officials, shall be exempt only if 
the remuneration of the corresponding officials or, as the case may be, members of the staff, if 
any, of the Government resident for similar purposes in the country concerned enjoys a similar 
exemption in that country: 

1. Subs. by Act 17 of 2013, s. 4, for “the Foreign Exchange Regulation Act, 1973 (46 of 1973)” (w.e.f. 1-4-2013). 
2. Subs. by Act 36 of 1989, s. 4, for clause (5) (w.e.f. 1-4-1989). 
3. Clause (5A) omitted by Act 21 of 1998, s. 5 (w.e.f. 1-4-1999). 
4. Clause (5B) omitted by Act 20 of 2002, s. 4 (w.e.f. 1-4-2003). 
5. Sub-clause (i) omitted by s. 4, ibid. (w.e.f. 1-4-2003). 
6. Subs. by Act 26 of 1988, s. 4, for sub-clauses (ii) to (v) (w.e.f. 1-4-1989). 

67 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
Provided further that such members  of  the  staff  are subjects of the country  represented and  are 
not engaged in any business or profession or employment in India otherwise than as members of such 
staff;] 

(vi)  the  remuneration  received  by  him  as  an  employee  of  a  foreign  enterprise  for  services 

rendered by him during his stay in India, provided the following conditions are fulfilled— 

(a) the foreign enterprise is not engaged in any trade or business in India; 

(b)  his  stay  in  India  does  not  exceed  in  the  aggregate  a  period  of  ninety  days  in  such 

previous year ; and 

(c)  such  remuneration  is  not  liable  to  be  deducted  from  the  income  of  the  employer 

chargeable under this Act; 

1* 

2* 

3* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

(viii)  any  income  chargeable  under  the  head  “Salaries”  received  by  or  due  to  any  such 
individual  being  a  non-resident  as  remuneration  for  services  rendered  in  connection  with  his 
employment  on  a  foreign  ship  where  his  total  stay  in  India  does  not  exceed  in  the  aggregate  a 
period of ninety days in the previous year; 

4* 

* 

* 

* 

* 

5[(xi) the remuneration received by him as an employee of the Government of a foreign State 
during his stay in India in connection with his training in any establishment or office of, or in any 
undertaking owned by,— 

(i) the Government ; or 

(ii)  any  company  in  which  the  entire  paid-up  share  capital  is  held  by  the  Central 
Government, or any State Government or Governments, or partly by the Central Government 
and partly by one or more State Governments; or 

(iii) any company which is a subsidiary of a company referred to in item (ii); or 

(iv) any corporation established by or under a Central, State or Provincial Act; or 

(v)  any  society  registered  under  the  Societies  Registration  Act,  1860  (14  of  1860),  or 
under  any  other  corresponding  law  for  the  time  being  in  force  and  wholly  financed  by  the 
Central Government, or any State Government or State Governments, or partly by the Central 
Government and partly by one or more State Governments;] 

6[(6A)  where  in  the  case  of  a  foreign  company  deriving  income  by  way  of  royalty  or  fees  for 
technical  services  received  from  Government  or  an  Indian  concern  in  pursuance  of  an  agreement 

1. Sub-clause (via) omitted by Act 21 of 1998, s. 5 (w.e.f. 1-4-1999). 
2. Sub-clause (vii) omitted by Act 38 of 1993, s. 3 (w.e.f. 1-4-1993). 
3. Sub-clause (viia) omitted by Act 21 of 1998, s. 5 (w.e.f. 1-4-1999). 
4. Sub-clause (ix) and (x) omitted by s. 5, ibid. (w.e.f. 1-4-1999). 
5. Ins. by Act 66 of 1976, s. 5 (w.e.f. 1-4-1976). 
6. Ins. by Act 11 of 1983, s. 5 (w.e.f. 1-4-1984).  

68 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
made by the foreign company with Government or the Indian concern after the 31st day of March, 
1976 1[but before the 1st day of June, 2002] 2[and,— 

(a)  where  the  agreement  relates  to  a  matter  included  in  the  industrial  policy,  for  the  time 
being in force, of the Government of India, such agreement is in accordance with that policy; and 

(b) in any other case, the agreement is approved by the Central Government, 

the tax on such income is payable, under the terms of the agreement, by Government or the Indian 
concern to the Central Government, the tax so paid]. 

Explanation.—3[For the purposes of this clause and clause (6B)],— 

(a)  “fees  for  technical  services”  shall  have  the  same  meaning  as  in Explanation  2 to  clause 

(vii) of sub-section (1) of section 9; 

(b) “foreign company” shall have the same meaning as in section 80B; 

(c) “royalty” shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) 

of section 9;] 

4[(6B)  where  in  the  case  of  a  non-resident  (not  being  a  company)  or  of  a  foreign  company 
deriving  income  (not  being  salary,  royalty  or  fees  for  technical  services)  from  Government  or  an 
Indian  concern in  pursuance  of  an  5[agreement  entered  into  before  the  1st  day  of June,  2002by  the 
Central Government] with the Government of a foreign State or an international organisation, the tax 
on such income is payable by Government or the Indian concern to the Central Government under the 
terms  of that  agreement  or  any  other  6[related  agreement  approved  before that  date]  by  the  Central 
Government, the tax so paid;] 

7[(6BB) where in the case of the Government of a foreign State or a foreign enterprise deriving 
income from an Indian company engaged in the business of operation of aircraft, as a consideration of 
acquiring  an  aircraft  or  an  aircraft  engine  (other  than  payment  for  providing  spares,  facilities  or 
services  in  connection  with  the  operation  of  leased  aircraft)  on  lease  under  8[an  agreement  entered 
into after the 31st day of March, 1997 but before the 1st day of April, 1999, 9[or entered into after the 
31st day of March, 2007and approved by the Central Government in this behalf]] and the tax on such 
income  is  payable  by  such  Indian  company  under  the  terms  of  that  agreement  to  the  Central 
Government, the tax so paid. 

Explanation.—For the purposes of this clause, the expression “foreign enterprise” means a person 

who is a non-resident;] 

1. Ins. by Act 20 of 2002, s. 4 (w.e.f. 1-4-2003). 
2. Subs. by Act 18 of 1992, s. 4, for certain words (w.e.f. 1-6-1992). 
3. Subs. by Act 26 of 1988, s. 4, for “For the purposes of this clause” (w.e.f. 1-4-1988). 
4. Ins. by s. 4, ibid. (w.e.f. 1-4-1988). 
5. Subs. by Act 20 of 2002, s. 4, for “agreement entered into by the Central Government” (w.e.f. 1-4-2003). 
6. Subs. by s. 4, ibid. for “related agreement approved” (w.e.f. 1-4-2003). 
7. Ins. by Act 26 of 1997, s. 3 (w.e.f. 1-4-1998). 
8. Subs. by Act 23 of 2004, s. 5, for certain words, figures and letters (w.e.f. 1-4-2006). 
9. Subs. by Act 21 of 2006, s. 4, for “or entered into after the 31st day of September, 2006 and approved by the Central 

Government in this behalf” (w.e.f. 1-4-2007). 

69 

                                                           
1[(6C)  any  income  arising  to  such  foreign  company,  as  the  Central  Government  may,  by 
notification in the Official Gazette, specify in this behalf,  2[by way of royalty or fees] for technical 
services  received  in  pursuance  of  an  agreement  entered  into  with  that  Government  for  providing 
services in or outside India in projects connected with security of India;] 

3[(6D) any income arising to a non-resident, not being a company, or a foreign company, by way 
of royalty from, or fees for technical services rendered in or outside India to, the National Technical 
Research Organisation;] 

(7) any allowances or perquisites paid or allowed as such outside India by the Government to a 

citizen of India for rendering service outside India; 

(8)  in  the  case  of  an  individual  who  is  assigned  to  duties  in  India  in  connection  with  any  
co-operative technical assistance programmes and projects in accordance with an agreement entered 
into by the Central Government and the Government of a foreign State (the terms whereof provide for 
the exemption given by this clause)— 

(a)  the  remuneration  received  by  him  directly  or  indirectly  from  the  Government  of  that 

foreign State for such duties, and 

(b)  any  other  income  of  such  individual  which  accrues  or  arises  outside  India,  and  is  not 
deemed  to  accrue  or  arise  in  India,  in  respect  of  which  such  individual  is  required  to  pay  any 
income or social security tax to the Government of that foreign State; 

4[(8A) in the case of a consultant— 

(a) any remuneration or fee received by him or it, directly or indirectly, out of the funds made 
available to an international organisation [hereafter referred to in this clause and clause (8B) as 
the agency] under a technical assistance grant agreement between the agency and the Government 
of a foreign State; and 

(b) any other income which accrues or arises to him or it outside India, and is not deemed to 
accrue  or  arise  in  India,  in  respect  of  which  such  consultant  is  required  to  pay  any  income  or 
social security tax to the Government of the country of his or its origin. 

Explanation.—In this clause, “consultant” means—  

(i)  any  individual,  who  is  either  not  a  citizen  of  India  or,  being  a  citizen  of  India,  is  not 

ordinarily resident in India; or 

(ii) any other person, being a non-resident, 

engaged  by  the  agency  for  rendering  technical  services  in  India  in  connection  with  any  technical 
assistance programme or project, provided the following conditions are fulfilled, namely:— 

 (1)  the  technical  assistance  is  in  accordance  with  an  agreement  entered  into  by  the  Central 

Government and the agency; and 

 (2)  the  agreement  relating  to  the  engagement  of  the  consultant  is  approved  by  the  prescribed 

authorityfor the purposes of this clause; 

1. Ins. by Act 3 of 1989, s. 4 (w.e.f. 1-4-1989). 
2. Subs. by Act 32 of 2003, s. 6, for “by way of fees” (w.e.f. 1-4-2004). 
3. Ins. by Act 13 of 2018, s. 5 (w.e.f. 1-4-2018). 
4. Ins. by Act 49 of 1991, s. 5 (w.e.f. 1-4-1991). 

70 

                                                           
(8B)  in  the  case  of  an  individual  who  is  assigned  to  duties  in  India  in  connection  with  any 
technical  assistance  programme  and  project  in  accordance  with  an  agreement  entered  into  by  the 
Central Government and the agency— 

(a)  the  remuneration  received  by  him,  directly  or  indirectly,  for  such  duties  from  any 

consultant referred to in clause (8A); and 

(b)  any  other  income  of  such  individual  which  accrues  or  arises  outside  India,  and  is  not 
deemed  to  accrue  or  arise  in  India,  in  respect  of  which  such  individual  is  required  to  pay  any 
income or social security tax to the country of his origin, provided the following conditions are 
fulfilled, namely :— 

(i) the individual is an employee of the consultant referred to in clause (8A) and is either 

not a citizen of India or, being a citizen of India, is not ordinarily resident in India ; and 

(ii)  the  contract  of  service  of  such  individual  is  approved  by  the  prescribed 

authority before the commencement of his service;] 

  (9) the income of any member of the family of any such individual as is referred to in clause (8) 
1[or clause (8A) or, as the case may be, clause (8B)] accompanying him to  India, which accrues or 
arises outside India, and is not deemed to accrue or arise in India, in respect of which such member is 
required to pay any income or social security tax to the Government of that foreign State  1[or, as the 
case may be, country of origin of such member]; 

2[(10)  (i)  any  death-cum-retirement  gratuity  received  under  the  revised  Pension  Rules  of  the 
Central  Government  or,  as  the  case  may  be,  the  Central  Civil  Services  (Pension)  Rules,  1972,  or 
under any similar scheme applicable to the members of the civil services of the Union or holders of 
posts  connected  with  defence  or  of  civil  posts  under  the  Union  (such  members  or  holders  being 
persons not governed by the said Rules) or to the members of the all-India services or to the members 
of the civil services of a State or holders of civil posts under a State or to the employees of a local 
authority  or  any  payment  of  retiring  gratuity  received  under  the  Pension  Code  or  Regulations 
applicable to the members of the defence services; 

(ii) any gratuity received under the Payment of Gratuity Act, 1972 (39 of 1972), to the extent it 
does not exceed an amount calculated in accordance with the provisions of sub-sections (2) and (3) of 
section 4 of that Act; 

(iii)  any  other  gratuity  received  by  an  employee  on  his  retirement  or  on  his  becoming 
incapacitated prior to such retirement or on termination of his employment, or any gratuity received 
by  his  widow,  children  or dependants  on  his  death,  to  the  extent it  does  not, in  either  case,  exceed 
one-half month’s salary for each year of completed service,  3[calculated on the basis of the average 
salary for the ten months immediately preceding the month in which any such event occurs, subject to 
such  limit  as  the  Central  Government  may,  by  notification  in  the  Official  Gazette,  specify  in  this 
behalf having regard to the limit applicable in this behalf to the employees of that Government]: 

Provided that  where  any  gratuities  referred  to  in  this  clause  are  received  by  an  employee  from 
more than one employer in the same previous year, the aggregate amount exempt from income-tax 
under this clause 4[shall not exceed the limit so specified]: 

1. Ins. by Act 49 of 1991, s. 5 (w.e.f. 1-4-1991). 
2. Subs. by Act 20 of 1974, s. 3, for clause (10) (w.e.f. 1-4-1975).                  
3. Subs. by Act 4 of 1988, s. 6, for the certain words (w.e.f. 1-4-1989). 
4. Subs. by s. 6, for clause (10), ibid, “shall not exceed thirty six thousand rupees” (w.e.f. 1-4-1989). 

71 

                                                           
Provided  further that  where  any  such  gratuity  or  gratuities  was  or  were  received  in  any  one  or 
more earlier previous years also and the whole or any part of the amount of such gratuity or gratuities 
was  not  included  in  the  total  income  of  the  assessee  of  such  previous  year  or  years,  the  amount 
exempt from income-tax under this clause 1[shall not exceed the limit so specified] as reduced by the 
amount  or,  as  the  case  may  be,  the  aggregate  amount  not  included  in  the  total income  of  any  such 
previous year or years. 

2* 

* 

* 

* 

* 

Explanation.—3[In this clause, and in clause (10AA)], “salary” shall have the meaning assigned to 

it in clause (h) of rule 2 of Part A of the Fourth Schedule;] 

4[(10A)  (i)  any  payment  in  commutation  of  pension  received  under  the  Civil  Pensions 
(Commutation)  Rules  of  the  Central  Government  5[or  under  any  similar  scheme  applicable  to  the 
members of the civil services of the Union or holders of posts connected with defence or of civil posts 
under the Union (such members or holders being persons  not governed by the said Rules) or to the 
members of the all-India services or to the members of the defence services or to the members of the 
civil services of a State or holders of civil posts under a State or to the employees of a local authority] 
or a corporation established by a Central, State or Provincial Act; 

(ii) any payment in commutation of pension received under any scheme of any other employer, to 

the extent it does not exceed— 

 (a) in a case where the employee receives any gratuity, the commuted value of one-third of 

the pension which he is normally entitled to receive, and 

 (b) in any other case, the commuted value of one-half of such pension, 

such  commuted  value  being  determined  having  regard  to  the  age  of  the  recipient,  the  state  of  his 
health, the rate of interest and officially recognised tables of mortality; 

6* 

* 

* 

* 

* 

7[(iii) any payment in commutation of pension received from a fund under clause (23AAB);] 

8[(10AA)  (i)  any  payment  received  by  an  employee  of  the  Central  Government  or  a  State 
Government as the cash equivalent of the leave salary in respect of the period of earned leave at his 
credit at the time of his retirement 9[whether on superannuation]  or otherwise; 

(ii)  any  payment  of  the  nature  referred  to  in  sub-clause  (i)  received  by  an  employee,  other  than  an 
employee of the Central Government or a State Government, in respect of so much of the period of earned 
leave  at  his  credit  at  the  time  of  his  retirement  9[whether  on  superannuation]  or  otherwise  as  does  not 
exceed  10[ten  months],  calculated  on  the  basis  of  the  average  salary  drawn  by  the  employee  during          

1. Subs. by Act 4 of 1988, s.6 for “shall not exceed thirty six thousand rupees” (w.e.f. 1-4-1989). 
2. The third and fourth provisos omitted by s. 6, ibid. (w.e.f. 1-4-1989). 
3. Subs. by s. 6, ibid., for “In this clause” (w.e.f. 1-4-1989). 
4. Ins. by Act 15 of 1965, s. 3 (w.e.f. 1-4-1962).  
5. Subs. by Act 20 of 1974, s. 3 for the certain words (w.e.f. 1-4-1962). 
6. The proviso omitted by Act 4 of 1988, s. 6 (w.e.f. 1-4-1989). 
7. Ins. by Act 33 of 1996, s. 4 (w.e.f. 1-4-1997). 
8. Ins. by Act 14 of 1982, s. 4 (w.e.f. 1-4-1978).  
9. Subs. by Act 67 of 1984, s. 4 for “on superannuation” (w.e.f. 1-4-1978). 
10. Subs. by Act 27 of 1999, s. 6 for “eight months” (w.e.f. 1-4-1989).  

72 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
the  period  of  ten  months  immediately  preceding  his  retirement  1[whether  on  superannuation]  or 
otherwise,  2[subject  to  such  limit  as  the  Central  Government  may,  by  notification  in  the  Official 
Gazette, specify in this behalf having regard to the limit applicable in this behalf to the employees of 
that Government]: 

Provided that  where  any  such  payments  are  received  by  an  employee  from  more  than  one 
employer in the same previous year, the aggregate amount exempt from income-tax under this sub-
clause 3[shall not exceed the limit so specified]: 

Provided further that where any such payment or payments was or were received in any one or 
more  earlier  previous  years  also  and  the  whole  or  any  part  of  the  amount  of  such  payment  or 
payments was or were not included in the total income of the assessee of such previous year or years, 
the amount exempt from income-tax under this sub-clause  3[shall not exceed the limit so specified], 
as  reduced  by  the  amount  or,  as  the  case  may  be,  the  aggregate  amount  not  included  in  the  total 
income of any such previous year or years. 

4* 

* 

 * 

 * 

* 

Explanation.—For the purposes of sub-clause (ii),— 

5*** the entitlement to earned leave of an employee shall not exceed thirty days for every year of 

actual service rendered by him as an employee of the employer from whose service he has retired; 

6*  

* 

 * 

* 

* 

7[(10B) any compensation received by a workman under the Industrial Disputes Act, 1947 (14 of 
1947),  or  under  any  other  Act  or  Rules,  orders  or  notifications  issued  thereunder  or  under  any 
standing  orders  or  under  any  award,  contract  of  service  or  otherwise,  8[at  the  time  of  his 
retrenchment: 

Provided that the amount exempt under this clause shall not exceed— 

(i) an amount calculated in accordance with the provisions of clause (b) of section 25F of the 

Industrial Disputes Act, 1947 (14 of 1947); or 

9[(ii) such amount, not being less than fifty thousand rupees, as the Central Government may, 

by notification in the Official Gazette, specify in this behalf,] 

whichever is less: 

Provided  further that  the  preceding  proviso  shall  not  apply  in  respect  of  any  compensation 
received by a workman in accordance with any scheme which the Central Government may, having 
regard to the need for extending special protection to the workmen in the undertaking to which such 
scheme applies and other relevant circumstances, approve in this behalf.] 

1. Subs. by Act 67 of 1984, s. 4 for “on superannuation”(w.e.f. 1-4-1978). 
2. Subs. by Act 4 of 1988, s. 6, for “thirty thousand rupees, whichever is less” (w.e.f. 1-7-1986). 
3. Subs. by s. 6, ibid., for “shall not exceed thirty thousand rupees” (w.e.f. 1-7-1986). 
4. The third and fourth provisos omitted by s. 6 ibid. (w.e.f. 1-7-1986). 
5. The brackets and figure “(i)” omitted by s. 6 ibid. (w.e.f. 1-7-1986). 
6. Clause (ii) omitted by s. 6, ibid., (w.e.f. 1-7-1986). 
7. Ins. by Act 25 of 1975, s. 3 (w.e.f. 1-4-1976). 
8. Subs. by Act 32 of 1985, s. 4, for certain words (w.e.f. 1-4-1986). 
9. Subs. by Act 4 of 1988, s. 6, for sub-clause (ii) (w.e.f. 1-4-1989). 

73 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
Explanation.—For the purposes of this clause— 

 (a) compensation received by a workman at the time of the closing down of the undertaking 
in  which  he  is  employed  shall  be  deemed  to  be  compensation  received  at  the  time  of  his 
retrenchment; 

 (b) compensation received by a workman, at the time of the transfer (whether by agreement 
or  by  operation  of  law)  of  the  ownership  or  management  of  the  undertaking  in  which  he  is 
employed from the employer in relation to that undertaking to a new employer, shall be deemed 
to be compensation received at the time of his retrenchment if— 

(i) the service of the workman has been interrupted by such transfer; or 

(ii) the terms and conditions of service applicable to the workman after such transfer are 
in any way less favourable to the workman than those applicable to him immediately before 
the transfer; or 

(iii) the new employer is, under the terms of such transfer or otherwise, legally not liable 
to pay to the workman, in the event of his retrenchment, compensation on the basis that his 
service has been continuous and has not been interrupted by the transfer; 

(c)  the  expressions  “employer”  and  “workman”  shall  have  the  same  meanings  as  in  the 

Industrial Disputes Act, 1947 (14 of 1947);] 

 1[(10BB) any payments made under the Bhopal Gas Leak Disaster (Processing of Claims) Act, 
1985  (21  of  1985),  and  any  scheme  framed  thereunder  except  payment  made  to  any  assessee  in 
connection  with  the  Bhopal  Gas  Leak  Disaster  to  the  extent  such  assessee  has  been  allowed  a 
deduction under this Act on account of any loss or damage caused to him by such disaster;] 

 2[(10BC) any amount received or receivable from the Central Government or a State Government 
or  a  local  authority  by  an  individual  or  his  legal  heir  by  way  of  compensation  on  account  of  any 
disaster, except the amount received or receivable to the extent such individual or his legal heir has 
been allowed a deduction under this Act on account of any loss or damage caused by such disaster. 

Explanation.—For the purposes of this clause, the expression “disaster” shall have the meaning 

assigned to it under clause (d) of section 2 of the Disaster Management Act, 2005 (53 of 2005);] 

3[(10C) 4[any amount received or receivable by an employee of]— 

  (i) a public sector company; or 

 (ii) any other company; or 

(iii) an authority established under a Central, State or Provincial Act; or 

(iv) a local 5[authority; or] 

 6[(v) a co-operative society; or 

1. Ins. by Act 18 of 1992, s. 4 (w.e.f. 1-4-1992). 
2. Ins. by Act 22 of 2007, s. 6 (w.e.f. 1-4-2005).  
3. Subs. by Act 38 of 1993, s. 3, for clause (10C) (w.e.f. 1-4-1993).  
4. Subs. by Act 32 of 2003, s. 6 for “any amount received by an employe of” (w.e.f. 1-4-2004). 
5. Subs. by Act 32 of 1994, s. 6, for “authority,” (w.e.f. 1-4-1995). 
6. Ins. by s. 6, ibid. (w.e.f. 1-4-1995). 

74 

                                                           
(vi)  a  University  established  or  incorporated  by  or  under  a  Central,  State  or  Provincial  Act 
and  an  institution  declared  to  be  a  University  under  section  3  of  the  University  Grants 
Commission Act, 1956(3 of 1956); or 

 (vii) an Indian Institute of Technology within the meaning of clause (g) of section 3 of the 

Institutes of Technology Act, 1961 (59 of 1961); or 

1[(viia) any State Government; or] 

 2[(viib) the Central Government; or] 

 3[(viic)  an  institution,  having  importance  throughout  India  or  in  any  State  or  States,  as  the 

Central Government may, by notification in the Official Gazette, specify in this behalf; or] 

 (viii)  such  institute  of  management  as  the  Central  Government  may,  by  notification  in  the 

Official Gazette, specify in this behalf,] 

4{on  his  5[voluntary  retirement}  or  termination  of  his  service,  in  accordance  with  any  scheme  or 
schemes  of  voluntary  retirement  or  in  the  case  of  a  public  sector  company  referred  to  in                  
sub-clause (i), a scheme of voluntary separation, to the extent such amount does not exceed five lakh 
rupees]: 

Provided that the schemes of the said companies or authorities 6[or societies or Universities or the 
Institutes  referred  to  in  sub-clauses  (vii)  and  (viii)],  as  the  case  may  be,  governing  the  payment  of 
such amount are framed in accordance with such guidelines (including inter alia criteria of economic 
viability) as may be prescribed 7***: 

Provided further that where exemption has been allowed to an employee under this clause for any 
assessment year, no exemption thereunder shall be allowed to him in relation to any other assessment 
year:] 

8[Provided  also that  where  any  relief  has  been  allowed  to  an  assessee  under  section  89 for  any 
assessment  year  in  respect  of  any  amount  received  or  receivable  on  his  voluntary  retirement  or 
termination of service or voluntary separation, no exemption under this clause shall be allowed to him 
in relation to such, or any other, assessment year;] 

9[(10CC)  in  the  case  of  an  employee,  being  an  individual  deriving  income  in  the  nature  of  a 
perquisite, not provided for by way of monetary payment, within the meaning of clause (2) of section 
17, the tax on such income actually paid by his employer, at the option of the employer, on behalf of 
such  employee,  notwithstanding  anything  contained  in  section  200  of  the  Companies  Act,  1956               
(1 of 1956);] 

1. Ins. by Act 14 of 2001, s. 5 (w.e.f. 1-4-2002). 
2. Ins. by s. 5, ibid, (w.e.f. 1-4-2002).  
3. Ins. by Act 20 of 2002, s. 4 (w.e.f. 1-4-2002). 
4. Subs. by Act 32 of 2003, s. 6, for “at the time of his voluntary retirement” (w.e.f. 1-4-2004).  
5. Subs. by Act 10 of 2000, s. 5, for certain words (w.e.f. 1-4-2001).  
6. Ins. by Act 32 of 1994, s. 6 (w.e.f. 1-4-1995).  
7. The certain words brackets and figures omitted by Act 10 of 2000, s. 5 (w.e.f. 1-4-2001). 
8. Ins. by Act 33 of 2009, s. 4 (w.e.f. 1-4-2010).  
9. Ins. by Act 20 of 2002, s. 4 (w.e.f. 1-4-2003). 

75 

                                                           
1[(10D)  any  sum  received  under  a life  insurance  policy,  including  the sum  allocated  by  way  of 

bonus on such policy, other than— 

(a) any  sum  received  under  sub-section  (3)  of  section  80DD or  sub-section  (3)  of            

section 80DDA; or 

(b) any sum received under a Keyman insurance policy; or 

 (c) any sum received under an insurance policy issued on or after the 1st day of April, 2003 
2[but on or before the 31st day of March, 2012] in respect of which the premium payable for any 
of  the  years  during  the  term  of  the  policy  exceeds  twenty  per  cent.  of  the  actual  capital  sum 
3[assured; or] 

4[(d) any sum received under an insurance policy issued on or after the 1st day of April, 2012 
in  respect  of  which  the  premium  payable  for  any  of  the  years  during  the  term  of  the  policy 
exceeds ten per cent. of the actual capital sum assured:] 

Provided that the provisions of 5[sub-clauses (c) and (d)] shall not apply to any sum received 

on the death of a person: 

Provided  further that  for  the  purpose  of  calculating  the  actual  capital  sum  assured  under          

5[sub-clause(c)],  effect  shall  be  given  to  the 6[Explanation to  sub-section  (3)  of  section  80C or 
the Explanation to sub-section (2A) of section 88, as the case may be:] 

7[Provided  also that  where  the  policy,  issued  on  or  after  the  1st  day  of  April,  2013,  is  for 

insurance on life of any person, who is— 

(i) a person with disability or a person with severe disability as referred to in section 80U; 

or 

(ii)  suffering  from  disease  or  ailment  as  specified  in  the  rules  made  under                 

section 80DDB, 

the  provisions  of  this  sub-clause  shall  have  effect  as  if  for  the  words  “ten  per  cent.”,  the  words 
“fifteen per cent.” had been substituted.] 

8[Explanation  1].—For  the  purposes  of  this  clause,  “Keyman  insurance  policy”  means  a  life 
insurance policy taken by a person on the life of another person who is or was the employee of the 
first-mentioned  person  or  is  or  was  connected  in  any  manner  whatsoever  with  the  business  of  the 
first-mentioned person]  7[and includes such policy which has been assigned to a person, at any time 
during the term of the policy, with or without any consideration;] 

9[Explanation 2.—For the purposes of sub-clause (d), the expression “actual capital sum assured” 

shall have the meaning assigned to it in the Explanation to sub-section (3A) of section 80C;] 

1. Subs. by Act 32 of 2003, s. 6, for clause (10D) (w.e.f. 1-4-2004). 
2. Ins. by Act 23 of 2012, s. 5 (w.e.f. 1-4-2013).  
3. Subs. by s. 5, ibid., for “assured” (w.e.f. 1-4-2013).  
4. Ins. by s. 5, ibid. (w.e.f. 1-4-2013).   
5. Subs. by s. 5, ibid., for “this sub-clause” (w.e.f. 1-4-2013). 
6. Subs. by Act 18 of 2005, s. 4 for “Explanation to sub-section (2A) of section 88” (w.e.f. 1-4-2006).  
7. Ins. by Act 17 of 2013, s. 5 (w.e.f. 1-4-2014).  
8. Explanation renumbered as Explanation 1 thereof by Act 23 of 2012, s. 5 (w.e.f. 1-4-2013). 
9. Ins. by s. 5, ibid. (w.e.f. 1-4-2013). 

76 

                                                           
(11) any payment from a provident fund to which the Provident Funds Act, 1925 (19 of 1925), 
applies 1[or from any other provident fund set up by the Central Government and notified by it in this 
behalf in the Official Gazette]; 

2[(11A)  any  payment  from  an  account,  opened  in  accordance  with  the  Sukanya  Samriddhi 

Account Rules, 2014 made under the Government Savings Bank Act, 1873 (5 of 1873);] 

(12)  the  accumulated  balance  due  and  becoming  payable  to  an  employee  participating  in  a 

recognised provident fund, to the extent provided in rule 8 of Part A of the Fourth Schedule ; 

3[(12A) any payment from the National Pension System Trust to an  4[assessee] on closure of his 
account or on his opting out of the pension scheme referred to in section 80CCD, to the extent it does 
not exceed forty per cent. of the total amount payable to him at the time of such closure or his opting 
out of the scheme;] 

5[(12B) any  payment from  the  National Pension  System  Trust to an employee  under the  pension 
scheme referred to in section 80CCD, on partial withdrawal made out of his account in accordance with 
the terms and conditions, specified under the Pension Fund Regulatory and Development AuthorityAct, 
2013  (23  of  2013)  and  the  regulations  made  thereunder,  to  the  extent  it  does  not  exceed  
twenty-five per cent. of the amount of contributions made by him;] 

6[(13) any payment from an approved superannuation fund made— 

  (i) on the death of a beneficiary; or 

 (ii) to an employee in lieu of or in commutation of an annuity on his retirement at or after a 

specified age or on his becoming incapacitated prior to such retirement; or 

(iii) by way of refund of contributions on the death of a beneficiary ; or 

(iv) by way of refund of contributions to an employee on his leaving the service in connection 
with which the fund is established otherwise than by retirement at or after a specified age or on 
his becoming incapacitated prior to such retirement, to the extent to which such payment does not 
exceed  the  contributions  made  prior  to  the  commencement  of  this  Act  and  any  interest                 
7[thereon; or] 

3[(v) by way of transfer to the account of the employee under a pension scheme referred to in 

section 80CCD and notified by the Central Government;] 
8[(13A)  any  special  allowance  specifically  granted  to  an  assessee  by  his  employer  to  meet 
expenditure actually incurred on payment of rent (by whatever name called) in respect of residential 
accommodation occupied by the assessee, to such extent 9*** as may be prescribed having regard to 
the area or place in which such accommodation is situate and other relevant considerations.] 

10[Explanation.—For the removal of doubts, it is hereby declared that nothing contained in this 

clause shall apply in a case where— 

(a) the residential accommodation occupied by the assessee is owned by him ; or 

(b) the assessee has not actually incurred expenditure on payment of rent (by whatever name 

called) in respect of the residential accommodation occupied by him;] 

11[(14) (i) any such special allowance or benefit, not being in the nature of a perquisite within the 
meaning  of  clause  (2)  of  section  17,  specifically  granted  to  meet  expenses  wholly,  necessarily  and 

1. Ins. by Act 19 of 1968, s. 30 and the third Schedule (w.e.f. 1-4-1969). 
2. Ins. by Act 20 of 2015, s. 7 (w.e.f. 1-4-2015). 
3. Ins. by Act 28 of 2016, s. 7 (w.e.f. 1-4-2017). 
4. Subs. by Act 13 of 2018, s. 5, for “employee” (w.e.f. 1-4-2019). 
5. Ins. by Act 7 of 2017, s. 6 (w.e.f. 1-4-2018). 
6. Subs. by Act 10 of 1965, s. 6 (w.r.e.f. 1-4-1962). 
7. Subs. by Act 28 of 2016, s.7, for “thereon” (w.e.f. 1-4-2017). 
8. Ins. by Act 13 of 1964, s. 3 (w.e.f. 6-10-1964). 
9. The words “(not exceeding four hundred rupees per month” omitted by 23 of 1986, s. 3 (w.e.f. 1-4-1987). 
10. The Explanation inserted by Act 67 of 1984, s. 4 (w.e.f. 1-4-1976). 
11. Subs. by Act 4 of 1988, s. 6, for clause (14) (w.e.f. 1-4-1989). 

77 

                                                           
 
exclusively incurred in the performance of the duties of an office or employment of profit, 1[as may 
be prescribed], to the extent to which such expenses are actually incurred for that purpose; 

(ii) any such allowance granted to the assessee either to meet his personal expenses at the place 
where the duties of his office or employment of profit are ordinarily performed by him or at the place 
where  he  ordinarily  resides,  or  to  compensate  him  for  the  increased  cost  of  living, 2[as  may  be 
prescribed and to the extent as may be prescribed]:] 

3[Provided that nothing in sub-clause (ii) shall apply to any allowance in the nature of personal 
allowance granted to the assessee to remunerate or compensate him for performing duties of a special 
nature relating to his office or employment unless such allowance is related to the place of his posting 
or residence;] 

4* 

* 

* 

* 

* 

(15) 5[(i) income by way of interest, premium on redemption or other payment on such securities, 
bonds, annuity certificates, savings certificates, other certificates issued by the Central Government 
and deposits as the Central Government may, by notification in the Official Gazette, specify in this 
behalf, subject to such conditions and limits as may be specified in the said notification; 

6[(iib)  7[in  the  case  of  an  individual  or  a  Hindu  undivided  family,]  interest  on  such  Capital 
Investment Bonds as the Central Government may, by notification in the Official Gazette, specify in 
this behalf:] 

8[Provided that the Central Government shall not specify, for the purposes of this sub-clause, such 

Capital Investment Bonds on or after the 1st day of June, 2002;] 

9[(iic) in the case of an individual or a Hindu undivided family, interest on such Relief Bonds as 

the Central Government may, by notification in the Official Gazette, specify in this behalf;] 

10[(iid)  interest  on  such  bonds,  as  the  Central  Government  may,  by  notification  in  the  Official 

Gazette, specify, arising to— 

 (a) a non-resident Indian, being an individual owning the bonds; or 

 (b)  any  individual  owning  the  bonds  by  virtue  of  being  a  nominee  or  survivor of  the  non-

resident Indian; or 

 (c) any individual to whom the bonds have been gifted by the non-resident Indian: 

Provided that the aforesaid bonds are purchased by a non-resident Indian in foreign exchange and 
the interest and principal received in respect of such bonds, whether on their maturity or otherwise, is 
not allowable to be taken out of India: 

Provided further that where an individual, who is a non-resident Indian in any  previous year in 
which the bonds are acquired, becomes a resident in India in any subsequent year, the provisions of 
this sub-clause shall continue to apply in relation to such individual: 

1. Subs. by Act 22 of 1995, s. 4, for “as the Central Government may, by notification in the Official Gazette, specify” (w.e.f. 

1-7-1995). 

2. Subs. by  s. 4,  ibid.,  for “as the Central  Government  may, by notification in the Official  Gazette, specify, to the  extent 

specified in the notification” (w.e.f. 1-7-1995). 
3. Added by Act 36 of 1989, s. 4 (w.e.f. 1-4-1989). 
4. Clause (14A) omitted by Act 20 of 2002, s. 4 (w.e.f. 1-4-2003). 
5. Subs. by Act 4 of 1988, s. 6, for clause (i), (ia), (ib), (ii) and (iia) (w.e.f. 1-4-1989). 
6. Ins. by Act 14 of 1982, s. 4 (w.e.f. 1-4-1983). 
7. Subs. by Act 11 of 1983, s. 5, for “interest or such capital interest” (w.e.f. 1-4-1983). 
8. Ins. by Act 20 of 2002, s. 4 (w.e.f. 1-4-2003). 
9. Ins. by Act 26 of 1988, s. 4 (w.e.f. 1-4-1989). 
10. Ins. by Act 3 of 1989, s. 4 (w.e.f. 1-4-1989). 

78 

 
 
 
 
 
 
 
                                                           
Provided  also that  in  a  case  where  the  bonds  are  encashed  in  a  previous  year  prior  to  their 
maturity by an individual who is so entitled, the provisions of this sub-clause shall not apply to such 
individual in relation to the assessment year relevant to such previous year: 

1[Provided also that the Central Government shall not specify, for the purposes of this sub-clause, 

such bonds on or after the 1st day of June, 2002.] 

Explanation.—For  the  purposes  of  this  sub-clause,  the  expression  “non-resident  Indian”  shall 

have the meaning assigned to it in clause (e) of section 115C;] 

(iii) interest on securities held by the Issue Department of the Central Bank of Ceylon constituted 

under the Ceylon Monetary Law Act, 1949; 

2[(iiia)  interest  payable  to  any  bank  incorporated  in  a  country  outside  India  and  authorised  to 
perform central banking functions in that country on any deposits made by it, with the approval of the 
Reserve Bank of India, with any scheduled bank. 

Explanation.—For  the  purposes  of  this  sub-clause,  “scheduled  bank”  shall  have  the  meaning 

assigned to it in 3[clause (ii) of the Explanation to clause (viia) of sub-section (1) of section 36];] 

4[(iiib) interest payable to the Nordic Investment Bank, being a multilateral financial institution 
constituted  by  the  Governments  of  Denmark,  Finland,  Iceland,  Norway  and  Sweden,  on  a  loan 
advanced  by  it  to  a  project  approved  by  the  Central  Government  in  terms  of  the  Memorandum  of 
Understanding entered into by the Central Government with that Bank on the 25th day of November, 
1986;] 

5[(iiic) interest payable to the European Investment Bank, on a loan granted by it in pursuance of 
the framework-agreement for financial co-operation entered into on the 25th day of November, 1993 
by the Central Government with that Bank;] 

(iv) interest payable— 

6[(a)  by  Government  or  a  local  authority  on  moneys  borrowed  by  it  before  the  1st  day  of 

June, 2001 from, or debts owed by it before the 1st day of June, 2001 to, sources outside India;] 

 (b) by an industrial undertaking in India on moneys borrowed by it under 7[a loan agreement 
entered  into  before  the  1st  day  of  June,  2001  with  any  such  financial  institution]  in  a  foreign 
country  as  may  be  approved  in  this  behalf  by  the  Central  Government  by  general  or  special             
order; 

 (c)  by  an  industrial  undertaking  in  India  on  any  moneys  borrowed  or  debt  incurred  by  it 
8[before the 1st day of June, 2001] in a foreign country in respect of the purchase outside India of 
raw  materials  9[or  components]  or  capital  plant  and  machinery,  10[to  the  extent  to  which  such 
interest  does  not  exceed  the  amount  of  interest  calculated  at  the  rate  approved  by  the  Central 
Government in this behalf, having regard to the terms of the loan or debt and its repayment.] 

 9[11[Explanation  1.]—For the  purposes  of  this  item,  “purchase  of capital  plant and  machinery” 
includes the purchase of such capital plant and machinery under a hire-purchase agreement or a lease 
agreement with an option to purchase such plant and machinery.] 

1. Ins. by Act 20 of 2002, s. 4 (w.e.f. 1-4-2003). 
2. Ins. by Act 32 of 1985, s. 4 (w.e.f. 1-4-1985). 
3. Subs. by Act 4 of 1988, s. 126, for “the Explanation to clause (iii) of sub-section (6) of section 11” (w.e.f. 1-4-1989). 
4. Ins. by Act 54 of 2003, s. 2 (w.e.f. 1-4-2001).  
5. Ins. by Act 23 of 2004, s. 5 (w.e.f. 1-4-2005). 
6. Subs. by Act 14 of 2001, s. 5, for item (a) (w.e.f. 1-4-2002). 
7. Subs. by s. 5, ibid., for “a loan agreement entered into with any such financial institution” (w.e.f. 1-4-2002). 
8. Subs. by s. 5, ibid., for “moneys borrowed or debt incurred by it” (w.e.f. 1-4-2002). 
9. Ins. by Act 11 of 1983, s. 5 (w.e.f. 1-4-1983). 
10. Subs. by Act 5 of 1964, s. 6, for “in any case where the loan or debt is approved by the Central Government, having 

regard to its terms generally and in particular to the terms of its repayment” (w.e.f. 1-4-1964). 

11. Explanation renumbered as Explanation 1 thereof by Act 54 of 2003, s. 2 (w.e.f. 1-4-1962). 

79 

                                                           
1[Explanation 2.—For the removal of doubts, it is hereby declared that the usance interest payable 
outside India by an undertaking engaged in the business of ship-breaking in respect of purchase of a 
ship  from  outside  India  shall  be  deemed  to  be  the  interest  payable  on  a  debt  incurred  in  a  foreign 
country in respect of the purchase outside India;] 

2[(d)  by  the  Industrial  Finance  Corporation  of  India  established  by  the  Industrial  Finance 
Corporation  Act,  1948  (15  of  1948),  or  the  Industrial  Development  Bank  of  India  established 
under the Industrial Development Bank of India Act, 1964 (18 of 1964),  3[or the Export-Import 
Bank of India established under the Export-Import Bank of India Act, 1981 (28 of 1981),] 4[or the 
National Housing Bank established under section 3 of the National Housing Bank Act, 1987 (53 
of 1987),] 5[or the Small Industries Development Bank of India established under section 3 of the 
Small Industries Development Bank of India Act, 1989 (39 of 1989),] or the Industrial Credit and 
Investment Corporation of India [a company formed and registered under the Indian Companies 
Act, 1913 (7 of 1913)], on 6[any moneys borrowed by it from sources outside Indiabefore the 1st 
day of June, 2001], to the extent to which such interest does not exceed the amount of interest 
calculated  at  the  rate  approved  by  the  Central  Government  in  this  behalf,  having  regard  to  the 
terms of the loan and its repayment;] 

 (e) by any other financial institution established in India or a banking company to which the 
Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution 
referred to in section 51 of that Act), on 6[any moneys borrowed by it from sources outside India 
before the 1st day of June, 2001] under a loan agreement approved by the Central Government 
where  the  moneys  are  borrowed  either  for  the  purpose  of  advancing  loans  to  industrial 
undertakings in India for purchase outside India of raw materials or capital plant and machinery 
or for the purpose of importing any goods which the Central Government may consider necessary 
to import in the public interest, to the extent to which such interest does not exceed the amount of 
interest calculated at the rate approved by the Central Government in this behalf, having regard to 
the terms of the loan and its repayment;] 

7[(f) by an industrial undertaking in India on any moneys borrowed by it in foreign currency 
from sources outside India under 8[a loan agreement approved by the Central Government before 
the 1st day of June, 2001] having regard to the need for industrial development in India, to the 
extent  to  which  such  interest  does  not  exceed  the  amount  of  interest  calculated  at  the  rate 
approved by the Central Government in this behalf, having regard to the terms of the loan and its 
repayment; 

9[(fa)  by  a  scheduled  bank  10***  11[to  a  non-resident  or  to  a  person  who  is  not  ordinarily 
resident within the meaning of sub-section (6) of section 6] on deposits in foreign currency where 
the acceptance of such deposits by the bank is approved by the Reserve Bank of India. 
12[Explanation.—For the purposes of this item, the expression “scheduled bank” means the State 
Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as 
defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new 
bank  constituted  under  section  3  of  the  Banking  Companies  (Acquisition  and  Transfer  of 
Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and 
Transfer  of  Undertakings) Act,  1980  (40  of  1980),  or  any  other  bank  being  a  bank  included  in  the 
Second  Schedule  to  the  Reserve  Bank  of  India  Act,  1934  (2  of  1934),  but  does  not  include  a            
co-operative bank; 

1. Ins. by Act 54 of 2003 s. 2, (w.e.f. 1-4-1962). 
2. Ins. by Act 26 of 1974, s. 2 (w.e.f. 1-4-1973). 
3. Ins. by Act 11 of 1983, s. 5 (w.e.f. 1-4-1983). 
4. Ins. by Act 49 of 1991, s. 5 (w.e.f. 1-4-1991). 
5. Ins. by Act 18 of 1992, s. 4 (w.e.f. 1-4-1992). 
6. Subs. by Act 14 of 2001, s. 5, for “any moneys borrowed by it from sources outside India” (w.e.f. 1-4-2002). 
7. Ins. by Act 66 of 1976, s. 5 (w.e.f. 1-6-1976). 
8. Subs. by, Act 14 of 2001 s. 5, for “a loan agreement approved by the Central Government” (w.e.f. 1-4-2001).  
9. Ins. by Act 49 of 1991, s. 5 (w.e.f. 1-4-1991). 
10. The words figures and letters “before the 1st day of April, 2005” omitted by Act 18 of 2005, s. 4 (w.e.f. 1-4-2006). 
11. Ins. by Act 38 of 1993, s. 3 (w.e.f. 1-4-1993). 
12. Subs. by Act 22 of 2007, s. 6, for the Explanation (w.e.f. 1-4-2007). 

80 

                                                           
1[(g) by a public company formed and registered in India with the main object of carrying on 
the  business  of  providing  long-term  finance  for construction  or  purchase  of  houses in  India for 
residential purposes,  2[being a company eligible for deduction under clause (viii) of sub-section 
(1) of section 36 on any moneys borrowed by it in foreign currency from sources outside India 
under 3[a loan agreement approved by the Central Government before the 1st day of June, 2003], 
to the extent to which such interest does not exceed the amount of interest calculated at the rate 
approved by the Central Government in this behalf, having regard to the terms of the loan and its 
repayment.] 
Explanation.—For  the  purposes  of  4[items  (f),  (fa)  and  (g)],  the  expression  “foreign  currency” 

shall  have  the  meaning  assigned  to  it  in  the  5[Foreign  Exchange  Management  Act,  1999                  
(42 of 1999)];] 

6[(h) by any public sector company in respect of such bonds or debentures and subject to such 
conditions, including the condition that the holder of such bonds or debentures registers his name 
and  the  holding  with  that  company,  as  the  Central  Government  may,  by  notification  in  the 
Official Gazette, specify in this behalf;] 

 7[(i) by Government on deposits made by an employee of the Central Government or a State 
Government  8[or  a  public  sector  company],  in  accordance  with  such  scheme  as  the  Central 
Government may, by notification in the Official Gazette, frame in this behalf, out of the moneys 
due to him on account of his retirement, whether on superannuation or otherwise.] 
9[10[Explanation 1].—For the purposes of this sub-clause, the expression “industrial undertaking” 

means any undertaking which is engaged in— 

 (a) the manufacture or processing of goods; or 
11[(aa) the manufacture of computer software or recording of programme on any disc, tape, 

perforated media or other information device; or] 

 (b) the business of generation or distribution of electricity or any other form of power; or 
12[(ba) the business of providing telecommunication services; or] 
 (c) mining; or 

 (d) the construction of ships; or 
13[(da) the business of ship-breaking; or] 
14[(e) the operation of ships or aircrafts or construction or operation of rail systems.]] 
15[Explanation 1A.—For the purposes of this sub-clause, the expression “interest” shall not 
include interest paid on delayed payment of loan or on default if it is in excess of two  per cent. 
per annum over the rate of interest payable in terms of such loan.] 

16[Explanation 2.—For the purposes of this clause, the expression “interest” includes hedging 

transaction charges on account of currency fluctuation;] 

1. Ins. by Act 11 of 1983, s. 5 (w.e.f. 1-4-1983). 
2. Subs. by Act 10 of 2000, s. 5, for “being a company approved by the Central Government for the purposes of clause (viii) 

of sub-section (1) of section 36” (w.e.f. 1-4-2000). 

3. Subs. by Act 32 of 2003, s. 6, for “a loan agreement approved by the Central Government” (w.e.f. 1-4-2004). 
4. Subs. by Act 49 of 1991, s. 5 for “items (f) and (g)” (w.e.f. 1-4-1991). 
5. Subs. by Act 17 of 2013, s. 4, for “the Foreign Exchange Regulation Act, 1973 (46 of 1973)” (w.e.f. 1-4-2013). 
6. Ins. by Act 11 of 1987, s. 4 (w.e.f. 1-4-1987). 
7. Ins. by Act 13 of 1989, s. 4 (w.e.f. 1-4-1990). 
8. Ins. by Act 12 of 1990, s. 5 (w.e.f. 1-4-1991). 
9. Ins. by Act 49 of 1991, s. 5 (w.e.f. 1-4-1991). 
10. Explanation renumbered as Explanation 1 thereof by the Act 27 of 1999, s. 6 (w.e.f. 1-4-2000). 
11. Ins. by Act 21 of 1998, s. 5 (w.e.f. 1-4-1999). 
12. Ins. by 26 of 1997, s. 3 (w.e.f. 1-4-1998). 
13. Ins. by Act 54 of 2003, s. 2 (w.e.f. 1-4-1991). 
14. Subs. by Act 33 of 1996, s. 4, for clause (e) (w.e.f. 1-4-1997). 
15. Subs. by Act 24 of 2001, s. 5, for Explanation IA (w.e.f. 1-4-2002). 
16. Ins. by Act 27 of 1999, s. 6 (w.e.f. 1-4-2000) 

81 

                                                           
1[(v) interest on— 

 (a)  securities  held  by  the  Welfare  Commissioner,  Bhopal  Gas  Victims,  Bhopal,  in  the 

Reserve Bank's SGL Account No. SL/DH 048; 

 (b)  deposits  for  the  benefit  of  the  victims  of  the  Bhopal  gas  leak  disaster  held  in  such 
account, with the Reserve Bank of India or with a public sector bank, as the Central Government 
may, by notification in the Official Gazette, specify, whether prospectively or retrospectively but 
in no case earlier than the 1st day of April, 1994 in this behalf. 
Explanation.—For the purposes of this sub-clause, the expression “public sector bank” shall have 

the meaning assigned to it in the Explanation to clause (23D);] 

2[(vi) interest on Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 3[or deposit 

certificates issued under the Gold Monetisation Scheme, 2015] notified by the Central Government; 

4[(vii) interest on bonds— 

 (a) issued by a local authority or by a State Pooled Finance Entity; and 
 (b) specified by the Central Government by notification in the Official Gazette. 

Explanation.—For the purposes of this sub-clause, the expression “State Pooled Finance Entity” 
shall  mean  such  entity  which  is  set  up  in  accordance  with  the  guidelines  for  the  Pooled  Finance 
Development Scheme notified by the Central Government in the Ministry of Urban Development;] 

5[(viii) any income by way of interest received by a non-resident or a person who is not ordinarily 
resident, in India on a deposit made on or after the 1st day of April, 2005, in an Offshore Banking 
Unit referred to in clause (u) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005);] 

6[(15A)  any  payment  made,  by  an  Indian  company  engaged  in  the  business  of  operation  of 
aircraft,  to  acquire  an  aircraft  or  an  aircraft  engine  (other  than  a  payment  for  providing  spares, 
facilities  or  services  in  connection  with  the  operation  of  leased  aircraft)  on  lease  from  the 
Government  of  a  foreign  State  or  a  foreign  enterprise  under  an  agreement  7[  8[,  not  being  an 
agreement  entered into  between  the  1st  day  of  April,  1997 and the  31st  day  of March,  1999,]  and] 
approved by the Central Government in this behalf: 

9[Provided that nothing contained in this clause shall apply to any such agreement entered into on 

or after the 10[1st day of April, [2007].] 

Explanation.—For the purposes of this clause, the expression “foreign enterprise” means a person 

who is a non-resident;] 

(16) scholarships granted to meet the cost of education; 
11[(17) any income by way of— 

  (i) daily allowance received by any person by reason of his membership of Parliament or of 

any State Legislature or of any Committee thereof; 12*** 

13[(ii)  any  allowance  received  by  any  person  by  reason  of  his  membership  of  Parliament 

under the Members of Parliament (Constituency Allowance) Rules, 1986; 
14[(iii) any constituency allowance received by any person by reason of his membership of any 

State Legislature under any Act or rules made by that State Legislature;]]] 

1. Subs. by Act 22 of 1995, s. 4, for sub-clause (v) (w.e.f. 1-4-1995). 
2. Ins. by Act 27 of 1999, s. 6 (w.e.f. 1-4-2000). 
3. Ins. by Act 28 of 2016, s. 7 (w.e.f. 1-4-2016). 
4. Subs. by Act 22 of 2007, s. 6, for sub-clause (vii) (w.e.f. 1-4-2008). 
5. Ins. by Act 28 o 2005, s. 27 and the second Schedule (w.e.f. 10-2-2006). 
6. Subs. by Act 22 of 1995, s. 4, for clause (15A) (w.e.f. 1-4-1996). 
7. Ins. by 26 of 1997, s. 3 (w.e.f. 1-4-1998). 
8. Subs. by Act 27 of 1999, s. 6“entered before the 1st day of April, 1997” (w.e.f. 1-4-2000). 
9. Ins. by Act 23 of 2004, s. 5 (w.e.f. 1-4-2006). 
10. Subs. by Act 21 of 2006, s. 4, for “the 1st day of April, 2006” (w.e.f. 1-4-2007). 
11. Subs. by Act 46 of 1986, s. 3, for clause (17) (w.e.f. 1-4-1986). 
12. The word “and” omitted by Act 11 of 1987, s. 4 (w.e.f. 1-4-1986). 
13. Subs. by s. 4, ibid., for  sub-clause (ii) (w.e.f. 1-4-1986). 
14. Subs. by Act 21 of 2006, s. 4, for sub-clause (iii) (w.e.f. 1-4-2007). 

82 

                                                           
1[(17A) any payment made, whether in cash or in kind,— 

(i) in pursuance of any award instituted in the public interest by the Central Government or 
any State Government or instituted by any other body and approved by the Central Government 
in this behalf; or 

(ii)  as  a  reward  by  the  Central  Government  or  any  State  Government  for  such  purposes  as 

may be approved by the Central Government in this behalf in the public interest;] 

2[(18) any income by way of— 

(i) pension received by an individual who has been in the service of the Central Government 
or State Government and has been awarded “Param Vir Chakra” or “Maha Vir Chakra” or “Vir 
Chakra”  or  such  other  gallantry  award  as  the  Central  Government  may,  by  notification  in  the 
Official Gazette, specify in this behalf; 

(ii)  family  pension  received  by  any  member  of  the  family  of  an  individual  referred  to  in  

sub-clause (i). 

Explanation.—For  the  purposes  of  this  clause,  the  expression  “family”  shall  have  the  meaning 

assigned to it in the Explanation to clause (5);] 

3* 

* 

* 

* 

* 

4[(19) family pension received by the widow or children or nominated heirs, as the case may be, 
of  a  member  of  the  armed  forces  (including  para-military  forces)  of  the  Union,  where  the  death  of 
such member has occurred in the course of operational duties, in such circumstances and subject to 
such conditions, as may be prescribed;] 

5[(19A) the annual value of any one palace in the occupation of a Ruler, being a palace, the annual 
value  whereof  was  exempt  from  income-tax  before  the  commencement  of  the  Constitution  
(Twenty-sixth  Amendment)  Act,  1971,  by  virtue  of  the  provisions  of  the  Merged  States  (Taxation 
Concessions) Order, 1949, or the Part B States (Taxation Concessions) Order, 1950, or, as the case 
may be, the Jammu and Kashmir (Taxation Concessions) Order, 1958: 

Provided that for the assessment year commencing on the 1st day of April, 1972, the annual value 
of  every  such  palace  in  the  occupation  of  such  Ruler  during  the  relevant  previous  year  shall  be 
exempt from income-tax;] 

(20) the income of a local authority which is chargeable under the head 6*** “Income from house 
property”, “Capital gains” or “Income from other sources” or from a trade or business carried on by it 
7[which accrues or arises from the supply of a commodity or service (not being water or electricity) 
within its own jurisdictional area or from the supply of water or electricity within or outside its own 
jurisdictional area]. 

8[Explanation.—For the purposes of this clause, the expression “local authority” means— 

(i) Panchayat as referred to in clause (d) of article 243 of the Constitution; or 

(ii) Municipality as referred to in clause (e) of article 243P of the Constitution; or 

(iii) Municipal Committee and District Board, 

1. Subs. by Act 4 of 1988, s. 6, for clauses (17A), (17B) and (18) (w.e.f. 1-4-1989). 
2. Ins. by Act 27 of 1999, s. 6 (w.e.f. 1-4-2000). 
3. Clause (18A) omitted by Act 21 of 1998, s. 5 (w.e.f. 1-4-1999). 
4. Ins. by Act 23 of 2004, s. 5 (w.e.f. 1-4-2005). 
5. Ins. by Act 54 of 1972, s. 7 (w.e.f. 28-12-1971). 
6. The words “Interest on securities” omitted by Act 26 of 1988, s. 4 (w.e.f. 1-4-1989). 
7. Subs. by  Act 32 of 1971, s. 4, for “which accrues or arises  from the supply of a commodity or service  within its own 

jurisdictional area” (w.e.f. 1-4-1972). 

8. Ins. by Act 20 of 2002, s. 4 (w.e.f. 1-4-2003). 

83 

 
 
 
 
 
 
 
                                                           
legally  entitled  to,  or  entrusted  by  the  Government  with,  the  control  or  management  of  a 
Municipal or local fund; or 

(iv) Cantonment Board as defined in section 3 of the Cantonments Act, 1924 (2 of 1924);] 

1* 

* 

* 

* 

* 

2[(21) any  income  of  a  3[research  association]  for  the  time  being  approved  for  the  purpose  of  

clause (ii) 4[or clause (iii)] of sub-section (1) of section 35: 

Provided that the 3[research association]— 

(a) applies its income, or accumulates it for application, wholly and exclusively to the objects 
for  which  it  is  established,  and  the  provisions  of  sub-section  (2)  and  sub-section  (3)  of  section 
11 shall apply in relation to such accumulation subject to the following modifications, namely:— 

(i) in sub-section (2),— 

(1) the words, brackets, letters and figure “referred to in clause (a) or clause (b) of 

sub-section (1) read with the Explanation to that sub-section” shall be omitted; 

(2) for the words “to charitable or religious purposes”, the words “for the purposes of 
5[scientific  research  or  research  in  social  science  or  statistical  research]”  shall  be 
substituted; 

(3) the reference to “Assessing Officer” in clause (a) thereof shall be construed as a 
reference  to  the  “prescribed  authority”  referred  to  in  clause  (ii)  4[or  clause  (iii)]  of  
sub-section (1) of section 35; 

 (ii) in sub-section (3), in clause (a), for the words “charitable or religious purposes”, the 
words  “the  purposes  of  5[scientific  research  or  research  in  social  science  or  statistical 
research]” shall be substituted; and 

6[(b) does not invest or deposit its funds, other than— 

(i)  any  assets  held  by  the  3[research  association]  where  such  assets  form  part  of  the 

corpus of the fund of the association as on the 1st day of June, 1973; 

(ii) any assets (being debentures issued by, or on behalf of, any company or corporation), 

acquired by the 3[research association] before the 1st day of March, 1983; 

(iii)  any  accretion  to  the  shares,  forming  part  of  the  corpus  of  the  fund  mentioned  in  

sub-clause (i), by way of bonus shares allotted to the 3[research association]; 

(iv) voluntary contributions received and maintained in the form of jewellery, furniture or 

any other article as the Board may, by notification in the Official Gazette, specify, 

for any period during the previous year otherwise than in any one or more of the forms or modes 
specified in sub-section (5) of section 11:] 

7[Provided further that the exemption under this clause shall not be denied in relation to voluntary 
contribution, other than voluntary contribution in cash or voluntary contribution of the nature referred 

1. Clause (20A) omitted by Act 20 of 2002, s. 4 (w.e.f. 1-4-2003). 
2.  Subs.  by  Act  3  of  1989,  s.  4,  for  clause  (21)  (w.e.f.  1-4-1990).  Earlier  Clause  (21)  amended  by  Act  11  of  1983,  s.  5              

(w.e.f. 1-4-1984) and then omitted by Act 4 of 1988, s. 6 and later restored by Act 3 of 1989, s. 95 (w.e.f. 1-4-1989).  

3. Subs. by Act 14 of 2010, s. 5, for “scientific research association” (w.e.f. 1-4-2011). 
4. Ins. by s. 5, ibid. (w.e.f. 1-4-2011). 
5. Subs. by s. 5, ibid., for “scientific research” (w.e.f. 1-4-2011). 
6. Subs. by Act 18 of 1992, s. 4, for clause (b) (w.e.f. 1-4-1990).  
7. Subs. by Act 49 of 1991, s. 5, for “Provided further” (w.e.f. 1-4-1990). 

84 

 
 
 
 
 
 
 
                                                           
to  in  clause  (b)  of  the  first  proviso  to  this  clause,  subject  to  the  condition  that  such  voluntary 
contribution is not held by the 1[research association], otherwise than in any one or more of the forms 
or modes specified in sub-section (5) of section 11, after the expiry of one year from the end of the 
previous year in which such asset is acquired or the 31st day of March, 1992, whichever is later: 

Provided also] that nothing contained in this clause shall apply in relation to any income of the 
1[research association], bei ng profits and gains of business, unless the business is incidental to the 
attainment  of  its  objectives  and  separate  books  of  account  are  maintained  by  it  in  respect  of  such 
business:] 

2[Provided also that where the 1[research association] is approved by the Central Government and 

subsequently that Government is satisfied that— 

(i)  the  1[research  association]  has  not  applied  its  income  in  accordance  with  the  provisions 

contained in clause (a) of the first proviso; or 

(ii) the  1[research association] has not invested or deposited its funds in accordance with the 

provisions contained in clause (b) of the first proviso; or 

(iii) the activities of the 1[research association] are not genuine; or 

(iv) the activities of the 1[research association] are not being carried out in accordance with all 

or any of the conditions subject to which such association was approved, 

it may, at any time after giving a reasonable opportunity of showing cause against the proposed 
withdrawal to the concerned association, by order, withdraw the approval and forward a copy of 
the order withdrawing the approval to such association and to the Assessing Officer;] 

3*  

* 

* 

* 

*  

4[(22B) any income of such news agency set up in India solely for collection and distribution of 

news as the Central Government may, by notification in the Official Gazette, specify in this behalf: 

Provided that  the  news  agency  applies  its  income  or  accumulates  it  for  application  solely  for 

collection and distribution of news and does not distribute its income in any manner to its members: 

Provided further that any notification issued by the Central Government under this clause shall, at 
any  one  time,  have  effect  for  such  assessment  year  or  years,  not  exceeding  three  assessment  years 
(including  an  assessment  year  or  years  commencing  before  the  date  on  which  such  notification  is 
issued) as may be specified in the notification:] 

2[Provided  also that  where  the  news  agency  has  been  specified,  by  notification,  by  the  Central 
Government and subsequently that Government is satisfied that such news agency has not applied or 
accumulated or distributed its income in accordance with the provisions contained in the first proviso, 
it may, at  any time after giving a reasonable opportunity of showing cause, rescind the notification 
and  forward  a  copy  of  the  order  rescinding  the  notification  to  such  agency  and  to  the  Assessing 
Officer;]  

5* 

* 

* 

* 

* 

1. Subs. by Act 14 of 2010, s. 5, for “scientific research association” (w.e.f. 1-4-2011). 
2. Ins. by Act 20 of 2002, s. 4 (w.e.f. 1-4-2003). 
3. Clause (22) and (22A) omitted by Act 21 of 1998, s. 5 (w.e.f. 1-4-1999). 
4. Ins. by Act 32 of 1994, s. 6 (w.e.f. 1-4-1994). 
5.  Clause  (23)  omitted  by  Act  20  of  2002,  s.  4  (w.e.f.  1-4-2003).  Earlier  Clause  (23)  omitted  by  Act  4  of  1988,  s.  6                 

(w.e.f. 1-4-1989) and then restored by Act 3 of 1989, s. 95 (w.e.f. 1-4-1989). 

85 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
1[(23A)  any  income  (other  than  income  chargeable  under  the  head2***“Income  from  house 
property” or any income received for rendering any specific services or income by way of interest or 
dividends derived from its investments) of an association or institution established in India having as 
its  object the control,  supervision, regulation  or encouragement  of  the  profession  of  law,  medicine, 
accountancy,  engineering  or  architecture  or  such  other  profession  as  the  Central  Government  may 
specify in this behalf, from time to time, by notification in the Official Gazette: 

Provided that— 

  (i) the association or institution applies its income, or accumulates it for application, solely 

to the objects for which it is established; and 

 (ii) the association or institution is for the time being approved for the purpose of this clause 

by the Central Government by general or special order:] 

3[Provided  further that  where  the  association  or  institution  has  been  approved  by  the  Central 

Government and subsequently that Government is satisfied that— 

(i)  such  association  or  institution  has  not  applied  or  accumulated  its  income  in  accordance 

with the provisions contained in the first proviso; or 

(ii) the activities of the association or institution are not being carried out in accordance with 

all or any of the conditions subject to which such association or institution was approved, 

it  may,  at  any  time  after  giving  a  reasonable  opportunity  of  showing  cause  against  the  proposed 
withdrawal to the concerned association or institution, by order, withdraw the approval and forward a 
copy  of  the  order  withdrawing  the  approval  to  such  association  or  institution  and  to  the  Assessing 
Officer;] 

4[(23AA) any income received by any person on behalf of any Regimental Fund or Non-Public 
Fund established by the armed forces of the Union for the welfare of the past and present members of 
such forces or their dependants;] 

5[(23AAA) any income received by any person on behalf of a fund established, for such purposes 
as  may  be  notified  by  the  Board  in  the  Official  Gazette,  for  the  welfare  of  employees  or  their 
dependants  and  of  which  fund  such  employees  are  members  if  such  fund  fulfils  the  following 
conditions, namely:— 

(a) the fund—  

(i)  applies  its  income  or  accumulates  it  for  application,  wholly  and  exclusively  to  the 

objects for which it is established; and 

(ii)  invests  its  funds  and  contributions  and  other  sums  received  by  it  in  the  forms  or 

modes specified in sub-section (5) of section 11; 

(b)  the  fund  is  approved  by  the 6[Principal  Commissioner  or  Commissioner]  in  accordance 

with the rules made in this behalf: 

Provided that any such approval shall at any one time have effect for such assessment year or 

years not exceeding three assessment years as may be specified in the order of approval;] 

1. Ins. by Act 15 of 1965, s. 3 (w.e.f. 1-4-1962). 
2. The words “Interest on securities” or’ omitted by Act 26 of 1988, s. 4 (w.e.f. 1-4-1989). 
3. Ins. by Act 20 of 2002, s. 4 (w.e.f. 1-4-2003). 
4. Ins. by Act 44 of 1980, s. 4 (w.e.f. 1-4-1962). 
5. Ins. by Act 22 of 1995, s. 4 (w.e.f. 1-4-1996). 
6. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.e.f. 1-6-2013). 

86 

                                                           
1[(23AAB)  any  income  of  a  fund,  by  whatever  name  called,  set  up  by  the  Life  Insurance 
Corporation of India on or after the 1st day of August, 1996  2[or any other insurer under a pension 
scheme],— 

(i) to  which  contribution  is  made  by  any  person  for the  purpose  of  receiving  pension  from 

such fund; 

(ii)  which  is  approved  by  the  Controller  of  Insurance  3[or  the  Insurance  Regulatory  and 
Development  Authority  established  under  sub-section  (1)  of  section  3  of  the  Insurance 
Regulatory and Development Authority Act, 1999 (41 of 1999), as the case may be]. 

Explanation.—For  the  purposes  of  this  clause,  the  expression  “Controller  of  Insurance”  shall 
have  the  meaning  assigned  to  it  in  clause  (5B)  of  section  2  of  the  Insurance  Act,  1938  
(4 of 1938);] 

 4[(23B) any income of an  institution constituted as a public charitable trust or registered under 
the Societies Registration Act, 1860 (21 of 1860), or under any law corresponding to that Act in force 
in any part of India, and existing solely for the development of khadi or village industries or both, and 
not for purposes of profit, to the extent such income is attributable to the business of production, sale, 
or marketing, of khadi or products of village industries: 

Provided that— 

(i)  the  institution  applies  its  income,  or  accumulates  it  for  application,  solely  for  the 

development of khadi or village industries or both; and 

(ii) the institution is, for the time being, approved for the purpose of this clause by the Khadi 

and Village Industries Commission: 

Provided  further that  the  Commission  shall  not,  at  any  one  time,  grant  such  approval  for  more 
than three assessment years beginning with the assessment year next following the financial year in 
which it is granted: 

5[Provided also that where the institution has been approved by the Khadi and Village Industries 

Commission and subsequently that Commission is satisfied that— 

(i) the institution has not applied or accumulated its income in accordance with the provisions 

contained in the first proviso; or 

(ii) the activities of the institution are not being carried out in accordance with all or any of 

the conditions subject to which such institution was approved, 

it  may,  at  any  time  after  giving  a  reasonable  opportunity  of  showing  cause  against  the  proposed 
withdrawal to the concerned institution, by order, withdraw the approval and forward a copy of the 
order withdrawing the approval to such institution and to the Assessing Officer.] 

Explanation.—For the purposes of this clause,— 

(i)  “Khadi  and  Village 

Industries  Commission”  means 

the  Khadi  and  Village                     

Industries  Commission  established  under  the  Khadi  and  Village  Industries  Commission             
Act, 1956 (61 of 1956); 

(ii) “khadi” and “village industries” have the meanings respectively assigned to them in that 

Act;] 
6[(23BB) any income of an authority (whether known as the Khadi and Village Industries Board 
or by any other name) established in a State by or under a State or Provincial Act for the development 
of khadi or village industries in the State. 

1. Ins. by Act 33 of 1996, s. 4 (w.e.f. 1-4-1997). 
2. Subs. by Act 14 of 2001, s. 5, for “under a pension scheme” (w.e.f. 1-4-2002). 
3. Ins. by s. 5, ibid. (w.e.f. 1-4-2002). 
4. Ins. by Act 20 of 1974, s. 3 (w.e.f. 1-6-1974). 
5. Ins. by Act 20 of 2002, s. 4 (w.e.f. 1-4-2003). 
6. Ins. by Act 21 of 1979, s. 3 (w.e.f. 1-4-1962). 

87 

                                                           
Explanation.—For  the  purposes  of  this  clause,  “khadi”  and  “village  industries”  have  the 
meanings respectively assigned to them in the Khadi and Village Industries Commission Act, 1956 
(61 of 1956); 

(23BBA)  any  income  of any  body  or  authority  (whether  or  not  a  body  corporate  or corporation 
sole)  established,  constituted  or  appointed  by  or  under  any  Central,  State  or  Provincial  Act  which 
provides for the administration of any one or more of the following, that is to say, public religious or 
charitable trusts or endowments (including maths, temples, gurdwaras, wakfs, churches, synagogues, 
agiaries or other places of public religious worship) or societies for religious or charitable purposes 
registered as such under the Societies Registration Act, 1860 (21 of 1860), or any  other law for the 
time being in force: 

Provided that nothing in this clause shall be construed to exempt from tax the income of any trust, 

endowment or society referred to therein;] 

1[(23BBB)  any  income  of  the  European  Economic  Community  derived  in  India  by  way  of 
interest, dividends or capital gains from investments made out of its funds under such scheme as the 
Central Government may, by notification in the Official Gazette, specify in this behalf. 

Explanation.—For  the  purposes  of  this  clause,  “European  Economic  Community”  means  the 

European Economic Community established by the Treaty of Rome of 25th March, 1957;] 

2[(23BBC) any income of the SAARC Fund for Regional Projects set up by Colombo Declaration 
issued  on  the  21st  day  of  December,  1991  by  the  Heads  of  State  or  Government  of  the  Member 
Countries  of  South  Asian  Association  for  Regional  Cooperation  established  on  the  8th  day  of 
December, 1985 by the Charter of the South Asian Association for Regional Cooperation;] 

3[(23BBD)  any  income  of  the  Secretariat  of  the  Asian  Organisation  of  the  Supreme                

Audit  Institutions  registered  as  “ASOSAI-SECRETARIAT”  under  the  Societies  Registration         
Act,  1860  (21  of  1860)  for  4[ten  previous  years  relevant  to  the  assessment  years  beginning  on  the       
1st day of April, 2001 and ending on the 31st day of March, 2011]; 

(23BBE) any income of the Insurance Regulatory and Development Authority established under 
sub-section  (1)  of  section  3  of  the  Insurance  Regulatory  and  Development  Authority  Act,  1999  
(41 of 1999);] 

5[(23BBF) any income of the North-Eastern Development Finance Corporation Limited, being a 

company formed and registered under the Companies Act, 1956 (1 of 1956): 

Provided that  in  computing  the  total  income  of  the  North-Eastern  Development  Finance 

Corporation Limited, the amount to the extent of— 

(i)  twenty  per  cent.  of  the  total  income  for  assessment  year  beginning  on  the  1st  day  of  

April, 2006; 

(ii)  forty  per  cent.  of  the  total  income  for  assessment  year  beginning  on  the  1st  day  of  

April, 2007; 

(iii)  sixty  per  cent.  of  the  total  income  for  assessment  year  beginning  on  the  1st  day  of  

April, 2008; 

(iv)  eighty  per  cent.  of  the  total  income  for  assessment  year  beginning  on  the  1st  day  of  

April, 2009; 

 (v) one hundred per cent. of the total income for assessment year beginning on the 1st day of 

April, 2010 and any subsequent assessment year or years, 

shall be included in such total income;] 

1. Ins. by Act 38 of 1993, s. 3 (w.e.f. 1-4-1994). 
2. Ins. by Act 33 of 1996, s. 4 (w.e.f. 1-4-1992). 
3. Ins. by Act 14 of 2001, s. 5 (w.e.f. 1-4-2001). 
4. Subs. by Act 22 of 2007, s. 6, for certain words, figures and letters (w.e.f. 1-4-2008). 
5. Ins. by Act 29 of 2006, s. 3 (w.e.f. 1-4-2006). 

88 

                                                           
1[(23BBG)  any  income  of  the  Central  Electricity  Regulatory  Commission  constituted  under     

sub-section (1) of section 76 of the Electricity Act, 2003 (36 of 2003);] 

2[(23BBH)  any  income  of  the  Prasar  Bharati  (Broadcasting  Corporation  of  India)  established 
under sub-section (1) of section 3 of the Prasar Bharati (Broadcasting Corporation of India) Act, 1990 
(25 of 1990);] 

3[(23C) any income received by any person on behalf of— 
(i) the Prime Minister's National Relief Fund; or 

(ii) the Prime Minister's Fund (Promotion of Folk Art); or 

(iii) the Prime Minister's Aid to Students Fund; or 
4[(iiia) the National Foundation for Communal Harmony; or] 
5[(iiiaa) the Swachh Bharat Kosh, set up by the Central Government; or 
(iiiaaa) the Clean Ganga Fund, set up by the Central Government; or] 
6[(iiiaaaa)  the  Chief  Minister’s  Relief  Fund  or  the  Lieutenant  Governor’s  Relief  Fund  in 
respect  of  any  State  or  Union  territory  as  referred  to  in  sub-clause  (iiihf)  of  clause  (a)  of           
sub-section (2) of section 80G; or 

7[(iiiab)  any  university  or  other  educational  institution  existing  solely  for  educational 
purposes  and  not  for  purposes  of  profit,  and  which  is  wholly  or  substantially  financed  by  the 
Government; or 

(iiiac)  any  hospital  or  other  institution  for  the  reception  and  treatment  of  persons  suffering 
from  illness  or  mental  defectiveness  or  for  the  reception  and  treatment  of  persons  during 
convalescence  or  of  persons  requiring  medical  attention  or  rehabilitation,  existing  solely  for 
philanthropic  purposes  and  not  for  purposes  of  profit,  and  which  is  wholly  or  substantially 
financed by the Government. 

8[Explanation.—For  the  purposes  of  sub-clauses  (iiiab)  and  (iiiac),  any  university  or  other 
educational institution, hospital or other institution referred therein, shall be considered as being 
substantially financed by the Government for any previous year, if the Government grant to such 
university or other educational institution, hospital or other institution exceeds such percentage of 
the total receipts including any voluntary contributions, as may be prescribed, of such university 
or  other  educational  institution,  hospital  or  other  institution,  as  the  case  may  be,  during  the 
relevant previous year;] or 

(iiiad) any university or other educational institution existing solely for educational purposes 
and not for purposes of profit if the aggregate annual receipts of such university or educational 
institution do not exceed the amount of annual receipts as may be prescribed; or 

(iiiae)  any  hospital  or  other  institution  for  the  reception  and  treatment  of  persons  suffering 
from  illness  or  mental  defectiveness  or  for  the  reception  and  treatment  of  persons  during 
convalescence  or  of  persons  requiring  medical  attention  or  rehabilitation,  existing  solely  for 
philanthropic  purposes  and  not  for  purposes  of  profit,  if  the  aggregate  annual  receipts  of  such 
hospital or institution do not exceed the amount of annual receipts as may be prescribed; or] 

1. Ins. by Act 22 of 2007, s. 6 (w.e.f. 1-4-2008). 
2. Ins. by Act 23 of 2012, s. 5 (w.e.f. 1-4-2013). 
3. Ins. by Act 41 of 1975, s. 3 (w.e.f. 1-4-1976). 
4. Ins. by Act 38 of 1993, s. 3 (w.e.f. 1-4-1993). 
5. Ins. by Act 20 of 2015, s. 7 (w.e.f. 1-4-2015). 
6. Ins. by Act 7 of 2017, s. 6 (w.e.f. 1-4-1998). 
7. Ins. by Act 21 of 1998, s. 5 (w.e.f. 1-4-1999). 
8. Ins. by Act 25 of 2014, s. 5 (w.e.f. 1-4-2015). 

89 

                                                           
1[(iv)  any  other  fund  or  institution  established  for  charitable  purposes  2[which  may  be 
approved by the prescribed authority], having regard to the objects of the fund or institution and 
its importance throughout India or throughout any State or States; or 

 (v) any trust (including any other legal obligation) or institution wholly for public religious 
purposes or wholly for public religious and charitable purposes, 2[which may be approved by the 
prescribed authority], having regard to the manner in which the affairs of the trust or institution 
are administered and supervised for ensuring that the income accruing thereto is properly applied 
for the objects thereof; 

3[(vi) any university or other educational institution existing solely for educational purposes 

and  not  for  purposes  of  profit,  other  than  those  mentioned  in  sub-clause  (iiiab)  or                            
sub-clause (iiiad) and which may be approved by the prescribed authority; or 

(via)  any  hospital  or  other  institution  for  the  reception  and  treatment  of  persons  suffering 
from  illness  or  mental  defectiveness  or  for  the  reception  and  treatment  of  persons  during 
convalescence  or  of  persons  requiring  medical  attention  or  rehabilitation,  existing  solely  for 
philanthropic  purposes  and  not  for  purposes  of  profit,  other  than  those  mentioned  in                         
sub-clause (iiiac) or sub-clause (iiiae) and which may be approved by the prescribed authority:] 

Provided that the fund or trust or institution 3[or any university or other educational institution or 
any  hospital  or  other  medical  institution]  referred  to  in  sub-clause  (iv)  or  sub-clause  (v)  3[or           
sub-clause (vi) or sub-clause (via)] shall make an application in the prescribed form and manner to the 
prescribed  authority for  the  purpose  of  grant  of  the  exemption,  or  continuance  thereof,  under          
sub-clause (iv) or sub-clause (v) 3[or sub-clause (vi) or sub-clause (via)]: 

4[Provided further that the prescribed authority, before approving any fund or trust or institution 
or  any  university  or  other educational  institution  or any  hospital  or  other  medical institution,  under 
sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via), may call for such documents 
(including  audited  annual  accounts)  or  information  from  the  fund  or  trust  or  institution  or  any 
university or other educational institution or any hospital or other medical institution, as the case may 
be, as it thinks necessary in order to satisfy itself about the genuineness of the activities of such fund 
or trust or institution or any university or other educational institution or any hospital or other medical 
institution, as the case may be, and the prescribed authority may also make such inquiries as it deems 
necessary in this behalf:] 

Provided  also that  the  fund  or  trust  or  institution  3[or  any  university  or  other  educational 
institution or any hospital or other medical institution] referred to in sub-clause (iv) or sub-clause (v) 
3[or sub-clause (vi) or sub-clause (via)]— 

5[(a)  applies  its  income,  or  accumulates  it  for  application,  wholly  and  exclusively  to  the 
objects for which it is established and in a case where more than fifteen per cent. of its income is 
accumulated on or after the 1st day of April, 2002, the period of the accumulation of the amount 
exceeding fifteen per cent. of its income shall in no case exceed five years; and] 

1. Subs. by Act 3 of 1989, s. 4, for sub-clauses (iv) and (v) (w.e.f. 1-4-1990). 
2.  Subs.  by  Act  22  of  2007,  s.  6,  for  “which  may  be  notified  by  the  Central  Government  in  the  Official  Gazette.”                        

(w.e.f. 1-6-2007) 

3. Ins. by Act 21 of 1998, s. 5 (w.e.f. 1-4-1999). 
4. Subs. by Act 22 of 2007, s. 6, for the proviso (w.e.f. 1-6-2007). 
5. Subs. by Act 20 of 2002, s. 4, for clause (a) (w.e.f. 1-4-2003). 

90 

                                                           
 1[(b) does not invest or deposit its funds, other than— 

 (i) any assets held by the fund, trust or institution 2[or any university or other educational 
institution  or  any  hospital  or  other  medical  institution]  where  such  assets  form  part  of  the 
corpus of the fund, trust or institution  2[or any university or other educational institution or 
any hospital or other medical institution] as on the 1st day of June, 1973; 

3[(ia) any asset, being equity shares of a public company, held by any university or other 
educational institution or any hospital or other medical institution where such assets form part 
of  the  corpus  of  any  university  or  other  educational  institution  or  any  hospital  or  other 
medical institution as on the 1st day of June, 1998;] 

 (ii)  any  assets  (being  debentures  issued  by,  or  on  behalf  of,  any  company  or  corporation), 
acquired by the fund, trust or institution 2[or any university or other educational institution or any 
hospital or other medical institution] before the 1st day of March, 1983; 

(iii) any accretion to the shares, forming part of the corpus mentioned in sub-clause (i) 3[and 
sub-clause  (ia)],  by  way  of  bonus  shares  allotted  to  the  fund,  trust  or  institution  2[or  any 
university or other educational institution or any hospital or other medical institution]; 

(iv) voluntary contributions received and maintained in the form of jewellery, furniture or any 

other article as the Board may, by notification in the Official Gazette, specify, 

for  any  period  during  the  previous  year  otherwise  than  in  any  one  or  more  of  the  forms  or  modes 
specified in sub-section (5) of section 11:] 

Provided  also that  the  exemption  under  sub-clause  (iv)  or  sub-clause  (v)  shall  not  be  denied  in 
relation to any funds invested or deposited before the 1st day of April, 1989, otherwise than in any 
one  or  more  of  the  forms  or  modes  specified  in  sub-section  (5)  of section  11 if  such  funds  do  not 
continue to remain so invested or deposited after the 4[30th day of March, 5[1993]]: 

2[Provided also that the exemption under sub-clause (vi) or sub-clause (via) shall not be denied in 
relation to any funds invested  or deposited before the 1st day of June, 1998, otherwise than in any 
one  or  more  of  the  forms  or  modes  specified  in  sub-section  (5)  of section  11  if  such  funds  do  not 
continue to remain so invested or deposited after the 30th day of March, 2001:]      

6[Provided  also that  the  exemption  under  sub-clause  (iv)  or  sub-clause  (v)  2[or  sub-clause  (vi)      

or  sub-clause  (via)]  shall  not  be  denied  in  relation  to  voluntary  contribution,  other  than  voluntary 
contribution  in  cash  or  voluntary  contribution  of  the  nature  referred  to  in  clause  (b)  of  the  third 
proviso to this sub-clause, subject to the condition that such voluntary contribution is not held by the 
trust or institution 2[or any university or other educational institution or any hospital or other medical 
institution],  otherwise  than  in  any  one  or  more  of  the  forms  or  modes  specified  in  sub-section  (5) 
of section 11, after the expiry of one year from the end of the previous year in which such asset is 
acquired or the 31st day of March, 1992, whichever is later:] 

Provided  also that  nothing  contained  in  sub-clause  (iv)  or  sub-clause  (v)  2[or  sub-clause  (vi)  or 
sub-clause  (via)]  shall  apply  in  relation  to  any  income  of  the  fund  or  trust  or  institution  2[or  any 
university or other educational institution or any hospital or other medical institution], being profits 
and gains of business, unless the business is incidental to the attainment of its objectives and separate 
books of account are maintained by it in respect of such business: 

1. Subs. by Act 18 of 1992, s. 4, for sub-clause (b) (w.e.f. 1-4-1990). 
2. Ins. by Act 21 of 1998, s. 5 (w.e.f. 1-4-1999). 
3. Ins. by Act 14 of 2001, s. 5 (w.e.f. 1-4-2001). 
4. Subs. by Act 49 of 1991, s. 5, for “the 30th day of March, 1990” (w.e.f. 1-4-1990). 
5. Subs. by Act 18 of 1992, s. 4, for “1992’ (w.e.f. 1-4-1992). 
6. Ins. by Act 49 of 1991, s. 5 (w.e.f. 1-4-1990). 

91 

                                                           
Provided also that any  1[notification issued by the Central Government under sub-clause (iv) or 
sub-clause  (v),  before  the  date  on  which  the  Taxation  Laws  (Amendment)  Bill,  2006  receives  the 
assent  of  the  President,  shall,  at  any  one  time,  have  effect  for  such  assessment  year  or  years],  not 
exceeding three assessment years (including an assessment year or years commencing before the date 
on which such notification is issued) as may be specified in the notification:] 

2[Provided also that where an application under the first proviso is made on or after the date on 
which  the  Taxation  Laws  (Amendment)  Bill,  2006  receives  the  assent  of  the  President, every 
notification under sub-clause (iv) or sub-clause (v) shall be issued or approval under 3[sub-clause (iv) 
or  sub-clause  (v)  or]  sub-clause  (vi)  or  sub-clause  (via)  shall  be  granted  or  an  order  rejecting  the 
application shall be passed within the period of twelve months from the end of the month in which 
such application was received: 

Provided also that where the total income, of the fund or trust or institution or any university or 
other educational institution or any hospital or other medical institution referred to in sub-clause (iv) 
or sub-clause (v) or sub-clause (vi) or sub-clause (via), without giving effect to the provisions of the 
said sub-clauses, exceeds the maximum amount which is not chargeable to tax in any previous year, 
such  trust  or  institution  or  any  university  or  other  educational  institution  or  any  hospital  or  other 
medical institution shall get its accounts audited in respect of that year by an accountant as defined in 
the Explanation below sub-section (2) of section 288 and furnish along with the return of income for 
the relevant assessment year, the report of such audit in the prescribed form duly signed and verified 
by such accountant and setting forth such particulars as may be prescribed:] 

4[Provided  also that  any  amount  of  donation  received  by  the  fund  or  institution  in  terms  of          

clause (d) of sub-section (2) of section 80G 5[in respect of which accounts of income and expenditure 
have not been rendered to the authority prescribed under clause (v) of sub-section (5C) of that section, 
in the manner specified in that clause, or] which has been utilised for purposes other than providing 
relief to the victims of earthquake in Gujarat or which remains unutilised in terms of sub-section (5C) 
of section 80G and not transferred to the Prime Minister's National Relief Fund on or before the 31st 
day of March, 6[2004] shall be deemed to be the income of the previous year and shall accordingly be 
charged to tax:] 

7[Provided also that any amount credited or paid out of income of any fund or trust or institution 
or any university or other educational institution or any hospital or other medical institution referred 
to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via), to any trust or institution 
registered under section 12AA, being voluntary contribution made with a specific direction that they 
shall form part of the corpus of the trust or institution, shall not be treated as application of income to 
the  objects  for  which  such  fund  or  trust  or  institution  or  university  or  educational  institution  or 
hospital or other medical institution, as the case may be, is established:] 

8[Provided also that for the purposes of determining the amount of application under item (a) of 
the third proviso, the provisions of sub-clause (ia) of clause (a) of section 40 and sub-sections (3) and 
(3A) of section 40A, shall, mutatis mutandis, apply as they apply in computing the income chargeable 
under the head “Profits and gains of business or profession.] 

9* 

 * 

* 

* 

* 

1. Subs. by Act 29 of 2006, s. 3, for certain words, brackets, figures and letters (w.e.f. 1-4-2006). 
2. Ins. by s. 3, ibid. (w.e.f. 1-4-2006). 
3. Subs. by Act 22 of 2007, s. 6, for certain words, brackets, figures and letters (w.e.f. 1-6-2007). 
4. Ins. by Act 4 of 2001, s. 4 (w.e.f. 3-2-2001). 
5. Ins. by Act 20 of 2002, s. 4 (w.e.f. 3-2-2001). 
6. Subs. by Act 32 of 2003, s. 6, for “2003” (w.e.f. 3-2-2001). 
7. Ins. by Act 7 of 2017, s. 6 (w.e.f. 1-4-2018). 
8. Ins. by Act 13 of 2018, s. 5 (w.e.f. 1-4-2018). 
9. The proviso omitted by Act 20 of 2002, s. 4 (w.e.f. 1-4-2002).  

92 

 
 
 
 
 
 
 
                                                           
1[Provided also that where the fund or trust or institution or any university or other educational 
institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) 
or  sub-clause  (vi)  or  sub-clause  (via)  does  not  apply  its  income  during  the  year  of  receipt  and 
accumulates it, any payment or credit out of such accumulation to any trust or institution registered 
under section  12AA or  to  any  fund  or  trust  or  institution  or  any  university  or  other  educational 
institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) 
or sub-clause (vi) or sub-clause (via) shall not be treated as application of income to the objects for 
which  such  fund  or  trust  or  institution  or  university  or  educational  institution  or  hospital  or  other 
medical institution, as the case may be, is established: 

Provided also that where the fund or institution referred to in sub-clause (iv) or trust or institution 
referred to in sub-clause (v) is notified by the Central Government 2[or is approved by the prescribed 
authority,  as  the  case  may  be,]  or  any  university  or  other  educational institution  referred to  in  sub-
clause (vi) or any hospital or other medical institution referred to in sub-clause (via), is approved by 
the  prescribed  authority  and  subsequently  that  Government  or  the  prescribed  authority  is  satisfied 
that— 

(i) such fund  or  institution  or  trust  or  any  university  or  other  educational  institution  or  any 

hospital or other medical institution has not— 

(A)  applied  its income  in  accordance  with the  provisions  contained in  clause  (a)  of  the 

third proviso; or 

(B) invested or deposited its funds in accordance with the provisions contained in clause 

(b) of the third proviso; or 

 (ii)  the  activities  of  such  fund  or  institution  or  trust  or  any  university  or  other  educational 

institution or any hospital or other medical institution— 

 (A) are not genuine; or 

 (B) are not being carried out in accordance with all or any of the conditions subject to 

which it was notified or approved, 

it may, at any time after giving a reasonable opportunity of showing cause against the proposed action 
to the concerned fund or institution or trust or any university or other educational institution or any 
hospital or other medical institution, rescind the notification or, by order, withdraw the approval, as 
the  case  may  be,  and  forward  a  copy  of  the  order  rescinding  the  notification  or  withdrawing  the 
approval to such fund or institution or trust or any university or other educational institution or any 
hospital or other medical institution and to the Assessing Officer:] 

3[Provided  also that  in  case  the  fund  or  trust  or  institution  or  any  university  or  other  educational 
institution or any hospital or other medical institution referred to in the first proviso makes an application 
on or after the 1st day of June, 2006 for the purposes of grant of exemption or continuance thereof, such 
application shall be 4[made on or before the 30th day of September of the relevant assessment year] from 
which the exemption is sought:] 

5[Provided also that any anonymous donation referred to in section 115BBC on which tax is payable 

in accordance with the provisions of the said section shall be included in the total income:] 

2[Provided  also that  all  pending  applications,  on  which  no  notification  has  been  issued  under  sub-
clause (iv) or sub-clause (v) before the 1st day of June, 2007, shall stand transferred on that day to the 
prescribed  authority  and  the  prescribed  authority  may  proceed  with  such  applications  under  those  sub-
clauses from the stage at which they were on that day:] 

1. Ins. by Act 20 of 2002, s. 4 (w.e.f. 1-4-2003).  
2. Ins. by Act 22 of 2007, s. 6 (w.e.f. 1-6-2007). 
3. Ins. by Act 21 of 2006, s. 4 (w.e.f. 1-6-2006).  
4.  Subs.  by  Act  33  of  2009,  s.  4  for  “made  at  any  time  during  the  financial  year  immediately  preceding  the  year”            

(w.e.f. 1-4-2009). 

5. Ins. by Act 21 of 2006, s. 4 (w.e.f. 1-4-2007).  

93 

                                                           
1[Provided also that the income of a trust or institution referred to in sub-clause (iv) or sub-clause (v) 
shall be included in its total income of the previous year if the provisions of the first proviso to clause 
(15) of section 2 become applicable to such trust or institution in the  said previous year, whether or not 
any approval granted or notification issued in respect of such trust or institution has been withdrawn or 
rescinded:] 

2[Provided  also that  where  the  fund  or  institution  referred  to  in  sub-clause  (iv)  or  the  trust  or 
institution referred to in sub-clause (v) has been notified by the Central Government or approved by the 
prescribed authority, as the case may be, or any university or other educational institution referred to in 
sub-clause  (vi)  or  any  hospital  or  other  medical  institution  referred  to  in  sub-clause  (via),  has  been 
approved  by  the  prescribed  authority,  and  the  notification  or  the  approval  is  in  force  for  any  previous 
year, then, nothing contained in any other provision of this section [other than clause (1) thereof] shall 
operate to exclude any income received on behalf of such fund or trust or institution or university or other 
educational institution or hospital or other medical institution, as the case may be, from the total income 
of the person in receipt thereof for that previous year. 

Explanation.—In this clause, where any income is required to be applied or accumulated, then, 
for  such  purpose  the  income  shall  be  determined  without  any  deduction  or  allowance  by  way  of 
depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application 
of income under this clause in the same or any other previous year;] 

3[(23D) 4[5[ 6*** 7[subject to the provisions of Chapter XII-E, any income of]—] 

 (i)  a  Mutual  Fund  registered  under  the  Securities  and  Exchange  Board  of  India                 

Act, 1992 (15 of 1992) or regulations made thereunder; 

 (ii) such other Mutual Fund set up by a public sector bank or a public financial institution or 
authorised  by  the  Reserve  Bank  of  India  and  subject  to  such  conditions  as  the  Central 
Government may, by notification in the Official Gazette, specify in this behalf.] 

Explanation.—For the purposes of this clause,— 

(a) the expression “public sector bank” means the State Bank of India constituted under the 
State  Bank  of  India  Act,  1955  (23  of  1955),  a  subsidiary  bank  as  defined  in  the  State  Bank  of 
India  (Subsidiary  Banks)  Act,  1959  (38  of  1959),  a corresponding  new  Bank  constituted  under 
section 3 of the Banking Companies (Acquisition and Transfer of Under-takings) Act, 1970 (5 of 
1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) 
Act, 1980 (40 of 1980) 8[and a bank included in the category “other public sector banks” by the 
Reserve Bank of India;] 

(b)  the  expression  “public  financial  institution”  shall  have  the  meaning  assigned  to  it  in 

section 4A of the Companies Act, 1956 (1 of 1956);] 

9[(c)  the  expression  “Securities  and  Exchange  Board  of  India”  shall  have  the  meaning 
assigned to it in clause (a) of sub-section (1) of section 2 of the Securities and Exchange Board of 
India Act, 1992 (15 of 1992);] 

1. Ins. by Act 23 of 2012, s. 5 (w.e.f. 1-4-2009). 
2. Ins. by Act 25 of 2014, s. 5 (w.e.f. 1-4-2015).  
3. Ins. by Act 4 of 1988, s. 6 (w.e.f. 1-4-1988). 
4. Subs. by Act 22 of 1995, s. 4, for certain words (w.e.f. 1-7-1995). 
5. Subs. by Act 27 of 1999, s. 6, for “any income of—” (w.e.f. 1-4-2000). 
6.  The  words  figures  and  letter  “subject  to  the  provisions  of  Chapter  XII-E,”  omitted  by  Act  20  of  2002,  s.  4                           

(w.e.f. 1-4-2003). 

7. Subs. by Act 32 of 2003, s. 6, for “any income of ” (w.e.f. 1-4-2004). 
8. Ins. by Act 33 of 2009, s. 4 (w.e.f. 1-4-2010). 
9. Ins. by Act 18 of 1992, S. 4 (w.e.f. 1-4-1993). 

94 

                                                           
1[(23DA) any income of a securitisation trust from the activity of securitisation. 

Explanation.—For the purposes of this clause,— 

(a) “securitisation” shall have the same meaning as assigned to it,— 

(i)  in  clause  (r)  of  sub-regulation  (1)  of  regulation  2  of  the  Securities  and  Exchange 
Board of India (Public Offer and Listing of Securitised Debt Instruments) Regulations, 2008 
made  under  the  Securities  and  Exchange  Board  of  India  Act,  1992  (15  of  1992)  and  the 
Securities Contracts (Regulation) Act, 1956 (42 of 1956); or 

2[(ia) in clause (z) of sub-section (1) of section 2 of the Securitisation and Reconstruction 

of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002); or] 

(ii) under the guidelines on securitisation of standard assets issued by the Reserve Bank 

of India; 

 (b) 

shall 
the Explanation below 3[section 115TCA];] 

“securitisation 

trust” 

have 

the  meaning 

assigned 

to 

it 

in 

4* 

* 

* 

* 

* 

5[(23EA)  6[any  income,  by  way  of  contributions received  from  recognised stock  exchanges  and 
the  members  thereof,]  of  such  Investor  Protection  Fund  set  up  by  recognised  stock  exchanges  in 
India,  either  jointly  or  separately,  as  the  Central  Government  may,  by  notification  in  the  Official 
Gazette, specify in this behalf: 

Provided that where any amount standing to the credit of the Fund and not charged to income-tax 
during  any  previous  year  is  shared,  either  wholly  or in  part,  with  a recognised stock  exchange,  the 
whole of the amount so shared shall be deemed to be the income of the previous year in which such 
amount is so shared and shall accordingly be chargeable to income-tax;] 

7[(23EB)  any  income  of  the  8[Credit  Guarantee  Fund  Trust  for  Small  Industries],  being  a  trust 
created by the Government of India and the Small Industries Development Bank of India established 
under  sub-section  (1)  of  section  3  of  the  Small  Industries  Development  Bank  of  India                     
Act,  1989  (39  of  1989),  for  five  previous  years  relevant  to  the  assessment  years  beginning  on  the          
1st day of April, 2002 and ending on the 31st day of March, 2007;] 

9[(23EC)  any  income,  by  way  of  contributions  received  from  commodity  exchanges  and  the 
members thereof, of such Investor Protection Fund set up by commodity exchanges in India, either 
jointly or separately, as the Central Government may, by notification in the Official Gazette, specify 
in this behalf: 

Provided that  where  any  amount  standing  to  the  credit  of  the  said  Fund  and  not  charged  to 
income-tax during any previous year is shared, either wholly or in part, with a commodity exchange, 
the whole of the amount so shared shall be deemed to be the income of the previous year in which 
such amount is so shared and shall accordingly be chargeable to income-tax. 

1. Ins. by Act 17 of 2013, s. 5 (w.e.f. 1-4-2014).  
2. Ins. by Act 28 of 2016, s. 7 (w.e.f. 1-4-2017). 
3. Subs. by s. 7, ibid., for “section 115TC” (w.e.f. 1-4-2017). 
4. Clause (23E) omitted by Act 20 of 2002, s. 4 (w.e.f. 1-4-2003). 
5. Ins. by Act 10 of 2000, s. 5 (w.e.f. 1-4-2001). 
6. Subs. by Act 21 of 2006, s. 4, for “any income” (w.e.f. 1-4-2007). 
7. Ins. by Act 20 of 2002, s. 4 (w.e.f. 1-4-2002). 
8. Subs. by Act 32 of 2003, s. 6, for “Credit Guarantee Fund Trust for Small Scale Industries” (w.e.f. 1-4-2002). 
9. Ins. by Act 22 of 2007, s. 6 (w.e.f. 1-4-2008). 

95 

 
 
 
 
 
 
 
                                                           
Explanation.—For the purposes of this clause, “commodity exchange” shall mean a  “registered 

association”  as  defined  in  clause  (jj)  of  section  2  of  the  Forward  Contracts  (Regulation)                           
Act, 1952 (74 of 1952);] 

1[(23ED)  any  income,  by  way  of  contributions  received  from  a  depository,  of  such  Investor 
Protection Fund set up in accordance with the regulations by a depository as the Central Government 
may, by notification in the Official Gazette, specify in this behalf: 

Provided that where any amount standing to the credit of the Fund and not charged to income-tax 
during any previous year is shared, either wholly or in part with a depository, the whole of the amount 
so shared shall be deemed to be the income of the previous year in which such amount is so shared 
and shall, accordingly, be chargeable to income-tax. 

Explanation.—For the purposes of this clause,— 

(i) “depository” shall have the same meaning as assigned to it in clause (e) of sub-section (1) 

of section 2 of the Depositories Act, 1996 (22 of 1996); 

(ii)  “regulations”  means  the  regulations  made  under  the  Securities  and  Exchange  Board  of 

India Act, 1992 (15 of 1992) and the Depositories Act, 1996 (22 of 1996);] 

2[(23EE) any specified income of such Core Settlement Guarantee Fund, set up by a recognised 
clearing  corporation  in  accordance  with  the  regulations,  as  the  Central  Government  may,  by 
notification in the Official Gazette, specify in this behalf: 

Provided that where any amount standing to the credit of the Fund and not charged to income-tax 
during any previous year is shared, either wholly or in part with the specified person, the whole of the 
amount so shared shall be deemed to be the income of the previous year in which such amount is so 
shared and shall, accordingly, be chargeable to income-tax. 

Explanation.—For the purposes of this clause,— 

(i) “recognised  clearing  corporation”  shall  have  the  same  meaning  as  assigned  to  it  in      

clause  (o)  of  sub-regulation  (1)  of  regulation  2  of  the  Securities  Contracts  (Regulation)  (Stock 
Exchanges  and  Clearing  Corporations)  Regulations,  2012  made  under  the  Securities  and 
Exchange  Board  of  India  Act,  1992  (15  of  1992)  and  the  Securities  Contracts  (Regulation)       
Act, 1956 (42 of 1956); 

(ii) “regulations” means the Securities Contracts (Regulation) (Stock Exchanges and Clearing 
Corporations)  Regulations,  2012  made  under  the  Securities  and  Exchange  Board  of  India        
Act, 1992 (15 of 1992) and the Securities Contracts (Regulation) Act, 1956 (42 of 1956); 

(iii) “specified income” shall mean,— 

(a) the income by way of contribution received from specified persons; 

(b) the income by way of penalties imposed by the recognised clearing corporation and 

credited to the Core Settlement Guarantee Fund; or 

(c) the income from investment made by the Fund; 

(iv) “specified person” shall mean,— 

(a) any  recognised  clearing  corporation  which  establishes  and  maintains  the  Core 

Settlement Guarantee Fund; 

(b) any  recognised  stock  exchange,  being  a  shareholder  in  such  recognised  clearing 

corporation, or a contributor to the Core Settlement Guarantee Fund; and 

1. Ins. by Act 17 of 2013, s. 5 (w.e.f. 1-4-2014). 
2. Ins. by Act 20 of 2015, s. 7 (w.e.f. 1-4-2016). 

96 

                                                           
 (c) any clearing member contributing to the Core Settlement Guarantee Fund;] 

1[(23F) any income by way of dividends or long-term capital gains of a venture capital fund or a 
venture  capital  company  from  investments  made  by  way  of  equity  shares  in  a  venture  capital 
undertaking: 

Provided that such venture capital fund or venture capital company is approved for the purposes 
of this clause by the prescribed authority in accordance with the rules made in this behalf and satisfies 
the prescribed conditions : 

Provided further that any approval by the prescribed authority shall, at any one time, have effect 
for such assessment year or years, not exceeding three assessment years, as may be specified in the 
order of approval: 

2[Provided  also that  nothing  contained  in  this  clause  shall  apply  in  respect  of  any  investment 

made after the 31st day of March, 1999.] 

3* 

* 

* 

* 

* 

Explanation.—For the purposes of this clause,— 

 (a) “venture capital fund” means such fund, operating under a trust deed registered under the 
provisions of the Registration Act, 1908 (16 of 1908), established to raise monies by the trustees 
for  investments  mainly  by  way  of  acquiring  equity  shares  of  a  venture  capital  undertaking  in 
accordance with the prescribed guidelines; 

 (b)  “venture  capital  company”  means  such  company  as  has  made  investments  by  way  of 
acquiring  equity  shares  of  venture  capital  undertakings  in  accordance  with  the  prescribed 
guidelines; 

4[(c) “venture capital undertaking” means such domestic company whose shares are not listed 
in  a  recognised  stock  exchange  in  India  and  which  is  engaged  in  the  business  of  generation  or 
generation and distribution of electricity or any other form of power or engaged in the business of 
providing  telecommunication  services  or  in  the  business  of  developing,  maintaining  and 
operating any infrastructure facility or engaged in the manufacture or production of such articles 
or  things  (including  computer  software)  as  may  be  notified  by  the  Central  Government  in  this 
behalf;and 

(d) “infrastructure facility” means a road, highway, bridge, airport, port, rail system, a water 
supply project, irrigation project, sanitation and sewerage system or any other public facility of a 
similar nature as may be notified by the Board in this behalf in the Official Gazette and which 
fulfils the conditions specified in sub-section (4A) of section 80-IA;]] 

2[(23FA) any income by way of 5[dividends, other than dividends referred to in section 115-O], or 
long-term capital gains of a venture capital fund or a venture capital company from investments made 
by way of equity shares in a venture capital undertaking: 

Provided that such venture capital fund or venture capital company is approved, for the purposes 
of  this  clause,  by  the  Central  Government  on  an  application  made  to  it  in  accordance  with  the 
rules made in this behalf and which satisfies the prescribed conditions: 

1. Ins. by Act 22 of 1995, s. 4 (w.e.f. 1-4-1996). 
2. Ins. by Act 27 of 1999, s. 6 (w.e.f. 1-4-2000). 
3. The third and fourth provisos omitted by Act 21 of 1998, s. 5 (w.e.f. 1-4-1999). 
4. Subs. by s. 5, ibid., for clause (c) (w.e.f. 1-4-1999). 
5. Subs. by Act 32 of 2003, s. 6, for “dividends” (w.e.f. 1-4-2004). 

97 

 
 
 
 
 
 
 
                                                           
Provided further that any approval by the Central Government shall, at any one time, have effect 
for such assessment year or years, not exceeding three assessment years, as may be specified in the 
order of approval: 

1[Provided  also that  nothing  contained  in  this  clause  shall  apply  in  respect  of  any  investment 

made after the 31st day of March, 2000.] 

Explanation.—For the purposes of this clause,— 

(a) “venture capital fund” means such fund, operating under a trust deed registered under the 
provisions of the Registration Act, 1908 (16 of 1908), established to raise monies by the trustees 
for  investments  mainly  by  way  of  acquiring  equity  shares  of  a  venture  capital  undertaking  in 
accordance with the prescribed guidelines; 

(b)  “venture  capital  company”  means  such  company  as  has  made  investments  by  way  of 
acquiring  equity  shares  of  venture  capital  undertakings  in  accordance  with  the  prescribed 
guidelines; and 

(c) “venture capital undertaking” means such domestic company whose shares are not listed 

in a recognised stock exchange in India and which is engaged in the— 

(i) business of— 

(A) software; 

(B) information technology; 

(C) production of basic drugs in the pharmaceutical sector; 

(D) bio-technology; 

(E) agriculture and allied sectors; or 

(F) such other sectors as may be notified by the Central Government in this behalf; or 

(ii)  production  or  manufacture  of  any  article  or  substance  for  which  patent  has  been 
granted  to  the  National  Research  Laboratory  or  any  other  scientific  research  institution 
approved by the Department of Science and Technology;] 

1[(23FB) any income of a venture capital company or venture capital fund 2[from investment] in a 

venture capital undertaking: 

3[Provided that nothing contained in this clause shall apply in respect of any income of a venture 
capital  company  or  venture  capital  fund,  being  an  investment  fund  specified  in  clause  (a)  of 
the Explanation 1 to section 115UB, of the previous year relevant to the assessment year beginning 
on or after the 1st day of April, 2016.] 

4[Explanation.—For the purposes of this clause,— 

(a) “venture capital company” means a company which— 

(A) has been granted a certificate of registration, before the 21st day of May, 2012, as a 
Venture  Capital  Fund  and  is  regulated  under  the  Securities  and  Exchange  Board  of  India 
(Venture  Capital  Funds)  Regulations,  1996  (hereinafter  referred  to  as  the  Venture  Capital 
Funds Regulations) made under the Securities and Exchange Board of India Act, 1992 (15 of 
1992); or 

1. Ins. by Act 10 of 2000, s. 5 (w.e.f. 1-4-2001). 
2. Subs. by Act 22 of 2007, s. 6, for “set up to raise funds for investment” (w.e.f. 1-4-2008). 
3. Ins. by Act 20 of 2015, s. 7 (w.e.f. 1-4-2016). 
4. Subs. by Act 17 of 2013, s. 5 for the Explanation 1 (w.e.f. 1-4-2013). 

98 

                                                           
(B)  has  been  granted  a  certificate  of  registration  as  Venture  Capital  Fund  as  a  sub-
category of Category I Alternative Investment Fund and is regulated under the Securities and 
Exchange  Board  of  India  (Alternative  Investment  Funds)  Regulations,  2012  (hereinafter 
referred to as the Alternative Investment Funds Regulations) made under the Securities and 
Exchange Board of India Act, 1992 (15 of 1992), and which fulfils the following conditions, 
namely:— 

(i) it is not listed on a recognised stock exchange; 

(ii) it  has invested  not  less  than two-thirds  of  its  investible  funds  in  unlisted  equity 

shares or equity linked instruments of venture capital undertaking; and 

(iii) it has not invested in any venture capital undertaking in which its director or a 
substantial shareholder (being a beneficial owner of equity shares exceeding ten per cent. 
of  its  equity  share  capital)  holds,  either  individually  or  collectively,  equity  shares  in 
excess  of  fifteen  per  cent.  of  the  paid-up  equity  share  capital  of  such  venture  capital 
undertaking; 

(b) “venture capital fund” means a fund— 

(A)  operating  under  a  trust  deed  registered  under  the  provisions  of  the  Registration       

Act, 1908 (16 of 1908), which— 

(I) has been granted a certificate of registration, before the 21st day of May, 2012, as 
a Venture Capital Fund and is regulated under the Venture Capital Funds Regulations; or 

(II)  has been  granted a  certificate  of  registration  as Venture  Capital  Fund  as  a  sub-
category  of  Category  I  Alternative  Investment  Fund  under  the  Alternative  Investment 
Funds Regulations and which fulfils the following conditions, namely:— 

(i) it has invested not less than two-thirds of its investible funds in unlisted equity 

shares or equity linked instruments of venture capital undertaking; 

(ii) it has not invested in any venture capital undertaking in which its trustee or 
the settler holds, either individually or collectively, equity shares in excess of fifteen 
per cent. of the paid-up equity share capital of such venture capital undertaking; and 

(iii)  the  units,  if  any,  issued  by  it  are  not  listed  in  any  recognised  stock        

exchange; or 

(B)  operating  as  a  venture  capital  scheme  made  by  the  Unit  Trust  of  India  established 

under the Unit Trust of India Act, 1963 (52 of 1963); 

(c) “venture capital undertaking” means— 

(i) a venture capital undertaking as defined in clause (n) of regulation 2 of the Venture 

Capital Funds Regulations; or 

(ii)  a  venture  capital  undertaking  as  defined  in  clause  (aa)  of  sub-regulation  (1)  of 

regulation 2 of the Alternative Investment Funds Regulations;]] 

1* 

* 

* 

* 

* 

1. The Explanation 2 omitted by Act 23 of 2004, s. 5 (w.e.f. 1-10-2004). 

99 

 
 
 
 
 
 
 
                                                           
1[(23FBA) any  income  of  an  investment  fund  other  than  the  income  chargeable  under  the  head 

“Profits and gains of business or profession”; 

(23FBB) any income referred to in section 115UB, accruing or arising to, or received by, a unit 
holder of an investment fund, being that proportion of income which is of the same nature as income 
chargeable under the head “Profits and gains of business or profession”. 

Explanation.—For  the  purposes  of  clauses  (23FBA)  and  (23FBB), the  expression  “investment 

fund” shall have the meaning assigned to it in clause (a) of the Explanation 1 to section 115UB;] 

2[(23FC) any income of a business trust 3[by way of— 

(a) interest received or receivable from a special purpose vehicle; or 

(b) divided referred to in sub-section (7) of section 115-O]. 

Explanation.—For the purposes of this clause, the expression "special purpose vehicle" means an 
Indian company in which the business trust holds controlling interest and any specific percentage of 
shareholding  or  interest,  as  may  be  required  by  the  regulations  under  which  such  trust  is  granted 
registration;  

1[(23FCA) any income of a business trust, being a real estate investment trust, by way of renting 

or leasing or letting out any real estate asset owned directly by such business trust. 

Explanation.—For  the  purposes  of  this  clause,  the  expression  "real  estate  asset"  shall  have  the 
same meaning as assigned to it in clause (zj) of sub-regulation (1) of regulation 2 of the Securities and 
Exchange  Board  of  India  (Real  Estate  Investment  Trusts)  Regulations,  2014  made  under  the 
Securities and Exchange Board of India Act, 1992 (15 of 1992);] 

(23FD) any distributed income, referred to in section 115UA, received by a unit holder from the 
business  trust,  not  being  that  proportion  of  the  income  which  is  of  the  same  nature  as  the  income 
referred to4[in sub-clause (a) of clause (23FC)] 3[or clause (23FCA)];] 

5* 

* 

* 

* 

* 

6[(24) any income chargeable under the heads “Income from house property” and “Income from 

other sources” of— 

(a)  a  registered  union  within  the  meaning  of  the  Trade  Unions  Act,  1926  (16  of  1926), 
formed primarily for the purpose of regulating the relations between workmen and employers or 
between workmen and workmen; 

(b) an association of registered unions referred to in sub-clause (a);] 

1. Ins. by Act 20 of 2015, s. 7 (w.e.f. 1-4-2016). 
2. Ins. by Act 25 of 2014, s. 5 (w.e.f. 1-4-2015). 
3.  Subs.  by  Act  27  of  2016,  s.  7,  for  “by  way  of  interest  received  or  receivable  from  a  special  purpose                                   

vehicle” (w.e.f. 1-4-2017). 

4. Subs. by Act 27 of 2016, s. 7, for “in clause (23FC)” (w.e.f. 1-4-2017). 
5. Clause (23G) omitted by Act 21 of 2006, s. 4 (w.e.f. 1-4-2007).                                            
6. Subs. by Act 33 of 1996, s. 4, for clause (24) (w.e.f. 1-4-1997). 

100 

 
 
 
 
 
 
 
                                                           
(25)  (i)  interest  on  securities  which  are  held  by,  or  are  the  property  of,  any  provident  fund  to 
which the Provident Funds Act, 1925 (19 of 1925), applies, and any capital gains of the fund arising 
from the sale, exchange or transfer of such securities; 

(ii) any income received by the trustees on behalf of a recognised provident fund; 

(iii) any income received by the trustees on behalf of an approved superannuation fund; 

1[(iv) any income received by the trustees on behalf of an approved gratuity fund;] 

2[(v) any income received— 

(a)  by  the  Board  of  Trustees  constituted  under  the  Coal  Mines  Provident  Funds  and 
Miscellaneous Provisions Act, 1948 (46 of 1948), on behalf of the Deposit-linked Insurance Fund 
established under section 3G of that Act; or 

(b)  by  the  Board  of  Trustees  constituted  under  the  Employees'  Provident  Funds  and 
Miscellaneous Provisions Act, 1952 (19 of 1952), on behalf of the Deposit-linked Insurance Fund 
established under section 6C of that Act;] 

3[(25A)  any  income  of  the Employees’  State  Insurance  Fund set  up  under the  provisions  of  the 

Employees' State Insurance Act, 1948 (34 of 1948);] 

4[(26) in the case of a member of a Scheduled Tribe as defined in clause (25) of article 366 of the 
Constitution, residing in any area specified in Part I or Part II of the Table appended to paragraph 20 
of the Sixth Schedule to the Constitution or in the 5[States of Arunachal Pradesh, Manipur, Mizoram, 
Nagaland and Tripura] or in the areas covered by notification No. TAD/R/35/50/109, dated the 23rd 
February, 1951, issued by the Governor of Assam under the proviso to sub-paragraph (3) of the said 
paragraph  20  [as  it  stood  immediately  before  the  commencement  of  the  North-Eastern  Areas 
(Reorganisation)  Act,  1971  (81  of  1971)]  6[or  in  the  Ladakh  region  of  the  State  of  Jammu  and 
Kashmir], any income which accrues or arises to him,— 

(a) from any source in the areas 7[or States aforesaid], or 

(b) by way of dividend or interest on securities;] 

8[(26A)  any  income  accruing  or  arising  to  any  person9***  from  any  source  in  the  district  of 
Ladakh or outside India in any previous year relevant to any assessment year commencing before the 
10[1st day of April, 1989], where such person is resident in the said district in that previous year: 

Provided that this clause shall not apply in the case of any such person unless he was resident in 
that district in the previous year relevant to the assessment year commencing on the 1st day of April, 
1962. 

1. Ins. by Act 16 of 1972, s. 4 (w.e.f. 1-4-1973). 
2. Ins. by Act 99 of 1976, s. 40 (w.e.f. 1-8-1976). 
3. Ins. by Act 22 of 1995, s. 4 (w.e.f. 1-4-1962). 
4. Subs. by the North-Eastern Areas (Reorganisation) Adaptation of  Laws on Union Subjects) Order, 1974, for clause 26 

(w.e.f. 21-1-1972). 

5.  Subs.  by  Act  32  of  1994,  s.  6,  for  “States  of  Nagaland,  Manipur  and  Tripura  or  in  the  Union  territories  of  Arunachal 

Pradesh and Mizoram” (w.e.f. 1-4-1995). 
6. Ins. by Act 21 of 1998, s. 5 (w.e.f. 1-4-1999). 
7. Subs. by Act 32 of 1994, s. 6, for “States or Union territories aforesaid” (w.e.f. 1-4-1995). 
8. Ins. by Act 15 of 1965, s. 3 (w.e.f. 1-4-1962). 
9. The brackets and words “(not being an individual who is in the service of Government)” omitted by Act 32 of 1971, s. 4 

(w.e.f. 1-4-1962). 

10. Subs. by Act 32 of 1985, s. 4, for “1st day of April, 1986” (w.e.f. 1-4-1985). 

101 

                                                           
1[Explanation 1].—For the purposes of this clause, a person shall be deemed to be resident in the 
district  of  Ladakh  if  he  fulfils  the  requirements  of  sub-section  (1)or  sub-section  (2)  or  
sub-section (3) or sub-section (4) of section 6, as the case may be, subject to the modifications that— 

 (i)  references  in  those  sub-sections  to  India  shall  be  construed  as  references  to  the  said 

district; and 

(ii)  in  clause  (i)  of  sub-section  (3),  reference  to  Indian  company  shall  be  construed  as 
reference to a company formed and registered under any law for the time being in force in the 
State of Jammu and Kashmir and having its registered office in that district in that year.] 

2[Explanation  2.—In  this  clause,  references  to  the  district  of  Ladakh  shall  be  construed  as 

references to the areas comprised in the said district on the 30th day of June, 1979;] 

3* 

* 

* 

* 

* 

4[(26AAA)  in  case  of  an  individual,  being  a  Sikkimese,  any  income  which  accrues  or  arises  to 

him— 

(a) from any source in the State of Sikkim; or 

(b) by way of dividend or interest on securities: 

Provided that nothing contained in this clause shall apply to a Sikkimese woman who, on or 

after the 1st day of April, 2008, marries an individual who is not a Sikkimese. 

Explanation.—For the purposes of this clause, “Sikkimese” shall mean— 

(i)  an  individual,  whose  name  is  recorded  in  the  register  maintained  under  the  Sikkim 
Subjects  Regulation, 1961 read  with  the  Sikkim  Subject  Rules,  1961 (hereinafter  referred  to  as 
the “Register of Sikkim Subjects”), immediately before the 26th day of April, 1975; or 

(ii) an individual, whose name is included in the Register of Sikkim Subjects by virtue of the 
Government of India Order No. 26030/36/90-I.C.I., dated the 7th August, 1990 and Order of even 
number dated the 8th April, 1991; or 

(iii) any other individual, whose name does not appear in the Register of Sikkim Subjects, but 
it  is  established  beyond  doubt  that  the  name  of  such  individual’s  father  or  husband  or  paternal 
grand-father or brother from the same father has been recorded in that register;] 

5[(26AAB)  any  income  of  an  agricultural  produce  market  committee  or  board  constituted  under 
any  law  for  the  time  being  in  force  for  the  purpose  of  regulating  the  marketing  of  agricultural 
produce;] 

6[(26B) any income of a corporation established by a Central, State or Provincial Act or of any 
other  body,  institution  or  association  (being  a  body,  institution  or  association  wholly  financed  by 
Government) where such corporation or other body or institution or association has been established 
or  formed  for  promoting  the  interests  of  the  7[members  of  the  Scheduled  Castes  or  the  Scheduled 
Tribes or backward classes or of any two or all of them]. 

1. The Explanation renumbered as Explanation 1 by Act 11 of 1983, s. 5 (w.e.f. 1-4-1980). 
2. Ins. by s. 5, ibid. (w.e.f. 1-4-1980). 
3. Clause (26AA) omitted by Act 26 of 1997, s. 3 (w.e.f. 1-4-1998). 
4. Ins. by Act 18 of 2008, s. 4 (w.e.f. 1-4-1990). 
5. Ins. by s. 4, ibid. (w.e.f. 1-4-2009). 
6. Ins. by Act 13 of 1980, s. 3 (w.e.f. 1-4-1972). 
7.  Subs.  by  Act  32  of  1994,  s.  6,  for  “members  of  either  the  Scheduled  Castes  or  the  Scheduled  Tribes  or  of  both”         

(w.e.f. 1-4-1993). 

102 

 
 
 
 
 
 
 
                                                           
1[Explanation.—For the purposes of this clause,— 

(a) “Scheduled Castes” and “Scheduled Tribes” shall have the meanings respectively assigned to 

them in clauses (24) and (25) of article 366 of the Constitution; 

(b) “backward classes” means such classes of citizens, other than the Scheduled Castes and the 

Scheduled Tribes, as may be notified— 

(i) by the Central Government; or 

(ii) by any State Government, 

as the case may be, from time to time;]] 

2[(26BB)  any  income  of  a  corporation  established  by  the  Central  Government  or  any  State 

Government for promoting the interests of the members of a minority community. 

Explanation.—For  the  purposes  of  this  clause,  “minority  community”  means  a  community 

notified as such by the Central Government in the Official Gazette in this behalf;] 

 3[(26BBB) any income of a corporation established by a Central, State or Provincial Act for the 

welfare and economic upliftment of ex-servicemen being the citizens of India. 

Explanation.—For the purposes of this clause, “ex-serviceman” means a person who has served 
in  any  rank,  whether  as  combatant  or  non-combatant,  in  the  armed  forces  of  the  Union  or  armed 
forces of the Indian States before the commencement of the Constitution (but excluding the Assam 
Rifles, Defence Security Corps, General Reserve Engineering Force, Lok Sahayak Sena, Jammu and 
Kashmir  Militia  and  Territorial  Army)  for  a  continuous  period  of  not  less  than  six  months  after 
attestation  and  has  been  released,  otherwise  than  by  way  of  dismissal  or  discharge  on  account  of 
misconduct or inefficiency, and in the case of a deceased or incapacitated ex-serviceman includes his 
wife,  children,  father,  mother,  minor  brother,  widowed  daughter  and  widowed  sister,  wholly 
dependant upon such ex-serviceman immediately before his death or incapacitation;] 

4[(27) any income of a co-operative society formed for promoting the interests of the members of 

either the Scheduled Castes or Scheduled Tribes or both referred to in clause (26B): 

Provided that  the  membership  of  the  co-operative  society  consists  of  only  other  co-operative 
societies formed for similar purposes and the finances of the society are provided by the Government 
and such other societies;] 

5* 

6* 

* 

* 

* 

* 

* 

* 

* 

* 

7[(29A) any income accruing or arising to— 

(a) the Coffee Board constituted under section 4 of the Coffee Act, 1942 (7 of 1942) in any 
previous year relevant to any assessment year commencing on or after the 1st day of April, 1962 
or the previous year in which such Board was constituted, whichever is later; 

1. Subs. by Act 32 of 1994, s. 6, for the Explanation (w.e.f. 1-4-1993). 
2. Ins. by Act 22 of 1995, s. 4 (w.e.f. 1-4-1995). 
3. Ins. by Act 32 of 2003, s. 6 (w.e.f. 1-4-2004). 
4. Ins. by Act 18 of 1992, s. 4 (w.e.f. 1-4-1989). 
5. Clause (28) omitted by Act 26 of 1997, s. 3 (w.e.f. 1-4-1998). 
6. Clause (29) omitted by Act 20 of 2002, s. 4 (w.e.f. 1-4-2003). 
7. Ins. by Act 27 of 1999, s. 6 (w.e.f. 11-5-1999). 

103 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
(b)  the  Rubber  Board  constituted  under  sub-section  (1)  of  section  4  of  the  Rubber  Board    

Act, 1947 (24 of 1947) in any previous year relevant to any assessment year commencing on or 
after  the  1st  day  of  April,  1962  or  the  previous  year  in  which  such  Board  was  constituted, 
whichever is later; 

(c)  the  Tea  Board  established  under  section  4  of  the  Tea  Act,  1953  (29  of  1953)  in  any 
previous year relevant to any assessment year commencing on or after the 1st day of April, 1962 
or the previous year in which such Board was constituted, whichever is later; 

(d)  the  Tobacco  Board  constituted  under  the  Tobacco  Board  Act,  1975  (4  of  1975)  in  any 
previous year relevant to any assessment year commencing on or after the 1st day of April, 1975 
or the previous year in which such Board was constituted, whichever is later; 

(e)  the  Marine  Products  Export  Development  Authority  established  under  section  4  of  the 
Marine  Products  Export  Development  Authority  Act,  1972  (13  of  1972)  in  any  previous  year 
relevant to any assessment year commencing on or after the 1st day of April, 1972 or the previous 
year in which such Authority was constituted, whichever is later; 

(f) the Agricultural and Processed Food Products Export Development Authority established 
under section 4 of the Agricultural and Processed Food Products Export Development Act, 1985 
(2 of 1986) in any previous year relevant to any assessment year commencing on or after the 1st 
day  of  April,  1985  or  the previous  year in  which such  Authority  was  constituted,  whichever  is 
later; 

(g) the Spices Board constituted under sub-section (1) of section 3 of the Spices Board Act, 
1986 (10 of 1986) in any previous year relevant to any assessment year commencing on or after 
the 1st day of April, 1986 or the previous year in which such Board was constituted, whichever is 
later;] 

1[(h) the Coir Board established under section 4 of the Coir Industry Act, 1953 (45 of 1953);] 

2[(30) in the case of an assessee who carries on the business of growing and manufacturing tea in 
India, the amount of any subsidy received from or through the Tea Board under any such scheme for 
replantation  or  replacement  of  tea  bushes  3[or  for  rejuvenation  or  consolidation  of  areas  used  for 
cultivation of tea] as the Central Government may, by notification in the Official Gazette, specify: 

Provided that  the  assessee  furnishes  to  the  4[Assessing  Officer],  along  with  his  return  of 
incomefor the assessment year concerned or within such further time as the  4[Assessing Officer] may 
allow, a certificate from the Tea Board as to the amount of such subsidy paid to the assessee during 
the previous year. 

Explanation.—In  this  clause,  “Tea  Board”  means the  Tea  Board  established  under  section 4  of 

the Tea Act, 1953 (29 of 1953);] 

5[(31)  in  the  case  of  an  assessee  who  carries  on  the  business  of  growing  and  manufacturing 
rubber,  coffee,  cardamom  or  such  other  commodity  in  India,  as  the  Central  Government  may,  by 
notification in the Official Gazette, specify in this behalf, the amount of any subsidy received from or 
through the concerned Board under any such scheme for replantation or replacement of rubber plants, 
coffee plants, cardamom plants or plants for the growing of such other commodity or for rejuvenation 
or consolidation of areas used for cultivation of rubber, coffee, cardamom or such other commodity 
as the Central Government may, by notification in the Official Gazette, specify: 

1. Ins. by Act 18 of 2008, s. 4 (w.e.f. 1-4-2002). 
2. Ins. by Act 42 of 1970, s. 3 (w.e.f. 1-4-1969). 
3. Ins. by Act 21 of 1984, s. 3 (w.e.f. 1-4-1985). 
4. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
5. Ins. by Act 26 of 1988, s. 4 (w.e.f. 1-4-1989). 

104 

                                                           
Provided that the assessee furnishes to the Assessing Officer, along with his return of income for 
the  assessment  year  concerned  or  within  such  further  time  as  the  Assessing  Officer  may  allow,  a 
certificate from the concerned Board, as to the amount of such subsidy paid to the assessee during the 
previous year. 

Explanation.—In this clause, “concerned Board” means,— 

(i)  in  relation  to  rubber,  the  Rubber  Board  constituted  under  section  4  of  the  Rubber  Act, 

1947 (24 of 1947), 

(ii) in relation to coffee, the Coffee Board constituted under section 4 of the Coffee Act, 1942 

(7 of 1942), 

(iii)  in  relation  to  cardamom,  the  Spices  Board  constituted  under  section  3  of  the  Spices 

Board Act, 1986 (10 of 1986), 

(iv)  in  relation  to  any  other  commodity  specified  under  this  clause,  any  Board  or  other 
authority  established  under  any  law  for  the  time  being  in  force  which  the  Central  Government 
may, by notification in the Official Gazette, specify in this behalf;] 

1[(32)  in  the  case  of  an  assessee  referred  to  in  sub-section  (1A)  of  section  64,  any  income 
includible in his total income under that sub-section, to the extent such income does not exceed one 
thousand five hundred rupees in respect of each minor child whose income is so includible;] 

2[(33)  any  income  arising  from  the  transfer  of  a  capital  asset,  being  a  unit  of  the  Unit         

Scheme,  1964  referred  to  in  Schedule  I  to  the  Unit  Trust  of  India  (Transfer  of  Undertaking  and 
Repeal) Act, 2002 (58 of 2002) and where the transfer of such asset takes place on or after the 1st day 
of April, 2002;] 

2[(34) any income by way of dividends referred to in section 115-O; 

3[Provided that nothing in this clause shall apply to any income by way of dividend chargeable to 

tax in accordance with the provisions of section 115BBDA;] 

4* 

* 

* 

* 

* 

5[(34A) any income arising to an assessee, being a shareholder, on account of buy back of shares 

(not being listed on a recognised stock exchange) by the company as referred to in section 115QA;] 

(35) any income by way of,— 

(a) income received in respect of the units of a Mutual Fund specified under clause (23D); or 

(b)  income  received  in  respect  of  units  from  the  Administrator  of  the  specified       

undertaking; or 

(c) income received in respect of units from the specified company: 

Provided that this clause shall not apply to any income arising from transfer of units of the 
Administrator of the specified undertaking or of the specified company or of a mutual fund, as the 
case may be. 

Explanation.—For the purposes of this clause,— 

(a) “Administrator” means the Administrator as referred to in clause (a) of section 2 of the 

Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002); 

1. Ins. by Act 18 of 1992, s. 4 (w.e.f. 1-4-1993). 
2. Ins. by Act 32 of 2003, s. 6 (w.e.f. 1-4-2004). 
3. Ins. by Act 28 of 2016, s. 7 (w.e.f. 1-4-2017). 
4. The Explanation omitted by Act 8 of 2011, s. 4 (w.e.f. 1-6-2011). 
5. Ins. by Act 17 of 2013, s. 5 (w.e.f. 1-4-2014). 

105 

 
 
 
 
 
 
 
                                                           
(b) “specified company” means a company as referred to in clause (h) of section 2 of the Unit 

Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002); 
1[(35A) any income by way of distributed income referred to in section 115TA received from a 

securitisation trust by any person being an investor of the said trust. 

2[Provided that nothing contained in this clause shall apply to any income by way of distributed 

income referred to in the said section, received on or after the 1st day of June, 2016.] 

Explanation.—For  the  purposes  of  this  clause,  the  expressions  “investor”  and  “securitisation 
trust”  shall  have  the  meanings  respectively  assigned  to  them  in  the Explanation below3[section 
115TCA]; 

(36)  any  income  arising  from  the  transfer  of  a  long-term  capital  asset,  being  an  eligible  equity 
share in a company purchased on or after the 1st day of March, 2003 and before the 1st day of March, 
2004 and held for a period of twelve months or more. 

Explanation.—For the purposes of this clause, “eligible equity share” means,— 

(i)  any  equity  share  in  a  company  being  a  constituent  of  BSE-500  Index  of  the  Stock 
Exchange, Mumbai as on the 1st day of March, 2003 and the transactions of purchase and sale of 
such equity share are entered into on a recognised stock exchange in India; 

(ii) any equity share in a company allotted through a public issue on or after  the 1st day of 
March, 2003 and listed in a recognised stock exchange in India before the 1st day of March, 2004 
and the transaction of sale of such share is entered into on a recognised stock exchange in India;] 
4[(37) in the case of an assessee, being an  individual or a Hindu undivided family, any income 

chargeable under the head “Capital gains” arising from the transfer of agricultural land, where— 

(i)  such  land  is  situate  in  any  area  referred  to  in  item  (a)  or  item  (b)  of  sub-clause  (iii)  of 

clause (14) of section 2; 

(ii) such land, during the period of two years immediately preceding the date of transfer, was 
being used for agricultural purposes by such Hindu undivided family or individual or a parent of 
his; 

(iii)  such  transfer  is  by  way  of  compulsory  acquisition  under  any  law,  or  a  transfer  the 
consideration  for  which  is  determined  or  approved  by  the  Central  Government  or  the  Reserve 
Bank of India; 

(iv) such income has arisen from the compensation or consideration for such transfer received 

by such assessee on or after the 1st day of April, 2004. 

this  clause, 

the  purposes  of 

Explanation.—For 

the  expression  “compensation  or 
consideration” includes the compensation or consideration enhanced or further enhanced by any 
court, Tribunal or other authority; 
5[(37A) any income chargeable under the head “Capital gains” in respect of transfer of a specified 
capital  asset  arising  to  an  assessee,  being  an  individual  or  a  Hindu  undivided  family,  who  was  the 
owner  of  such  specified  capital  asset  as  on  the  2nd  day  of  June,  2014  and  transfers  that  specified 
capital asset under the Land Pooling Scheme (herein referred to as “the scheme”) covered under the 
Andhra Pradesh Capital City Land Pooling Scheme (Formulation and Implementation) Rules, 2015 
made under the provisions of the Andhra Pradesh Capital Region Development Authority Act, 2014 
(Andhra Pradesh 11 of 2014) and the rules, regulations and Schemes made under the said Act. 

Explanation.—For the purposes of this clause, “specified capital asset” means,— 

(a) the land or building or both owned by the assessee as on the 2nd day of June, 2014 and 

which has been transferred under the scheme; or 

1. Ins. by Act 17 of 2013, s. 5 (w.e.f. 1-4-2014). 
2. Ins. by Act 28 of 2016, s. 7 (w.e.f. 1-4-2017). 
3. Subs. by s. 7, ibid., for “section 115TC” (w.e.f. 1-4-2017). 
4. Ins. by Act 23 of 2004, s. 5 (w.e.f. 1-4-2005). 
5. Ins. by Act 7 of 2017, s. 6 (w.e.f. 1-4-2015). 

106 

                                                           
(b)  the  land  pooling  ownership  certificate  issued  under  the  scheme  to  the  assessee  in 

respect of land or building or both referred to in clause (a); or 

(c) the reconstituted plot or land, as the case may be, received by the assessee in lieu of land 
or building or both referred to in clause (a) in accordance with the scheme, if such plot or land, as 
the case may be, so received is transferred within two years from the end of the financial year in 
which the possession of such plot or land was handed over to him;] 

(38) any income arising from the transfer of a long-term capital asset, being an equity share in a 

company or a unit of an equity oriented fund 1[or a unit of a business trust] where— 

(a) the transaction of sale of such equity share or unit is entered into on or after the date on 

which Chapter VII of the Finance (No. 2) Act, 2004 comes into force; and 

(b) such transaction is chargeable to securities transaction tax under that Chapter: 

2[Provided that the income by way of long-term capital gain of a company shall be taken into 

account in computing the book profit and income-tax payable under section 115JB:] 

3* 

* 

* 

* 

* 

4[Provided  also that  nothing  contained  in  sub-clause  (b)  shall  apply  to  a  transaction 
undertaken on a recognised stock exchange located in any International Financial Services Centre 
and where the consideration for such transaction is paid or payable in foreign currency.] 

5[Provided also that nothing contained in this clause shall apply to any income arising from 
the transfer of a long-term capital asset, being an equity share in a company, if the transaction of 
acquisition, other than the acquisition notified by the Central Government in this behalf, of such 
equity share is entered into on or after the 1st day of October, 2004 and such transaction is not 
chargeable  to  securities  transaction  tax  under  Chapter  VII  of  the  Finance  (No.  2)  Act,  2004                   
(23 of 2004).] 

6[Provided also that nothing contained in this clause shall apply to any income arising from 
the transfer of long-term capital asset, being an equity share in a company or a unit of an equity 
oriented fund or a unit of a business trust, made on or after the 1st day of April, 2018.] 

7[Explanation.—For the purposes of this clause,— 

(a) “equity oriented fund” means a fund—  

(i) where the investible funds are invested by way of equity shares in domestic companies 

to the extent of more than sixty-five per cent.. of the total proceeds of such fund; and 

 (ii) which  has  been  set  up  under  a  scheme  of  a  Mutual  Fund  specified  under            

clause (23D): 

Provided that the percentage of equity share holding of the fund shall be computed with 

reference to the annual average of the monthly averages of the opening and closing figures;] 

(b) “International Financial Services Centre” shall have the same meaning as assigned to it in 

clause (q) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005); 

1. Ins. by Act 25 of 2014, s. 5 (w.e.f. 1-4-2015). 
2. Ins. by Act 21 of 2006, s. 4 (w.e.f. 1-4-2007). 
3. The second proviso omitted by Act 20 of 2015, s. 7 (w.e.f. 1-4-2016). 
4. Ins. by Act 28 of 2016, s. 7 (w.e.f. 1-4-2016). 
5. Ins. by Act 7 of 2017, s. 6 (w.e.f. 1-4-2018). 
6. Ins. by Act 13 of 2018, s. 5 (w.e.f. 1-4-2018). 
7. Subs. by Act 28 of 2016, s. 7, for the Explanation (w.e.f. 1-4-2016). 

107 

 
 
 
 
 
 
 
                                                           
(c) “recognised  stock  exchange”  shall  have  the  meaning  assigned  to  it  in  clause  (ii)  of 

the Explanation 1 to sub-section (5) of section 43;] 
1[(39)  any  specified  income,  arising  from  any  international  sporting  event  held  in  India,  to  the 
person  or  persons  notified  by  the  Central  Government  in  the  Official  Gazette,  if  such  international 
sporting event— 

(a)  is  approved  by  the  international  body  regulating  the  international  sport  relating  to  such 

event; 

(b) has participation by more than two countries; 

(c)  is  notified  by  the  Central  Government  in  the  Official  Gazette  for  the  purposes  of  this 

clause. 

Explanation.—For the purposes of this clause, “the specified income” means the income, of the 
nature and to the extent, arising from the international sporting event, which the Central Government 
may notify in this behalf; 

(40) any income of any subsidiary company by way of grant or otherwise received from an Indian 
company,  being  its  holding  company  engaged  in  the  business  of  generation  or  transmission  or 
distribution  of  power  if  receipt  of  such  income  is  for  settlement  of  dues  in  connection  with 
reconstruction or revival of an existing business of power generation: 

Provided that the provisions of this clause shall apply if reconstruction or revival of any existing 
business of power generation is by way of transfer of such business to the Indian company notified 
under sub-clause (a) of clause (v) of sub-section (4) of section 80-IA; 

(41) any income arising from transfer of a capital asset, being an asset of an undertaking engaged 
in the business of generation or transmission or distribution of power where such transfer is effected 
on  or  before  the  31st  day  of  March,  2006,  to  the  Indian  company  notified  under  sub-clause  (a)  of 
clause (v) of sub-section (4) of section 80-IA;] 

2[(42) any specified income arising to a body or authority which— 

 (a) has been established or constituted or appointed under a treaty or an agreement entered 
into by the Central Government with two or more countries or a convention signed by the Central 
Government; 

 (b) is established or constituted or appointed not for the purposes of profit; 

 (c)  is  notified  by  the  Central  Government  in  the  Official  Gazette  for  the  purposes  of  this 

clause. 

Explanation.—For the purposes of this clause, “specified income” means the income, of the 
nature  and  to  the  extent,  arising  to  the  body  or  authority  referred  to  in  this  clause,  which  the 
Central Government may notify in this behalf;] 
3[(43) any amount received by an individual as a loan, either in lump sum or in instalment, in a 

transaction of reverse mortgage referred to in clause (xvi) of section 47;] 

4[(44)  any  income  received  by  any  person  for,  or  on  behalf  of,  the  New  Pension  System  Trust 
established on the 27th day of February, 2008 under the provisions of the Indian Trusts Act, 1882 (2 
of 1882);] 

5[(45) any allowance or perquisite, as may be notified by the Central Government in the Official 
Gazette  in  this  behalf,  paid  to  the  Chairman  or  a  retired  Chairman  or  any  other  member  or  retired 
member of the Union Public Service Commission;] 

1. Ins. by Act 55 of 2005, s. 2 (w.e.f. 1-4-2006). 
2. Ins. by Act 21 of 2006. s. 4 (w.e.f. 1-4-2007). 
3. Ins. by Act 43 of 2008, s. 4 (w.e.f. 1-4-2008). 
4. Ins. by Act 33 of 2009, s. 4 (w.e.f. 1-4-2009). 
5. Ins. by Act 8 of 2011, s. 4 (w.e.f. 1-4-2008). 

108 

                                                           
 
1[(46) any specified income arising to a body or authority or Board or Trust or Commission (by 

whatever name called) 2[, or a class thereof] which— 

(a)  has  been  established  or  constituted  by  or  under  a  Central,  State  or  Provincial  Act,  or 
constituted  by  the  Central Government  or  a  State  Government,  with the  object of  regulating  or 
administering any activity for the benefit of the general public; 

 (b) is not engaged in any commercial activity; and 

 (c)  is  notified  by  the  Central  Government  in  the  Official  Gazette  for  the  purposes  of  this 

clause. 

Explanation.—For  the  purposes  of  this  clause,  “specified  income”  means  the  income,  of  the 
nature and to the extent arising to a body or authority or Board or Trust or Commission (by whatever 
name called) 2[, or a class thereof] referred to in this clause, which the Central Government may, by 
notification in the Official Gazette, specify in this behalf; 

(47) any income of an infrastructure debt fund, set up in accordance with the guidelines as may 
be prescribed, which is notified by the Central Government in the Official Gazette for the purposes of 
this clause;] 

3[(48) any income received in India in Indian currency by a foreign company on account of 4[sale 
of crude oil, any other goods or rendering of services, as may be notified by the Central Government 
in this behalf, to any person] in India: 

Provided that— 

  (i) receipt of such income in India by the foreign company is pursuant to an agreement or an 

arrangement entered into by the Central Government or approved by the Central Government; 

 (ii)  having  regard  to  the  national  interest,  the  foreign  company  and  the  agreement  or 

arrangement are notified by the Central Government in this behalf; and 

(iii) the foreign company is not engaged in any activity, other than receipt of such income, in 

India;] 
5[(48A) any income accruing or arising to a foreign company on account of storage of crude oil in 

a facility in India and sale of crude oil therefrom to any person resident in India: 

Provided that— 

(i) the storage and sale by the foreign company is pursuant to an agreement or an arrangement 

entered into by the Central Government or approved by the Central Government; and 

(ii) having  regard  to  the  national  interest,  the  foreign  company  and  the  agreement  or 

arrangement are notified by the Central Government in this behalf;] 
6[(48B) any income accruing or arising to a foreign company on account of sale of leftover stock of 
crude oil, if any, from the facility in India after the expiry of the agreement or the arrangement referred to 
in clause (48A) 7[or on termination of the said agreement or the arrangement, in accordance with the 
terms  mentioned  therein,  as  the  case  may  be,]  subject  to  such  conditions  as  may  be  notified  by  the 
Central Government in this behalf;] 

8[(49) any income of the National Financial Holdings Company Limited, being a company set up 
by the Central Government, of any previous year relevant to any assessment year commencing on or 
before the 1st day of April, 2014;] 

1. Ins. by Act 8 of 2011, s. 4 (w.e.f. 1-6-2011). 
2. Ins. by Act 13 of 2018, s. 5 (w.e.f. 1-4-2018). 
3. Ins. by Act 23 of 2012, s. 5 (w.e.f. 1-4-2012). 
4. Subs. by Act 17 of 2013, s. 5, for “sale of crude oil to any person” (w.e.f. 1-4-2014). 
5. Ins. by Act 28 of 2016, s. 7 (w.e.f. 1-4-2016). 
6. Ins. by Act 7 of 2017, s. 6 (w.e.f. 1-4-2018). 
7. Ins. by Act 13 of 2018, s. 5 (w.e.f. 1-4-2019). 
8. Ins. by Act 17 of 2013, s. 5 (w.e.f. 1-4-2014). 

109 

                                                           
1[(50) any income arising from any specified service provided on or after the date on which the 
provisions of Chapter VIII of the Finance Act, 2016 comes into force and chargeable to equalisation 
levy under that Chapter. 

Explanation.—For  the  purposes  of  this  clause,  “specified  service”  shall  have  the  meaning 

assigned to it in clause (i) of section 164 of Chapter VIII of the Finance Act, 2016.] 

2[10A. Special provision in respect of newly established undertakings in free trade zone, etc.—
(1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by an 
undertaking  from  the  export  of  articles  or  things  or  computer  software  for  a  period  of  ten  consecutive 
assessment  years  beginning  with  the  assessment  year  relevant  to  the  previous  year  in  which  the 
undertaking begins to manufacture or produce such articles or things or computer software, as the case 
may be, shall be allowed from the total income of the assessee: 

Provided that  where  in  computing  the  total  income  of  the  undertaking  for  any  assessment  year,  its 
profits  and  gains  had  not  been  included  by  application  of  the  provisions  of  this  section  as  it  stood 
immediately  before  its  substitution  by  the  Finance  Act,  2000,  the  undertaking  shall  be  entitled  to 
deduction  referred  to  in  this  sub-section  only  for  the  unexpired  period  of  the  aforesaid  ten  consecutive 
assessment years: 

Provided  further that  where  an  undertaking  initially  located  in  any  free  trade  zone  or  export 
processing zone is subsequently located in a special economic zone by reason of conversion of such free 
trade  zone  or  export  processing  zone  into  a  special  economic  zone,  the  period  of  ten  consecutive 
assessment years referred to in this sub-section shall be reckoned from the assessment year relevant to the 
previous  year  in  which  the  3[undertaking  began  to  manufacture  or  produce  such  articles  or  things  or 
computer software] in such free trade zone or export processing zone: 

4* 

* 

* 

* 

* 

5[Provided also that for the assessment year beginning on the 1st day of April, 2003, the deduction 
under this sub-section shall be ninety per cent. of the profits and gains derived by an undertaking from the 
export of such articles or things or computer software:] 

Provided  also that  no  deduction  under  this  section  shall  be  allowed  to  any  undertaking  for  the 

assessment year beginning on the 6[1st day of April, 2012] and subsequent years. 

7[(1A) Notwithstanding anything contained in sub-section (1), the deduction, in computing the  total 
income  of  an  undertaking,  which  begins  to  manufacture  or  produce  articles  or  things  or  computer 
software during the previous year relevant to any assessment year commencing on or after the 1st day of 
April, 2003, in any special economic zone, shall be,— 

(i)  hundred  per  cent.  of  profits  and  gains  derived  from  the  export  of  such  articles  or  things  or 
computer software for a period of five consecutive assessment years beginning with the assessment 
year relevant to the previous year in which the undertaking begins to manufacture or produce such 
articles  or  things  or  computer  software,  as  the  case  may  be,  and  thereafter,  fifty  per  cent.  of  such 
profits and gains for further two consecutive assessment years, and thereafter; 

(ii) for the next three consecutive assessment years, so much of the amount not exceeding fifty 
per cent. of the profit as is debited to the profit and loss account of the previous year in respect of 
which  the  deduction  is  to  be  allowed  and  credited  to  a  reserve  account  (to  be  called  the  “Special 
Economic  Zone  Re-investment  Allowance  Reserve  Account”)  to  be  created  and  utilised  for  the 
purposes of the business of the assessee in the manner laid down in sub-section (1B): 

1. Ins. by Act 28 of 2016, s. 7 (w.e.f. 1-6-2016). 
2. Subs. by Act 10 of 2000. s. 6, for section 10A (w.e.f. 1-4-2001). 
3. Subs. by Act 14 of 2001, s. 6, for “undertaking was first set up” (w.e.f. 1-4-2001). 
4. The third proviso omitted by s. 6, ibid. (w.e.f. 1-4-2002). 
5. Ins. by Act 20 of 2002, s. 5 (w.e.f. 1-4-2003). 
6. Subs. by Act 33 of 2009, s. 5, for “1st day of April, 2011” (w.e.f. 1-4-2009). 
7. Subs. by Act 32 of 2003, s. 7 (w.e.f. 1-4-2004). 

110 

 
 
 
 
 
 
 
 
                                                           
1[Provided that  no  deduction  under  this  section  shall  be  allowed  to  an  assessee  who  does  not 
furnish  a  return  of  his  income  on  or  before  the  due  date  specified  under  sub-section  (1)  of  section 
139.] 

(1B)  The  deduction  under  clause  (ii)  of  sub-section  (1A)  shall  be  allowed  only  if  the  following 

conditions are fulfilled, namely:— 

(a)  the  amount  credited  to  the  Special  Economic  Zone  Re-investment  Allowance  Reserve 

Account is to be utilised— 

(i) for the purposes of acquiring new machinery or plant which is first put to use before the 
expiry  of  a  period  of  three  years  next  following  the  previous  year  in  which  the  reserve  was 
created; and 

(ii)  until  the  acquisition  of  new  machinery  or  plant  as  aforesaid,  for  the  purposes  of  the 
business  of  the  undertaking  other  than  for  distribution  by  way  of  dividends  or  profits  or  for 
remittance outside India as profits or for the creation of any asset outside India; 

 (b) the  particulars,  as  may  be  prescribed in  this  behalf,  have  been furnished  by  the  assessee in 
respect of new machinery or plant along with the return of income for the assessment year relevant to 
the previous year in which such plant or machinery was first put to use. 

(1C) Where  any  amount  credited to  the  Special  Economic  Zone  Re-investment  Allowance  Reserve 

Account under clause (ii) of sub-section (1A),— 

(a) has been utilised for any purpose other than those referred to in sub-section (1B), the amount 

so utilised; or 

(b) has not been utilised before the expiry of the period specified in sub-clause (i) of clause (a) of 

sub-section (1B), the amount not so utilised, 

shall be deemed to be the profits,— 

(i) in a case referred to in clause (a), in the year in which the amount was so utilised; or 

(ii) in a case referred to in clause (b), in the year immediately following the period of three years 

specified in sub-clause (i) of clause (a) of sub-section (1B), 

and shall be charged to tax accordingly.] 

(2) This section applies to any undertaking which fulfils all the following conditions, namely :— 

(i)  it  has  begun  or  begins  to  manufacture  or  produce  articles  or  things  or  computer  software 

during the previous year relevant to the assessment year— 

(a) commencing on or after the 1st day of April, 1981, in any free trade zone; or 

(b) commencing on or after the 1st day of April, 1994, in any electronic hardware technology 

park, or, as the case may be, software technology park; 

  (c) commencing on or after the 1st day of April, 2001 in any special economic zone; 

(ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence: 

Provided that  this  condition  shall  not  apply  in respect  of  any  undertaking  which  is  formed  as a 
result  of  the re-establishment,  reconstruction  or  revival  by the assessee of  the  business  of  any  such 
undertakings as is referred to in section 33B, in the circumstances and within the period specified in 
that section; 

(iii) it is not formed by the transfer to a new business of machinery or plant previously used for 

any purpose. 

1. Ins. by Act 18 of 2005, s. 5 (w.e.f. 1-4-2006). 

111 

                                                           
Explanation.—The  provisions  of Explanation  1 and Explanation  2 to 

sub-section 

(2)  of                      

section 80-I shall apply for the purposes of clause (iii) of this sub-section as they apply for the purposes of 
clause (ii) of that sub-section. 

(3)  This  section  applies  to  the  undertaking,  if  the  sale  proceeds  of  articles  or  things  or  computer 
software exported out of India are received in, or brought into, India by the assessee in convertible foreign 
exchange, within a period of six months from the end of the previous year or, within such further period 
as the competent authority may allow in this behalf. 

Explanation 1.—For the purposes of this sub-section, the expression “competent authority” means the 
Reserve Bank of India or such other authority as is authorised under any law for the time being in force 
for regulating payments and dealings in foreign exchange. 

Explanation  2.—The  sale  proceeds  referred  to  in  this  sub-section  shall  be  deemed  to  have  been 
received in India where such sale proceeds are credited to a separate account maintained for the purpose 
by the assessee with any bank outside India with the approval of the Reserve Bank of India. 

1[(4) For the purposes of  2[sub-sections (1) and (1A)], the profits derived from export of articles or 
things  or  computer  software  shall  be  the  amount  which  bears  to  the  profits  of  the  business  of  the 
undertaking, the same proportion as the export turnover in respect of such articles or things or computer 
software bears to the total turnover of the business carried on by the undertaking.] 

(5) The deduction under 3[this section] shall not be admissible for any assessment year beginning on 
or after the 1st day of April, 2001, unless the assessee furnishes in the prescribed form, along with the 
return  of  income,  the  report  of  an  accountant,  as  defined  in  the Explanation below  sub-section  (2)  of 
section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of 
this section. 

(6)  Notwithstanding  anything  contained  in  any  other  provision  of  this  Act,  in  computing  the  total 
income of the assessee of the previous year relevant to the assessment year immediately succeeding the 
last  of  the  relevant  assessment  years,  or  of  any  previous  year,  relevant  to  any  subsequent  assessment 
year,— 

  (i) section 32, section 32A, section 33, section 35 and clause (ix) of sub-section (1) of section 
36 shall apply as if every allowance or deduction referred to therein and relating to or allowable for 
any  of the  relevant  assessment  years  4[ending  before the 1st  day  of  April,  2001],  in  relation to any 
building, machinery, plant or furniture used for the purposes of the business of the undertaking in the 
previous year relevant to such assessment year or any expenditure incurred for the purposes of such 
business  in  such  previous  year  had  been  given  full  effect  to  for  that  assessment  year  itself  and 
accordingly sub-section (2) of section 32, clause (ii) of sub-section (3) of section 32A, clause (ii) of 
sub-section (2) of section 33, sub-section (4) of section 35 or the second proviso to clause (ix) of sub-
section  (1)  of  section  36,  as  the  case  may  be,  shall  not  apply  in  relation  to  any  such  allowance  or 
deduction; 

(ii)  no  loss  referred  to  in  sub-section  (1)  of  section  72 or  sub-section  (1)  or  sub-section  (3)  of 
section 74, in so far as such loss relates to the business of the undertaking, shall be carried forward or 
set off where such loss relates to any of the relevant assessment years  4[ending before the 1st day of 
April, 2001]; 

(iii)  no  deduction  shall  be  allowed  under  section  80HH or  section  80HHA or  section  80-I or 

section 80-IA or section 80-IB in relation to the profits and gains of the undertaking; and 

(iv)  in  computing  the  depreciation  allowance  under  section  32,  the  written  down  value  of  any 
asset used for the purposes of the business of the undertaking shall be computed as if the assessee had 
claimed and been actually allowed the deduction in respect of depreciation for each of the relevant 
assessment year. 

1. Ins. by Act 14 of 2001, s. 6 (w.e.f. 1-4-2001). 
2. Subs. by Act 32 of 2003, s. 7, for “sub-section (1)” (w.e.f. 1-4-2003). 
3. Subs. by s. 7, ibid., for “sub-section (1)” (w.e.f. 1-4-2003). 
4. Ins. by s. 7, ibid. (w.e.f. 1-4-2001). 

112 

                                                           
(7) The provisions of sub-section (8) and sub-section (10) of section 80-IA shall, so far as may be, 
apply  in  relation  to  the  undertaking  referred  to  in  this  section  as  they  apply  for  the  purposes  of  the 
undertaking referred to in section 80-IA. 

1[(7A)  Where  any  undertaking  of  an  Indian  company  which  is  entitled  to  the  deduction  under  this 
section is transferred, before the expiry of the period specified in this section, to another Indian company 
in a scheme of amalgamation or demerger,— 

(a)  no  deduction  shall  be  admissible  under  this  section  to  the  amalgamating  or  the  demerged 

company for the previous year in which the amalgamation or the demerger takes place; and 

(b) the provisions of this section shall, as far as may be, apply to the amalgamated or the resulting 
company  as  they  would  have  applied  to  the  amalgamating  or  the  demerged  company  if  the 
amalgamation or demerger had not taken place.] 
2[(7B) The provisions of this section shall not apply to any undertaking, being a Unit referred to in 
clause  (zc)  of  section  2  of  the  Special  Economic  Zones  Act,  2005,  which  has  begun  or  begins  to 
manufacture or produce articles or things or computer software during the previous year relevant to the 
assessment year commencing on or after the 1st day of April, 2006 in any Special Economic Zone. 

(8)  Notwithstanding  anything  contained  in  the  foregoing  provisions  of  this  section,  where  the 
assessee,  before  the  due  date  for  furnishing  the  return  of  income  under  sub-section  (1)  of  section 
139,furnishes to the Assessing Officer a declaration in writing that the provisions of this section may not 
be made applicable to him, the provisions of this section shall not apply to  him for any of the relevant 
assessment years. 

3* 
4* 

* 

* 

* 

* 

* 

* 

* 

* 

Explanation 2.—For the purposes of this section,— 

(i) “computer software” means— 

(a)  any  computer  programme  recorded  on  any  disc,  tape,  perforated  media  or  other 

information storage device; or 

(b)  any  customized  electronic  data  or  any  product  or  service  of  similar  nature,  as  may  be 

notified by the Board, 

which is transmitted or exported from India to any place outside India by any means; 

(ii) “convertible foreign exchange” means foreign exchange which is for the time being treated by 
the Reserve Bank of India as convertible foreign exchange for the purposes of 5[the Foreign Exchange 
Management Act, 1999 (42 of 1999), and any rules made thereunder or any other corresponding law 
for the time being in force; 

(iii)  “electronic  hardware  technology  park”  means  any  park  set  up  in  accordance  with  the 
Electronic  Hardware Technology  Park  (EHTP)  Scheme  notified  by  the  Government  of  India  in  the 
Ministry of Commerce and Industry; 

(iv)  “export  turnover”  means  the  consideration  6[in  respect  of  export  by  the  undertaking]  of 
articles  or  things  or  computer  software  received  in,  or  brought  into,  India  by  the  assessee  in 
convertible  foreign  exchange  in  accordance  with  sub-section  (3),  but  does  not  include  freight, 
telecommunication  charges  or  insurance  attributable  to  the  delivery  of  the  articles  or  things  or 
computer  software  outside  India  or  expenses,  if  any,  incurred in  foreign  exchange  in  providing  the 
technical services outside India; 

1. Ins. by Act 32 of 2003, s. 7 (w.e.f. 1-4-2004). 
2. Ins. by Act 28 of 2005, s. 37 and the Second Schedule (w.e.f. 10-2-2006). 
3. Sub-sections (9) and (9A) omitted by Act 32 of 2003, s. 7 (w.e.f. 1-4-2003). 
4. Explanation 1 omitted by s. 7, ibid. (w.e.f. 1-4-2004). 
5. Subs. by Act 17 of 2013, s. 4, for “Foreign Exchange Regulation Act, 1973 (46 of 1973)” (w.e.f. 1-4-2013). 
6. Subs. by Act 14 of 2001, s. 6, for “in respect of export” (w.e.f. 1-4-2001). 

113 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
(v)  “free  trade  zone”  means  the  Kandla  Free  Trade  Zone  and  the  Santacruz  Electronics  Export 
Processing  Zone  and  includes  any  other  free  trade  zone  which  the  Central  Government  may,  by 
notification in the Official Gazette, specify for the purposes of this section; 

(vi)  “relevant  assessment  year”  means  any  assessment  year  falling  within  a  period  of  ten 

consecutive assessment years referred to in this section; 

(vii)  “software  technology  park”  means  any  park  set  up  in  accordance  with  the  Software 
Technology  Park  Scheme  notified  by  the  Government  of  India  in  the  Ministry  of  Commerce  and 
Industry; 

(viii) “special economic zone” means a zone which the Central Government may, by notification 

in the Official Gazette, specify as a special economic zone for the purposes of this section.] 

1[Explanation 3.—For the removal of doubts, it is hereby declared that the profits and gains derived 
from on site development of computer software (including services for development of software) outside 
India shall be deemed to be the profits and gains derived from the export of computer software outside 
India.] 

2[Explanation 4.—For the purposes of this section, “manufacture or produce” shall include the cutting 

and polishing of precious and semi-precious stones.] 

10AA.3[Special provisions in respect of newly established Units in Special Economic Zones.—(1) 
Subject  to  the  provisions  of  this  section,  in  computing  the  total  income  of  an  assessee,  being  an 
entrepreneur as referred to in clause (j) of section 2 of the Special Economic Zones Act, 2005, from his 
Unit, who begins to manufacture or produce articles or things or provide any services during the previous 
year  relevant  to  any  assessment  year  commencing  on  or  after  the  1st  day  of 4[April,  2006,  a  deduction 
of]— 

(i)  hundred  per  cent.  of  profits  and  gains  derived  from  the  export,  of  such  articles  or  things  or 
from services for a period of five consecutive assessment years beginning with the assessment year 
relevant  to  the  previous  year  in  which  the  Unit  begins  to  manufacture  or  produce  such  articles  or 
things or provide services, as the case may be, and fifty per cent. of such profits and gains for further 
five assessment years and thereafter; 

(ii) for the next five consecutive assessment years, so much of the amount not exceeding fifty per 
cent. of the profit as is debited to the profit and loss account of the previous year in respect of which 
the deduction is to be allowed and credited to a reserve account (to be called the “Special Economic 
Zone Re-investment Reserve Account”) to be created and utilized for the purposes of the business of 
the assessee in the manner laid down in sub-section (2). 

5[Explanation.––For  the  removal  of  doubts,  it  is  hereby  declared  that  the  amount  of  deduction 
under this section shall be allowed from the total income of the assessee computed in accordance with 
the  provisions  of  this  Act,  before  giving  effect  to  the  provisions  of  this  section  and  the  deduction 
under this section shall not exceed such total income of the assessee.] 

(2) The deduction under clause (ii) of sub-section (1) shall be allowed only if the following conditions 

are fulfilled, namely:— 

(a) the amount credited to the Special Economic Zone Re-investment Reserve Account is to be 

utilised— 

1. Ins. by Act 14 of 2001, s. 6 (w.e.f. 1-4-2001). 
2. Ins. by Act 32 of 2003, s. 7 (w.e.f. 1-4-2004). 
3. Ins. by Act 28 of 2005, s. 27 and the Second Schedule (w.e.f. 10-2-2006). 
4. Subs. by Act 28 of 2016, s. 8, for the words, figures and letters “April, 2006, a deduction of” (w.e.f. 1-4-2017). 
5. Ins. Act 7 of 2017, s. 7 (w.e.f. 1-4-2018). 

114 

                                                           
(i) for the purposes of acquiring machinery or plant which is first put to use before the expiry 

of a period of three years following the previous year in which the reserve was created; and 

(ii)  until  the  acquisition  of  the  machinery  or  plant  as  aforesaid,  for  the  purposes  of  the 
business  of  the  undertaking  other  than  for  distribution  by  way  of  dividends  or  profits  or  for 
remittance outside India as profits or for the creation of any asset outside India; 

(b) the particulars, as may be specified by the Central Board of Direct Taxes in this behalf, under 
clause  (b)  of  sub-section  (1B)  of section  10A have  been  furnished  by  the  assessee  in  respect  of 
machinery or plant along with the return of income for the assessment year relevant to the previous 
year in which such plant or machinery was first put to use. 

(3) Where any amount credited to the Special Economic Zone Re-investment Reserve Account under 

clause (ii) of sub-section (1),— 

(a) has been utilised for any purpose other than those referred to in sub-section (2), the amount so 

utilised; or 

(b) has not been utilised before the expiry of the period specified in sub-clause (i) of clause (a) of 

sub-section (2), the amount not so utilised, 

shall be deemed to be the profits,— 

(i) in a case referred to in clause (a), in the year in which the amount was so utilised; or 

(ii) in a case referred to in clause (b), in the year immediately following the period of three years 

specified in sub-clause (i) of clause (a) of sub-section (2), 

and shall be charged to tax accordingly: 

Provided that where in computing the total income of the Unit for any assessment year, its profits 
and gains had not been included by application of the provisions of sub-section (7B) of section 10A, 
the undertaking, being the Unit shall be entitled to deduction referred to in this sub-section only for 
the  unexpired  period  of  ten  consecutive  assessment  years  and  thereafter  it  shall  be  eligible  for 
deduction from income as provided in clause (ii) of sub-section (1). 

Explanation.—For  the  removal  of  doubts,  it  is  hereby  declared  that  an  undertaking,  being  the 
Unit,  which  had  already  availed,  before  the  commencement  of  the  Special  Economic  Zones  Act, 
2005, the deductions referred to in section 10A for ten consecutive assessment years, such Unit shall 
not be eligible for deduction from income under this section: 

Provided  further that  where  a  Unit  initially  located  in  any  free  trade  zone  or  export  processing 
zone is subsequently located in a Special Economic Zone by reason of conversion of such free trade 
zone  or  export  processing  zone  into  a  Special  Economic  Zone,  the  period  of  ten  consecutive 
assessment  years  referred  to  above  shall  be  reckoned  from  the  assessment  year  relevant  to  the 
previous year in which the Unit began to manufacture, or produce or process such articles or things or 
services in such free trade zone or export processing zone: 

Provided also that where a Unit initially located in any free trade zone or export processing zone 
is subsequently located in a Special Economic Zone by reason of conversion of such free trade zone 
or  export  processing  zone  into  a  Special  Economic  Zone  and  has  completed  the  period  of  ten 
consecutive assessment years referred to above, it shall not be eligible for deduction from income as 
provided in clause (ii) of sub-section (1) with effect from the 1st day of April, 2006. 

115 

 
1[(4)  This  section  applies  to  any  undertaking,  being  the  Unit,  which  fulfils  all  the  following 

conditions, namely:— 

(i) it has begun or begins to manufacture or produce articles or things or provide services during 
the previous year relevant to the assessment year commencing on or after the 1st day of April, 2006 
in any Special Economic Zone; 

(ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence: 

Provided that this condition shall not apply in respect of any undertaking, being the Unit, which is 
formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of 
any  such  undertaking  as  is  referred  to  in section  33B,  in  the  circumstances  and  within  the  period 
specified in that section; 

(iii) it is not formed by the transfer to a new business, of machinery or plant previously used for 

any purpose. 

Explanation.—The provisions of Explanations 1 and 2 to sub-section (3) of section 80-IA shall apply 
for the purposes of clause (iii) of this sub-section as they apply for the purposes of clause (ii) of that sub-
section.] 

(5)  Where  any  undertaking  being  the  Unit  which  is  entitled  to  the  deduction  under  this  section  is 
transferred, before the expiry of the period specified in this section, to another undertaking, being the Unit 
in a scheme of amalgamation or demerger,— 

(a) no deduction shall be admissible under this section to the amalgamating or the demerged Unit, 
being the company for the previous year in which the amalgamation or the demerger takes place; and 

(b)  the  provisions  of  this  section  shall,  as  they  would  have  applied  to  the  amalgamating  or  the 

demerged Unit being the company as if the amalgamation or demerger had not taken place. 

(6) Loss referred to in sub-section (1) of section 72 or sub-section (1) or sub-section (3) of section 74, 
in  so  far  as  such  loss  relates  to  the  business  of  the  undertaking,  being  the  Unit  shall  be  allowed  to  be 
carried forward or set off. 

(7)  For  the  purposes  of  sub-section  (1),  the  profits  derived  from  the  export  of  articles  or  things  or 
services (including computer software) shall be the amount which bears to the profits of the business of 
the undertaking, being the Unit, the same proportion as the export turnover in respect of such articles or 
things or services bears to the total turnover of the business carried on 2[by the undertaking]: 

3[Provided that  the  provisions  of  this  sub-section  [as  amended  by  section  6  of  the  Finance  (No.  2)  
Act, 2009 (33 of 2009)] shall have effect for the assessment year beginning on the 1st day of April, 2006 
and subsequent assessment years.] 

(8) The provisions of sub-sections (5) and (6) of section 10A shall apply to the articles or things or 

services referred to in sub-section (1) as if— 

 (a) for the figures, letters and word “1st April, 2001”, the figures, letters and word “1st April, 

2006” had been substituted; 

 (b) for the word “undertaking”, the words “undertaking, being the Unit” had been substituted. 

(9) The provisions of sub-section (8) and sub-section (10) of section 80-IA shall, so far as may be, 
apply  in  relation  to  the  undertaking  referred  to  in  this  section  as  they  apply  for  the  purposes  of  the 
undertaking referred to in section 80-IA. 

1. Subs. by Act 22 of 2007, s. 7, for certain words (w.e.f. 10-2-2006). 
2. Subs. by Act 33 of 2009, s. 6, for “by the assessee” (w.e.f. 1-4-2010). 
3. Ins. by Act 14 of 2010, s. 6 (w.e.f. 1-4-2010).   

116 

                                                           
1[(10) Where a deduction under this section is claimed and allowed in respect of profits of any of the 
specified business, referred to in clause (c) of sub-section (8) of section 35AD, for any assessment year, 
no deduction shall be allowed under the provisions of section 35AD in relation to such specified business 
for the same or any other assessment year.] 

Explanation 1.—For the purposes of this section,— 

(i) “export turnover” means the consideration in respect of export by the undertaking, being the 
Unit of articles or things or services received in, or brought into, India by the assessee but does not 
include freight, telecommunication charges or insurance attributable to the delivery of the articles or 
things  outside  India  or  expenses,  if  any,  incurred  in  foreign  exchange  in  rendering  of  services 
(including computer software) outside India; 

(ii) “export in relation to the Special Economic Zones” means taking goods or providing services 
out of India from a Special Economic Zone by land, sea, air, or by any other mode, whether physical 
or otherwise; 

(iii) “manufacture” shall have the same meaning as assigned to it in clause (r) of section 2 of the 

Special Economic Zones Act, 2005; 

(iv)  “relevant  assessment  year”  means  any  assessment  year  falling  within  a  period  of  fifteen 

consecutive assessment years referred to in this section; 

 (v)  “Special  Economic  Zone”  and  “Unit”  shall  have  the  same  meanings  as  assigned  to  them 

under clauses (za) and (zc) of section 2 of the Special Economic Zones Act, 2005. 

Explanation  2.—For the  removal  of  doubts,  it  is  hereby  declared  that  the  profits  and  gains  derived 
from on site development of computer software (including services for development of software) outside 
India shall be deemed to be the profits and gains derived from the export of computer software outside 
India.] 

2[10B.  Special  provisions  in  respect  of  newly  established  hundred  per  cent.  export-oriented 
undertakings.— (1) Subject to the provisions of this section, a deduction of such profits and gains as are 
derived  by  a  hundred  per  cent.  export-oriented  undertaking  from  the  export  of  articles  or  things  or 
computer software for a period of ten consecutive assessment years beginning with the assessment year 
relevant to the previous year in which the undertaking begins to manufacture or produce articles or things 
or computer software, as the case may be, shall be allowed from the total income of the assessee: 

Provided that  where  in  computing  the  total  income  of  the  undertaking  for  any  assessment  year,  its 
profits  and  gains  had  not  been  included  by  application  of  the  provisions  of  this  section  as  it  stood 
immediately  before  its  substitution  by  the  Finance  Act,  2000,  the  undertaking  shall  be  entitled  to  the 
deduction  referred  to  in  this  sub-section  only  for  the  unexpired  period  of  aforesaid  ten  consecutive 
assessment years: 

3[Provided4[further] that  for  the  assessment  year  beginning  on  the  1st  day  of  April,  2003,  the 
deduction  under  this  sub-section  shall  be  ninety  per  cent.  of  the  profits  and  gains  derived  by  an 
undertaking from the export of such articles or things or computer software:] 

Provided  also that  no  deduction  under  this  section  shall  be  allowed  to  any  undertaking  for  the 

assessment year beginning on the 5[1st day of April, 2012] and subsequent years: 

6[Provided  also that  no  deduction  under  this  section  shall  be  allowed  to  an  assessee  who  does  not 

furnish a return of his income on or before the due date specified under sub-section (1) of section 139.] 

1. Ins. by Act 25 of 2014, s. 6, (w.e.f. 1-4-2015). 
2. Subs. by Act 10 of 2000, s. 7, for section 10B (w.e.f. 1-4-2001). 
3. Ins. by Act 20 of 2002, s. 6 (w.e.f. 1-4-2003). 
4. Subs. by Act 21 of 2006, s. 5, for “also” (w.e.f. 1-4-2006).  
5. Subs. by Act 33 of 2009 s. 7, for “1st day of April 2011” (w.e.f. 1-4-2009). 
6. Ins. by Act 21 of 2006, s. 5 (w.e.f. 1-4-2006). 

117 

                                                           
(2) This section applies to any undertaking which fulfils all the following conditions, namely:— 

  (i) it manufactures or produces any articles or things or computer software; 

 (ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence: 

Provided that  this  condition  shall  not  apply  in respect  of  any  undertaking  which  is  formed  as a 
result  of  the re-establishment,  reconstruction  or  revival  by the assessee of  the  business  of  any  such 
undertaking as is referred to in section 33B, in the circumstances and within the period specified in 
that section; 

(iii) it is not formed by the transfer to a new business of machinery or plant previously used for 

any purpose. 

Explanation.—The  provisions  of Explanation  1 and Explanation  2 to 

sub-section 

(2)  of             

section 80-I shall apply for the purposes of clause (iii) of this sub-section as they apply for the purposes of 
clause (ii) of that sub-section. 

(3)  This  section  applies  to  the  undertaking,  if  the  sale  proceeds  of  articles  or  things  or  computer 
software exported out of India are received in, or brought into, India by the assessee in convertible foreign 
exchange, within a period of six months from the end of the previous year or, within such further period 
as the competent authority may allow in this behalf. 

Explanation 1.—For the purposes of this sub-section, the expression “competent authority” means the 
Reserve Bank of India or such other authority as is authorised under any law for the time being in force 
for regulating payments and dealings in foreign exchange. 

Explanation  2.—The  sale  proceeds  referred  to  in  this  sub-section  shall  be  deemed  to  have  been 
received in India where such sale proceeds are credited to a separate account maintained for the purpose 
by the assessee with any bank outside India with the approval of the Reserve Bank of India. 

1[(4)  For  the  purposes  of  sub-section  (1),  the  profits  derived  from  export  of  articles  or  things  or 
computer software shall be the amount which bears to the profits of the business of the undertaking, the 
same proportion as the export turnover in respect of such articles or things or computer software bears to 
the total turnover of the business carried on by the undertaking.] 

(5) The deduction under sub-section (1) shall not be admissible for any assessment year beginning on 
or after the 1st day of April, 2001, unless the assessee furnishes in the prescribed form, along with the 
return  of  income,  the  report  of  an  accountant,  as  defined  in  the Explanation below  sub-section  (2) 
of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions 
of this section. 

(6)  Notwithstanding  anything  contained  in  any  other  provision  of  this  Act,  in  computing  the  total 
income of the assessee of the previous year relevant to the assessment year immediately succeeding the 
last  of  the  relevant  assessment  years,  or  of  any  previous  year,  relevant  to  any  subsequent  assessment 
year,— 

(i) section  32, section  32A, section  33, section  35 and  clause  (ix)  of  sub-section  (1)  of         

section  35 shall  apply  as  if  every  allowance  or  deduction  referred  to  therein  and  relating  to  or 
allowable  for  any  of  the  relevant  assessment  years  2[ending  before  the  1st  day  of  April,  2001],  in 
relation  to  any  building,  machinery,  plant  or  furniture  used  for  the  purposes  of  the  business  of  the 
undertaking in the previous year relevant to such assessment year or any expenditure incurred for the 
purposes of such business in such previous year had been given full effect to for that assessment year 
itself  and  accordingly  sub-section  (2)  of section  32,  clause  (ii)  of  sub-section  (3)  of section  32A, 
clause  (ii)  of  sub-section  (2)  of  section  33,  ,  sub-section  (4)  of section  35 or  the  second  proviso  to 
clause (ix) of sub-section (1) of section 36, as the case may be, shall not apply in relation to any such 
allowance or deduction; 

1. Subs. by Act 14 of 2001, s. 7, for sub-section (4) (w.e.f. 1-4-2001). 
2. Ins. by Act 32 of 2003, s. 8, (w.r.e.f. 1-4-2001). 

118 

                                                           
 (ii)  no  loss  referred  to  in  sub-section  (1)  of section  72 or  sub-section  (1)  or  sub-section  (3) 
of section 74, in so far as such loss relates to the business of the undertaking, shall be carried forward 
or set-off where such loss relates to any of the relevant assessment years  1[ending before the 1st day 
of April, 2001;] 

(iii)  no  deduction 

shall  be 

allowed  under section  80HH or 

section  80HHA or                           

section  80-I or section  80IA or section  80-IB in  relation  to  the  profits  and  gains  of  the  undertaking; 
and 

(iv)  in  computing  the  depreciation  allowance  under section  32,  the  written  down  value  of  any 
asset used for the purposes of the business of the undertaking shall be computed as if the assessee had 
claimed and been actually allowed the deduction in respect of depreciation for each of the relevant 
assessment year. 

(7) The  provisions of sub-section  (8)  and  sub-section  (10)  of section  80-IA shall,  so  far  as  may  be, 
apply  in  relation  to  the  undertaking  referred  to  in  this  section  as  they  apply  for  the  purposes  of  the 
undertaking referred to in section 80-IA. 

2[(7A)  Where  any  undertaking  of  an  Indian  company  which  is  entitled  to  the  deduction  under  this 
section is transferred, before the expiry of the period specified in this section, to another Indian company 
in a scheme of amalgamation or demerger— 

(a)  no  deduction  shall  be  admissible  under  this  section  to  the  amalgamating  or  the  demerged 

company for the previous year in which the amalgamation or the demerger takes place; and 

(b) the provisions of this section shall, as far as may  be, apply to the amalgamated or resulting 
company  as  they  would  have  applied  to  the  amalgamating  or  the  demerged  company  if  the 
amalgamation or the demerger had not taken place.] 

(8)  Notwithstanding  anything  contained  in  the  foregoing  provisions  of  this  section,  where  the 
assessee,  before  the  due  date  for  furnishing  the  return  of  income  under  sub-section  (1)  of  section  139, 
furnishes to the Assessing Officer a declaration in writing that the provisions of this section may not be 
made  applicable  to  him,  the  provisions  of  this  section  shall  not  apply  to  him  for  any  of  the  relevant 
assessment year. 

3* 

4* 

5* 

* 

* 

*                  

*              

* 

* 

* 

* 

* 

* 

* 

* 

Explanation 2.—For the purposes of this section,— 

(i) “computer software” means— 

(a)  any  computer  programme  recorded  on  any  disc,  tape,  perforated  media  or  other 

information storage device; or 

(b)  any  customized  electronic  data  or  any  product  or  service  of  similar  nature  as  may  be 

notified by the Board, 

which is transmitted or exported from India to any place outside India by any means; 

1. Ins. by Act 32 of 2003, s. 8 (w.r.e.f. 1-4-2001). 
2. Ins. by s. 8, ibid. (w.e.f. 1-4-2004). 
3. Clause (9) omitted by, s. 8 (w.e.f. 1-4-2004). 
4. Clause (9A) omitted by s. 8 ibid. (w.e.f. 1-4-2004). 
5. Explanation 1 omittedby s. 8 ibid. (w.e.f. 1-4-2004). 

119 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
(ii) “convertible foreign exchange” means foreign exchange which is for the time being treated by 
the Reserve Bank of India as convertible foreign exchange for the purposes of 1[the Foreign Exchange 
Management Act, 1999 (42 of 1999)], and any rules made thereunder or any other corresponding law 
for the time being in force; 

(iii)  “export  turnover”  means  the  consideration  2[in  respect  of  export  by  the  undertaking]  of 
articles  or  things  or  computer  software  received  in,  or  brought  into,  India  by  the  assessee  in 
convertible  foreign  exchange  in  accordance  with  sub-section  (3),  but  does  not  include  freight, 
telecommunication  charges  or  insurance  attributable  to  the  delivery  of  the  articles  or  things  or 
computer  software  outside  India  or  expenses,  if  any,  incurred in  foreign  exchange  in  providing  the 
technical services outside India; 

(iv)  “hundred  per  cent.  export-oriented  undertaking”  means  an  undertaking  which  has  been 
approved as a hundred per cent. export-oriented undertaking by the Board appointed in this behalf by 
the  Central  Government  in  exercise  of  the  powers  conferred  by  section  14  of  the  Industries 
(Development and Regulation) Act, 1951 (65 of 1951), and the rules made under that Act; 

(v)  “relevant  assessment  years”  means  any  assessment  years  falling  within  a  period  of  ten 

consecutive assessment years, referred to in this section.] 
3[Explanation 3.—For the removal of doubts, it is hereby declared that the profits and gains derived 
from on site development of computer software (including services for development of software) outside 
India shall be deemed to be the profits and gains derived from the export of computer software outside 
India.] 

4[Explanation 4.—For the purposes of this section, “manufacture or produce” shall include the cutting 

and polishing of precious and semi-precious stones.] 

5[10BA. Special provisions in respect of export of certain articles or things.— (1) Subject to the 
provisions of this section, a deduction of such profits and gains as are derived by an undertaking from the 
export out of India of eligible articles or things, shall be allowed from the total income of the assessee: 

Provided that  where  in  computing  the  total  income  of  the  undertaking  for  any  assessment  year, 
deduction under section 10A or section 10B has been claimed, the undertaking shall not be entitled to the 
deduction under this section: 

Provided  further that  no  deduction  under  this  section  shall  be  allowed  to  any  undertaking  for  the 

assessment year beginning on the 1st day of April, 2010 and subsequent years. 

(2) This section applies to any undertaking which fulfils the following conditions, namely:— 

(a)  it  manufactures  or  produces  the  eligible  articles  or  things  without  the  use  of  imported  raw 

materials; 

(b) it is not formed by the splitting up, or the reconstruction, of a business already in existence: 

Provided that  this  condition  shall  not  apply  in respect  of  any  undertaking  which  is  formed  as a 
result  of  the re-establishment,  reconstruction  or  revival  by the assessee of  the  business  of  any  such 
undertaking as is referred to in section 33B, in the circumstances and within the period specified in 
that section; 

(c) it is not formed by the transfer to a new business of machinery or plant previously used for 

any purpose.    

Explanation.—The  provisions  of Explanation  1 and Explanation  2 to  sub-section  (2)  of         

section 80-I shall apply for the purposes of this clause as they apply for the purposes of clause (ii) of 
sub-section (2) of that section; 

1. Subs. by Act 17 of 2013, s. 4, for “the Foreign Exchange Regulation Act, 1973 (46 of 1973)” (w.e.f. 1-4-2013).   
2. Subs. by Act 14 of 2001, s. 7, for the words “in the respect of export” (w.e.f. 1-4-2001). 
3. Ins. by s. 7, ibid. (w.e.f. 1-4-2001). 
4. Ins. by Act 32 of 2003, s. 8 (w.e.f. 1-4-2004). 
5. Ins. by Act 54 of 2003, s. 3 (w.e.f. 1-4-2004). 

120 

                                                           
 (d) ninety per cent. or more of its sales during the previous year relevant to the assessment year 

are by way of exports of the eligible articles or things; 

 (e) it employs twenty or more workers during the previous year in the process of manufacture or 

production. 

(3)  This  section  applies  to  the  undertaking,  if  the  sale  proceeds  of  the  eligible  articles  or  things 
exported  out  of  India  are  received  in  or  brought  into,  India  by  the  assessee  in  convertible  foreign 
exchange, within a period of six months from the end of the previous year or, within such further period 
as the competent authority may allow in this behalf. 

Explanation.—For the purposes of this sub-section, the expression “competent authority” means the 
Reserve Bank of India or such other authority as is authorised under any law for the time being in force 
for regulating payments and dealings in foreign exchange. 

(4)  For  the  purposes  of  sub-section  (1),  the  profits  derived  from  export  out  of  India  of  the  eligible 
articles  or  things  shall  be the  amount  which  bears  to the profits of the  business of the undertaking,  the 
same proportion as the export turnover in respect of such articles or things bears to the total turnover of 
the business carried on by the undertaking. 

(5) The deduction under sub-section (1) shall not be admissible, unless the assessee furnishes in the 
prescribed  form,  along  with  the  return  of  income,  the  report  of  an  accountant,  as  defined  in 
the Explanation below  sub-section  (2)  of section  288,  certifying  that  the  deduction  has  been  correctly 
claimed in accordance with the provisions of this section. 

(6)  Notwithstanding  anything  contained  in  any  other  provision  of  this  Act,  where  a  deduction  is 
allowed under this section in computing the total income of the assessee, no deduction shall be allowed 
under any other section in respect of its export profits. 

(7) The  provisions of sub-section  (8)  and  sub-section  (10)  of section  80-IA shall,  so  far  as  may  be, 
apply  in  relation  to  the  undertaking  referred  to  in  this  section  as  they  apply  for  the  purposes  of  the 
undertaking referred to in section 80-IA. 

Explanation.—For the purposes of this section,— 

(a) “convertible foreign exchange” means foreign exchange which is for the time being treated by 
the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange 
Management Act, 1999 (42 of 1999), and any rules made thereunder or any other corresponding law 
for the time being in force; 

(b) “eligible articles or things” means all hand-made articles or things, which are of artistic value 

and which requires the use of wood as the main raw material; 

(c) “export turnover” means the consideration in respect of export by the undertaking of eligible 
articles or things received in, or brought into, India by the assessee in convertible foreign exchange in 
accordance with sub-section (3), but does not include freight, telecommunication charges or insurance 
attributable to the delivery of the articles or things outside India; 

(d) “export out of India” shall not include any transaction by way of sale or otherwise, in a shop, 
emporium or any other establishment situate in India, not involving clearance of any customs station 
as defined in the Customs Act, 1962 (52 of 1962).] 

1[10BB. Meaning of computer programmes in certain cases.—The profits and gains derived by an 
undertaking  from  the  production  of  computer  programmes  under  section  10B,  as  it  stood  prior  to  its 
substitution  by  section  7  of  the  Finance  Act,  2000  (10  of  2000),  shall  be  construed  as  if  for  the  words 
“computer  programmes”,  the  words  “computer  programmes  or  processing  or  management  of electronic 
data” had been substituted in that section.] 

1. Ins. by Act 14 of 2001, s. 8 (w.e.f. 1-4-1994). 

121 

                                                           
1[10C.  Special  provision  in  respect  of  certain  industrial  undertakings  in  North-Eastern 
Region.—(1) Subject to the provisions of this section, any profits and gains derived by an assessee from 
an industrial undertaking, which has begun or begins to manufacture or produce any article or thing on or 
after the 1st day of April, 1998 in any Integrated Infrastructure Development Centre or Industrial Growth 
Centre  located  in  the  North-Eastern  Region  (hereafter  in  this  section  referred  to  as  the  industrial 
undertaking) shall not be included in the total income of the assessee. 

(2)  This  section  applies  to  any  industrial  undertaking  which  fulfils  all  the  following  conditions, 

namely:— 

(i) it is not formed by the splitting up, or the reconstruction of, a business already in existence: 

Provided that  this  condition  shall  not  apply  in  respect  of  any  industrial  undertaking  which  is 
formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of 
any such industrial undertaking as is referred to in section 33B, in the circumstances and within the 
period specified in that section; 

(ii) it is not formed by the transfer to a new business of machinery or plant previously used for 

any purpose. 

Explanation.—The  provisions  of Explanation  1 and Explanation  2 to 

sub-section 

(3)  of              

section 80-IA shall apply for the purposes of clause (ii) of this sub-section as they apply for the purposes 
of clause (ii) of that sub-section. 

(3) The profits and gains referred to in sub-section (1) shall not be included in the total income of the 
assessee in respect of ten consecutive assessment years beginning with the assessment year relevant to the 
previous year in which the industrial undertaking begins to manufacture or produce articles or things. 

(4)  Notwithstanding  anything  contained  in  any  other  provision  of  this  Act,  in  computing  the  total 

income of the assessee of any previous year relevant to any subsequent assessment year,— 

(i) section  32, section  35 and  clause  (ix)  of  sub-section  (1)  of section  36 shall  apply  as  if 
deduction referred to therein and relating to or allowable for any of the relevant assessment years, in 
relation  to  any  building,  machinery,  plant  or  furniture  used  for  the  purposes  of  the  business  of  the 
industrial  undertaking  in  the  previous  year  relevant  to  such  assessment  year  or  any  expenditure 
incurred for the purposes of such business in such previous year had been given full effect to for that 
assessment year itself and, accordingly, sub-section (2) of section 32, sub-section (4) of section 35 or 
the second proviso to clause (ix) of sub-section (1) of section 36, as the case may be, shall not apply 
in relation to any such deduction; 

(ii)  no  loss  referred  to  in  sub-section  (1)  of section  72 or  sub-section  (1)  or  sub-section  (3) 
of section  74,  in  so  far  as  such  loss  relates  to  the  business  of  the  industrial  undertaking,  shall  be 
carried forward or set off where such loss relates to any of the relevant assessment years; 

(iii) 

no 

deduction 

shall 

be 

allowed 

under section 

80HH or section 

80HHA or                        

section 80-I or section 80-IA or section 80-IB or section 80JJA in relation to the profits and gains of 
the industrial undertakings; and 

(iv)  in  computing  the  depreciation  allowance  under section  32,  the  written  down  value  of  any 
asset used for the purposes of the business of the industrial undertaking shall be computed as if the 
assessee had claimed and been actually allowed the deduction in respect of depreciation for each of 
the relevant assessment years. 

(5) The  provisions of sub-section  (8)  and  sub-section  (10)  of section  80-IA shall,  so  far  as  may  be, 
apply in relation to the industrial undertaking referred to in this section as they apply for the purposes of 
the industrial undertaking referred to in section 80-IA or section 80IB, as the case may be. 

1. Ins. by Act 27 of 1999, s. 7 (w.e.f. 1-4-1999). 

122 

                                                           
(6) Notwithstanding anything contained in the foregoing provisions of this section, where the assessee 
before the due date for furnishing the return of his income under sub-section (1) of section 139, furnishes 
to  the  Assessing  Officer  a  declaration  in  writing  that  the  provisions  of  this  section  may  not  be  made 
applicable to him, the provisions of this section shall not apply to him in any of the relevant assessment 
years: 

1[Provided that no deduction under this section shall be allowed to any undertaking for the assessment 

year beginning on the 1st day of April, 2004 and subsequent years.] 

Explanation.—For the purposes of this section,— 

(i) “Integrated Infrastructure Development Centre” means such centres located in the States of the 
North-Eastern Region, which the Central Government, may, by notification in the Official Gazette, 
specify for the purposes of this section; 

(ii)  “Industrial  Growth  Centre”  means  such  centres  located  in  the  States  of  the  North-Eastern 
Region, which the Central Government  may, by notification in the Official Gazette, specify for the 
purposes of this section; 

(iii)  “North-Eastern  Region”  means  the  region  comprising  the  States  of  Arunachal  Pradesh, 

Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura; 

(iv)  “relevant  assessment  years”  means  the  ten  consecutive  years  beginning  with  the  year  in 

which the industrial undertaking begins to manufacture or produce articles or things.] 

2[11. Income  from  property  held  for  charitable  or  religious  purposes.—(1)  Subject  to  the 
provisions  of  sections  60  to  63,  the  following  income  shall  not  be  included  in  the  total  income  of  the 
previous year of the person in receipt of the income— 

3[(a) income derived from property held under trust wholly for charitable or religious purposes, to 
the extent to which such income is applied to such purposes in India; and, where any such income is 
accumulated or set apart for application to such purposes in India, to the extent to which the income 
so accumulated or set apart is not in excess of 4[fifteen per cent.] of the income from such property; 

(b) income derived from property held under trust in part only for such purposes, the trust having 
been created before the commencement of this Act, to the extent to which such income is applied to 
such  purposes  in  India;  and,  where  any  such  income  is  finally  set  apart  for  application  to  such 
purposes in India, to the extent to which the income so set apart is not in excess of 4[fifteen per cent.] 
of the income from such property; 

(c) income 5[derived from property held under trust]— 

(i)  created  on  or  after  the  1st  day  of  April,  1952,  for  a  charitable  purpose  which  tends  to 
promote international welfare in which India is interested, to the extent to which such income is 
applied to such purposes outside India, and 

(ii) for charitable or religious purposes, created before the 1st day of April, 1952, to the extent 

to which such income is applied to such purposes outside India: 

Provided that the Board, by general or special order, has directed in either case that it shall not be 

included in the total income of the person in receipt of such income; 

1. Ins. by Act 32 of 2003, s. 9 (w.e.f. 1-4-2004).  
2. Section 11 restored by Act 3  of 1989, s. 95 with amendments (w.e.f. 1-4-1989). Earlier omitted by Act 4 of 1988, s. 7 

(w.e.f. 1-4-1989). 

3.  Subs. by Act 41 of 1975, s. 4, for clauses (a) and (b) (w.e.f. 1-4-1976). 
4.  Subs. by Act 20 of 2002, s. 7, for “twenty-five per cent.” (w.e.f. 1-4-2003). 
5. Ins. by Act 16 of 1972, s. 5 (w.e.f. 1-4-1973). 

123 

                                                           
1[(d) income in the form of voluntary contributions made with a specific direction that they shall 

form part of the corpus of the trust or institution. 
2[Explanation 3[1].—For the purposes of clauses (a) and (b),— 

 (1) in computing the  4[fifteen per cent.] of the income which may be accumulated or set apart, 
any  such  voluntary  contributions  as  are  referred  to  in  section  12 shall  be  deemed  to  be  part  of  the 
income; 

 (2) if, in the previous year, the income applied to charitable or religious purposes in India falls 
short of 5[eighty-five per cent.] of the income derived during that year from property held under trust, 
or, as the case may be, held under trust in part, by any amount— 

   (i) for the reason that the whole or any part of the income has not been received during that 

year, or 

  (ii) for any other reason, 

then—  

(a) in the case referred to in sub-clause (i), so much of the income applied to such purposes in 
India  during  the  previous  year  in  which  the  income  is  received  or  during  the  previous  year 
immediately following as does not exceed the said amount, and 

  (b) in the case referred to in sub-clause (ii), so much of the income applied to such purposes 
in India during the previous year immediately following the previous year in which the income 
was derived as does not exceed the said amount, 

may, at the option of the person in receipt of the income 6[(such option to be exercised before the expiry 
of the time allowed under sub-section (1) of section 139 for furnishing the return of income, in such form 
and manner as may be prescribed)] be deemed to be income applied to such purposes during the previous 
year in which the income was derived; and the income so deemed to have been applied shall not be taken 
into account in calculating the amount of income applied to such purposes, in the case referred to in sub-
clause  (i),  during  the  previous  year  in  which  the  income  is  received  or  during  the  previous  year 
immediately  following,  as  the  case  may  be,  and,  in  the  case  referred  to  in  sub-clause  (ii),  during  the 
previous year immediately following the previous year in which the income was derived.] 

7[Explanation 2.—Any amount credited or paid, out of income referred to in clause (a) or clause (b) 
read  with  Explanation  1,  to  any  other  trust  or  institution  registered  under  section  12AA,  being 
contribution with a specific direction that they shall form part of the corpus of the trust or institution, shall 
not be treated as application of income for charitable or religious purposes.] 

8[Explanation  3.—For  the  purposes  of  determining  the  amount  of  application  under  clause  (a)  or 
clause (b), the provisions of sub-clause (ia) of clause (a) of section 40 and sub-sections (3) and (3A) of 
section 40A, shall, mutatis mutandis, apply as they apply in computing the income chargeable under the 
head “Profits and gains of business or profession.] 
9[(1A) For the purposes of sub-section (1),— 

 (a)  where  a  capital  asset,  being  property  held  under  trust  wholly  for  charitable  or  religious 
purposes,  is  transferred  and  the  whole  or  any  part  of  the  net  consideration  is  utilised  for  acquiring 
another capital asset to be so held, then, the capital gain arising from the transfer shall be deemed to 
have been applied to charitable or religious purposes to the extent specified hereunder, namely:— 

(i) where the whole of the net consideration is utilised in acquiring the new capital asset, the 

whole of such capital gain; 

1. Ins. by Act 3 of 1989, s. 5 (w.e.f. 1-4-1989). 
2. Subs. by Act 41 of 1975, s. 4, for Explanation (w.e.f.  1-4-1976). 
3. The Explanation renumbered as Explanation 1 thereof by Act 7 of 2017, s. 8 (w.e.f. 1-4-2018). 
4. Subs. by Act 20 of 2002, s. 7 for “twenty-five per cent.” (w.e.f. 1-4-2003). 
5. Subs. by s. 7, ibid., for “seventy-five per cent.” (w.e.f. 1-4-2003). 
6. Subs. by Act 20 of 2015, s. 8, for “(such option to be exercised in writing  before the expiry of the time allowed under  

sub-section (1) of section 139 for furnishing the return of income)” (w.e.f. 1-4-2016).  

7. Ins. by Act 7 of 2017, s. 8 (w.e.f. 1-4-2018). 
8. Ins. by Act 13 of 2018, s. 6 (w.e.f. 1-4-2019). 
9.  Ins. by Act 32 of 1971, s. 5 (w.r.e.f. 1-4-1962). 

124 

                                                           
(ii) where only a part of the net consideration is utilised for acquiring the new capital asset, so 
much  of  such  capital  gain  as  is  equal  to  the  amount,  if  any,  by  which  the  amount  so  utilised 
exceeds the cost of the transferred asset; 

(b)  where  a  capital  asset,  being  property  held  under  trust  in  part  only  for  such  purposes,  is 
transferred and the whole or any part of the net consideration is utilised for acquiring another capital 
asset to be so held, then, the appropriate fraction of the capital gain arising from the transfer shall be 
deemed  to  have  been  applied  to  charitable  or  religious  purposes  to  the  extent  specified  hereunder, 
namely:— 

(i) where the whole of the net consideration is utilised in acquiring the new capital asset, the 

whole of the appropriate fraction of such capital gain; 

(ii) in any other case, so much of the appropriate fraction of the capital gain as is equal to the 
amount,  if  any,  by  which  the  appropriate  fraction  of  the  amount  utilised  for  acquiring  the  new 
asset exceeds the appropriate fraction of the cost of the transferred asset. 

Explanation.—In this sub-section,— 

(i) “appropriate fraction” means the fraction which represents the extent to which the income 
derived  from  the  capital  asset  transferred  was  immediately  before  such  transfer  applicable  to 
charitable or religious purposes; 

(ii)  “cost  of  the  transferred  asset”  means  the  aggregate  of  the  cost  of  acquisition  (as 
ascertained for the purposes of section 48 and 49) of the capital asset which is the subject of the 
transfer and the cost of any improvement thereto within the meaning assigned to that expression 
in sub-clause (b) of clause (1) of section 55; 

(iii) “net consideration” means the full value of the consideration received or accruing as a 
result  of  the  transfer  of  the  capital  asset  as  reduced  by  any  expenditure  incurred  wholly  and 
exclusively in connection with such transfer.] 

1[(1B)  Where  any  income  in  respect  of  which  an  option  is  exercised  under  clause  (2)  of 
the Explanation to  sub-section  (1)  is  not  applied  to  charitable  or  religious  purposes  in  India  during  the 
period referred to in sub-clause (a) or, as the case may be, sub-clause (b), of the said clause, then, such 
income shall be deemed to be the income of the person in receipt thereof— 

(a) in the case referred to in sub-clause (i) of the  said clause, of the previous year immediately 

following the previous year in which the income was received; or 

(b) in the case referred to in sub-clause (ii) of the said clause, of the previous year immediately 

following the previous year in which the income was derived. 

2[(2)  3[Where  4[eighty-five  per  cent.]  of  the  income  referred  to  in  clause  (a)  or  clause  (b)  of            

sub-section (1) read with the Explanation to that sub-section is not applied, or is not deemed to have been 
applied,  to  charitable  or  religious  purposes  in  India  during  the  previous  year  but  is  accumulated  or  set 
apart, either in whole or in part, for application to such purposes in India, such income so accumulated or 
set  apart  shall  not  be  included  in  the  total  income  of  the  previous  year  of  the  person  in  receipt  of  the 
income, provided the following conditions are complied with, namely:—] 

5[(a) such  person  furnishes a  statement  in the  prescribed  form  and  in the  prescribed3 manner  to 
the Assessing Officer, stating the purpose for which the income is being accumulated or set apart and 

1. Ins. by Act 41 of 1975, s. 4 (w.e.f. 1-4-1976). 
2. Subs. by Act 19 of 1970, s. 5, for sub-section (2) (w.e.f. 1-4-1971). 
3. Subs. by Act 41 of 1975, s. 4, for certain words (w.e.f. 1-4-1976). 
4. Subs. by Act 20 of 2002, s. 7, for “seventy-five per cent.” (w.e.f. 1-4-2003). 
5. Subs. by Act 20 of 2015, s. 8, for clauses (a), (b) and the first and second provisos (w.e.f. 1-4-2016). 

125 

                                                           
the period for which the income is to be accumulated or set apart, which shall in no case exceed five 
years; 

 (b) the  money  so  accumulated  or  set  apart  is  invested  or  deposited  in  the  forms  or  modes 

specified in sub-section (5); 

 (c) the statement referred to in clause (a) is furnished on or before the due date specified under 

sub-section (1) of section 139 for furnishing the return of income for the previous year: 

Provided that  in  computing  the  period  of  five  years  referred  to  in  clause  (a),  the  period  during 
which the income could not be applied for the purpose for which it is so accumulated or set apart, due 
to an order or injunction of any court, shall be excluded.]] 

1[Explanation.—Any amount credited or paid, out of income referred to in clause (a) or clause (b) of 
sub-section (1), read with the Explanation to that sub-section, which is not applied, but is accumulated or 
set apart, to any trust or institution registered under section 12AA or to any fund or institution or trust or 
any university or other educational institution or any hospital or other medical institution referred to in 
sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, shall 
not  be  treated as  application  of  income  for  charitable  or  religious  purposes,  either  during  the  period  of 
accumulation or thereafter.] 

2[(3) Any income referred to in sub-section (2) which— 

(a) is applied to purposes other than charitable or religious purposes as aforesaid or ceases to be 

accumulated or set apart for application thereto, or 

3[(b)  ceases  to  remain  invested  or  deposited  in  any  of  the  forms  or  modes  specified  in               

sub-section (5), or] 

(c)  is  not  utilised  for  the  purpose  for  which  it  is  so  accumulated  or  set  apart  during  the  period 

referred to in clause (a) of that sub-section or in the year immediately following the expiry thereof, 

1[(d) is credited or paid to any trust or institution registered under section 12AA or to any fund or 
institution or trust or any university or other educational institution or any hospital or other medical 
institution  referred  to  in  sub-clause  (iv)  or  sub-clause  (v)  or  sub-clause  (vi)  or  sub-clause  (via)  of 
clause (23C) of section 10,] 

shall be deemed to be the income of such person of the previous year in which it is so applied or ceases to 
be so accumulated or set apart or ceases to remain so invested or deposited or credited or paid or, as the 
case may be, of the previous year immediately following the expiry of the period aforesaid. 

4[(3A) Notwithstanding anything contained in sub-section (3), where due to circumstances beyond the 
control of the person in receipt of the income, any income invested or deposited in accordance with the 
provisions of clause (b) of sub-section (2) cannot be applied for the purpose for which it was accumulated 
or set apart, the 5[Assessing Officer ]may, on an application made to him in this behalf, allow such person 
to  apply  such  income  for  such  other  charitable  or  religious  purpose  in  India  as  is  specified  in  the 
application  by  such  person  and  as  is  in  conformity  with  the  objects  of  the  trust;  and  thereupon  the 
provisions  of  sub-section  (3)  shall  apply  as  if  the  purpose  specified  by  such  person  in  the  application 
under  this  sub-section  were  a  purpose  specified  in  the  notice  given  to  the  5[Assessing  Officer]  under 
clause (a) ofsub-section (2): 

1. Ins. by Act 20 of 2002, s. 7 (w.e.f. 1-4-2003). 

2. Subs. by Act 19 of 1970, s. 5, for sub-section (3) (w.e.f. 1-4-1971). 

3. Subs. by Act 11 of 1983, s. 39, for clause (b) (w.e.f. 1-4-1983). 

4. Ins. by Act 41 of 1975, s. 4 (w.e.f. 1-4-1976). 

5. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 

126 

                                                           
1[Provided that  the  2[Assessing  Officer]  shall  not  allow  application  of  such  income  by  way  of 

payment or credit made for the purposes referred to in clause (d) of sub-section (3) of section 11:] 

3[Provided further that in case the trust or institution, which has invested or deposited its income in 
accordance with the provisions of clause (b) of sub-section (2), is dissolved, the 2[Assessing Officer] may 
allow application of such income for the purposes referred to in clause (d) of sub-section (3) in the year in 
which such trust or institution was dissolved.] 

(4)  For  the  purposes  of  this  section  “property  held  under  trust”  includes  a  business  undertaking  so 
held, and where a claim is made that the income of any such undertaking shall not be included in the total 
income  of  the  persons  in  receipt  thereof,  the  2[Assessing  Officer]  shall  have  power  to  determine  the 
income  of  such  undertaking  in  accordance  with  the  provisions  of  this  Act  relating  to  assessment;  and 
where any income so determined is in excess of the income as shown in the accounts of the undertaking, 
such excess shall be deemed to be applied to purposes other than charitable or religious purposes 4***. 

5[(4A)  Sub-section  (1)  or  sub-section  (2)  or  sub-section  (3)  or  sub-section  (3A)  shall  not  apply  in 
relation to any income of a trust or an institution, being profits and gains of business, unless the business 
is incidental to the attainment of the objectives of the trust or, as the case may be, institution, and separate 
books of account are maintained by such trust or institution in respect of such business.] 

6[(5)  The  forms  and  modes  of  investing  or  depositing  the  money  referred  to  in  clause  (b)  of  sub-

section (2) shall be the following, namely:— 

   (i)  investment  in  savings  certificates  as  defined  in  clause  (c)  of  section  2  of  the  Government 
Savings  Certificates  Act,  1959  (46  of  1959),  and  any  other  securities  or  certificates  issued  by  the 
Central Government under the Small Savings Schemes of that Government; 

 (ii) deposit in any account with the Post Office Savings Bank; 

(iii) deposit in any account with a scheduled bank or a co-operative society engaged in carrying 
on  the  business  of  banking  (including  a  co-operative  land  mortgage  bank  or  a  co-operative  land 
development bank). 

Explanation.—In this clause, “scheduled bank” means the State Bank of India constituted under 
the  State  Bank  of  India  Act,  1955  (23  of  1955),  a  subsidiary  bank  as  defined  in  the  State  Bank  of 
India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted under section 
3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or 
under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 
of  1980),  or  any  other  bank  being  a  bank  included in  the  Second  Schedule to the  Reserve  Bank  of 
India Act, 1934 (2 of 1934); 

(iv) investment in units of the Unit Trust of India established under the Unit Trust of India Act, 

1963 (52 of 1963); 

 (v)  investment  in  any  security  for  money  created  and  issued  by  the  Central  Government  or  a 

State Government; 

1. Ins. byAct 20 of 2002, s. 7 (w.e.f. 1-4-2003). 
2. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
3. Ins. by Act 32 of 2003, s. 10 (w.e.f. 1-4-2003). 
4.  The  words  brackets  and  figures  “and  accordingly  chargeable  to  tax  within  the  meaning  of  sub-section  (3)”  omitted  by      

Act 19 of 1970, s. 5 (w.e.f. 1-4-1971). 

5. Subs. by Act 49 of 1991, s. 6, for sub-section (4A) (w.e.f. 1-4-1992). 
6.Ins. by Act 11 of 1983, s. 6 (w.e.f. 1-4-1984). 

127 

                                                           
(vi)  investment  in  debentures  issued  by,  or  on  behalf  of,  any  company  or  corporation  both  the 
principal  whereof and the interest  whereon  are  fully and  unconditionally  guaranteed  by  the  Central 
Government or by a State Government; 

(vii) investment or deposit in any 1[public sector company]: 

2[Provided that where an investment or deposit in any public sector company has been made and 

such public sector company ceases to be a public sector company,— 

(A) such investment made in the shares of such company shall be deemed to be an investment 
made  under  this  clause  for  a  period  of  three  years  from  the  date  on  which  such  public  sector 
company ceases to be a public sector company; 

(B)  such  other  investment or  deposit  shall  be  deemed  to  be  an  investment  or  deposit  made 
under  this  clause  for  the  period  up  to  the  date  on  which  such  investment  or  deposit  becomes 
repayable by such company;] 

(viii) deposits with or investment in any bonds issued by a financial corporation which is engaged 
in  providing  long-term  finance  for  industrial  development  in  India  and  3[which  is  eligible  for 
deduction under clause (viii) of sub-section (1) of section 36]; 

(ix) deposits with or investment in any bonds issued by a public company formed and registered 
in  India  with  the  main  object  of  carrying  on  the  business  of  providing  long-term  finance  for 
construction  or  purchase  of  houses  in  India  for  residential  purposes  and  3[which  is  eligible  for 
deduction under clause (viii) of sub-section (1) of section 36]; 

4[(ixa)  deposits  with  or  investment  in  any  bonds  issued  by  a  public  company  formed  and 
registered in India with the main object of carrying on the business of providing long-term finance for 
urban infrastructure in India. 

Explanation.—For the purposes of this clause,— 

(a) “long-term finance” means any loan or advance where the terms under which moneys are 
loaned or advanced provide for repayment along with interest thereof during a period of not less 
than five years; 

(b)  “public  company”  shall  have  the  meaning  assigned  to  it  in  section  3  of  the  Companies 

Act, 1956 (1 of 1956); 

(c) “urban infrastructure” means a project for providing potable water supply, sanitation and 

sewerage, drainage, solid waste management, roads, bridges and flyovers or urban transport;] 

(x) investment in immovable property. 

Explanation.—”Immovable  property”  does  not  include  any  machinery  or  plant  (other  than 
machinery or plant installed in a building for the convenient occupation of the building) even though 
attached to, or permanently fastened to, anything attached to the earth;] 

1.  Subs.  by  Act  3  of  1989,  s.  5,  for  “Government  company  as  defined  in  section  617  of  the  Companies  Act,  1956  (1  of 

1956)” (w.e.f. 1-4-1989). 

2.  Ins. by Act 10 of 2000, s. 8 (w.e.f. 1-4-2001). 
3. Subs. by s. 8, ibid., for “which is approved by the Central Government of the purposes of clause (viii) of sub-section (10) 

of section 36” (w.e.f. 1-4-2001). 
4. Ins. by s. 8, ibid. (w.e.f. 1-4-2001). 

128 

                                                           
1[(xi) deposits with the Industrial Development Bank of India established under the Industrial 

Development Bank of India Act, 1964 (18 of 1964);] 

2[(xii) any other form or mode of investment or deposit as may be prescribed.] 

3[(6)  In  this  section  where  any  income  is  required  to  be  applied  or  accumulated  or  set  apart  for 
application, then, for such purposes the income shall be determined without any deduction or allowance 
by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an 
application of income under this section in the same or any other previous year. 

(7) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) of 
section 12AA or has obtained registration at any time under section 12A [as it stood before its amendment 
by the Finance (No. 2) Act, 1996 (33 of 1996)] and the said registration is in force for any previous year, 
then,  nothing  contained  in  section  10  [other  than  clause  (1)  and  clause  (23C)  thereof]  shall  operate  to 
exclude  any  income  derived  from  the  property  held  under  trust  from  the  total  income  of  the  person  in 
receipt thereof for that previous year.] 

4[12.  Income  of  trusts  or  institutions  from  contributions.—5[(1)]  Any  voluntary  contributions 
received  by  a  trust  created  wholly  for  charitable  or  religious  purposes  or  by  an  institution  established 
wholly for such purposes (not being contributions made with a specific direction that they shall form part 
of  the  corpus  of  the  trust  or  institution)  shall  for  the  purposes  of section  11 be  deemed  to  be  income 
derived from property held under trust wholly for charitable or religious purposes and the provisions of 
that section and section 13 shall apply accordingly.] 

6[(2)  The  value  of  any  services,  being  medical  or  educational  services,  made  available  by  any 
charitable or religious trust running a hospital or medical institution or an educational institution, to any 
person referred to in clause (a) or clause (b) or clause (c) or clause (cc) or clause (d) of sub-section (3) 
of section 13, shall be deemed to be income of such trust or institution derived from property held under 
trust wholly for charitable or religious purposes during the previous year in which such services are so 
provided  and  shall  be  chargeable  to  income-tax  notwithstanding  the  provisions  of  sub-section  (1) 
of section 11. 

Explanation.—For the purposes of this sub-section, the expression “value” shall be the value of any 
benefit  or  facility  granted  or  provided  free  of  cost  or  at  concessional  rate  to  any  person  referred  to  in 
clause (a) or clause (b) or clause (c) or clause (cc) or clause (d) of sub-section (3) of section 13.] 

7[(3) Notwithstanding anything contained in section 11, any amount of donation received by the trust 
or  institution  in  terms  of  clause  (d)  of  sub-section  (2)  of section  80G 8[in  respect  of  which  accounts  of 
income  and  expenditure  have  not  been  rendered  to  the  authority  prescribed  under  clause  (v)  of             
sub-section (5C)  of  that  section,  in the  manner  specified  in that  clause,  or]  which  has  been  utilised  for 
purposes other than providing relief to the victims of earthquake in Gujarat or which remains unutilised in 
terms of sub-section (5C) of section 80G and not transferred to the Prime Minister's National Relief Fund 
on or before the 31st day of March,  9[2004] shall be deemed to be the income of the previous year and 
shall accordingly be charged to tax.] 

1. Ins. by Act 21 of 1984, s. 4 (w.e.f. 1-4-1985). 
2. Ins. by Act 3 of 1989, s. 5 (w.e.f. 1-4-1989). 
3. Ins. by Act 25 of 2014, s. 7 (w.e.f. 1-4-2015). 
4. Sections 12 and 12A restored by Act 3 of 1989, s. 95 (w.e.f. 1-4-1989). Earlier section 12 was omitted by Act 4 of 1988,    

s. 7 (w.e.f. 1-4-1989). 

5. Section 12 renumbered as sub-section (1) therof by Act 10 of 2000, s. 9 (w.e.f. 1-4-2001). 
6. Ins. by s. 9, ibid. (w.e.f. 1-4-2001).  
7. Ins. by Act 4 of 2001, s. 5 (w.e.f. 3-2-2001). 
8. Ins. by Act 20 of 2002, s. 8 (w.e.f. 3-2-2001). 
9. Subs. by Act 32 of 2003, s. 11, for the figures “2003” (w.e.f. 3-2-2001).  

129 

                                                           
12A.  1[Conditions  for  applicability  of  sections  11  and  12.]—2[(1)]  The  provisions  of section 
11 and section 12 shall not apply in relation to the income of any trust or institution unless the following 
conditions are fulfilled, namely:— 

(a)  the  person  in  receipt  of  the  income  has  made  an  application  for  registration  of  the  trust  or 
institution in the prescribed form and in the prescribed manner to the 3*** 4[Principal Commissioner 
or Commissioner] before the 1st day of July, 1973, or before the expiry of a period of one year from 
the  date  of  the  creation  of  the  trust  or  the  establishment  of  the  institution,  5[whichever  is  later  and 
such trust or institution is registered under section 12AA]: 

6[Provided that  where  an  application  for  registration  of  the  trust  or  institution is  made  after  the 
expiry  of  the  period  aforesaid,  the  provisions  of  section  11  and 12 shall  apply  in  relation  to  the 
income of such trust or institution,— 

   (i) from the date of the creation of the trust or the establishment of the institution if the 3*** 
4[Principal  Commissioner  or  Commissioner]  is,  for  reasons  to  be  recorded  in  writing,  satisfied 
that  the  person  in  receipt  of  the  income  was  prevented  from  making  the  application  before  the 
expiry of the period aforesaid for sufficient reasons; 

(ii)  from  the  1st  day  of  the  financial  year  in  which  the  application  is  made,  if  the 

3*** 4[Principal Commissioner or Commissioner] is not so satisfied:] 

7[Provided further that the provisions of this clause shall not apply in relation to any application 

made on or after the 1st day of June, 2007;] 

7[(aa) the person in receipt of the income has made an application for registration of the trust or 
institution on or after the 1st day of June, 2007 in the prescribed form and manner to the 4[Principal 
Commissioner or Commissioner] and such trust or institution is registered under section 12AA;] 

8[(ab)  the  person  in  receipt  of  the  income  has  made  an  application  for  registration  of  the  trust  or 
institution, in a case where a trust or an institution has been granted registration under section 12AA or 
has obtained registration at any time under section 12A [as it stood before its amendment by the Finance 
(No. 2) Act, 1996 (33 of 1996)], and, subsequently, it has adopted or undertaken modifications of the 
objects  which  do not  conform  to  the  conditions  of registration, in the  prescribed  form  and  manner, 
within  a  period  of  thirty  days  from  the  date  of  said  adoption  or  modification,  to  the  Principal 
Commissioner or Commissioner and such trust or institution is registered under section 12AA;] 

(b) where the total income of the trust or institution as computed under this Act without giving 
effect  to  the  9[provisions  of section  11 and section  12 exceeds  the  maximum  amount  which  is  not 
chargeable to income-tax in any previous year], the accounts of the trust or institution for that year 
have  been  audited  by  an  accountant  as  defined  in  the Explanation below  sub-section  (2)  of section 
288 and the person in receipt of the income furnishes along with the return of income for the relevant 
assessment  year  the  report  of  such  audit  in  the  prescribed  form duly  signed  and  verified  by  such 
accountant and setting forth such particulars as may be prescribed. 

1. Subs. by Act 22 of 2007, s. 8, for “Conditions as to registration of trusts, etc.” (w.e.f. 1-6-2007).  
2. Section 12A renumbered as sub-section (1) thereof by s. 8 ibid. (w.e.f. 1-6-2007). 
3. The words “chief commissioner or” omitted by Act 27 of 1999, s. 8 (w.e.f. 1-6-1999). 
4. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.r.e.f. 1-6-2013).   
5. Subs. by Act 33 of 1996, s. 5, for “whichever is later” (w.e.f. 1-4-1997). 
6. The proviso substituted by Act 49 of 1991, s. 7, (w.e.f. 1-10-1991).  
7. Ins. by Act 22 of 2007, s. 8 (w.e.f. 1-6-2007).  
8. Ins. by Act 7 of 2017, s. 9 (w.e.f. 1-4-2018). 
9. Subs by Act 29 of 2006, s. 4, for certain words and figures (w.e.f. 1-4-2006). 

130 

                                                           
1[(ba) the person in receipt of the income has furnished the return of income for the previous year 
in accordance with the provisions of sub-section (4A) of section 139, within the time allowed under 
that section;] 

2* 

* 

* 

* 

* 

3[(2)  Where  an  application  has  been  made  on  or  after  the  1st  day  of  June,  2007,  the  provisions  of 
sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment 
year immediately following the financial year in which such application is made:] 

4[Provided that  where  registration  has  been  granted  to  the  trust  or  institution  under section  12AA, 
then, the provisions of sections 11 and 12 shall apply in respect of any income derived from property held 
under  trust  of  any  assessment  year  preceding  the  aforesaid  assessment  year,  for  which  assessment 
proceedings are pending before the Assessing Officer as on the date of such registration and the objects 
and activities of such trust or institution remain the same for such preceding assessment year: 

Provided further that no action under section 147 shall be taken by the Assessing Officer in case of 
such  trust  or  institution  for  any  assessment  year  preceding  the  aforesaid  assessment  year  only  for  non-
registration of such trust or institution for the said assessment year: 

Provided also that provisions contained in the first and second proviso shall not apply in case of any 
trust  or  institution  which  was  refused  registration  or  the  registration  granted  to  it  was  cancelled  at  any 
time under section 12AA.] 

5[12AA.  Procedure  for  registration.— (1)  The  6*** 7[Principal  Commissioner  or  Commissioner], 
on receipt of an application for registration of a trust or institution made under clause (a) 8[or clause (aa) 
9[or clause (ab)] of sub-section (1)] of section 12A, shall— 

(a) call for such documents or information from the trust or institution as he thinks necessary in 
order  to  satisfy  himself  about  the  genuineness  of  activities  of  the  trust  or  institution  and  may  also 
make such inquiries as he may deem necessary in this behalf; and 

(b) after satisfying himself about the objects of the trust or institution and the genuineness of its 

activities, he— 

(i) shall pass an order in writing registering the trust or institution; 

(ii)  shall,  if  he  is  not  so  satisfied,  pass  an  order  in  writing  refusing  to  register  the  trust  or 

institution, 

and a copy of such order shall be sent to the applicant: 

Provided that  no  order  under  sub-clause  (ii)  shall  be  passed  unless  the  applicant  has  been  given  a 

reasonable opportunity of being heard. 

1. Ins. by Act 7 of 2017, s. 9 (w.e.f. 1-4-2018). 
2. Clause (c) omitted by Act 20 of 2002, s. 9 (w.e.f. 1-4-2002). 
3. Ins. by Act 22 of 2007, s. 8 (w.e.f. 1-6-2007). 
4. Ins. by Act 25 of 2014, s. 8 (w.e.f. 1-10-2014). 
5. Ins. by Act 33 of 1996, s. 6 (w.e.f. 1-4-1997). 
6. The words “chief commissioner or” omitted by Act 27 of 1999, s. 8 (w.e.f. 1-6-1999). 
7. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.e.f. 1-6-2013) 
8. Ins. by Act 22 of 2007, s. 9 (w.e.f. 1-6-2007). 
9. Ins. by Act 7 of 2017, s. 10 (w.e.f. 1-4-2018). 

131 

 
 
 
 
 
                                                           
1[(1A) All applications, pending before the 2[Principal Chief Commissioner or Chief Commissioner] 

on which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, 
shall stand transferred on that day to the 3[Principal Commissioner or Commissioner] and the 3[Principal 

Commissioner  or  Commissioner]  may  proceed  with  such  applications  under  that  sub-section  from  the 

stage at which they were on that day.] 

(2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed 

before the expiry of six months from the end of the month in which the application was received under 
clause (a) 4[or clause (aa) 5[or clause (ab)] of sub-section (1)] of section 12A.] 

6[(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) 
7[or  has  obtained  registration  at  any  time  under section  12A. [as  it  stood  before  its  amendment  by  the 
Finance  (No.  2)  Act,  1996  (33  of  1996)]]  and  subsequently  the  3[Principal  Commissioner  or 

Commissioner] is satisfied that the activities of such trust or institution are not genuine or are not being 

carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an 

order in writing cancelling the registration of such trust or institution: 

Provided that no order under this sub-section shall be passed unless such trust or institution has been 

given a reasonable opportunity of being heard.] 

8[(4) Without prejudice to the provisions of sub-section (3), where a trust or an institution has been 

granted  registration  under  clause  (b)  of  sub-section  (1)  or  has  obtained  registration  at  any  time  under 

section  12A  [as  it  stood  before  its  amendment  by  the  Finance  (No.  2)  Act,  1996  (33  of  1996)]  and 

subsequently it is noticed that the activities of the trust or the institution are being carried out in a manner 

that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of 

such  trust  or  institution  due  to  operation  of  sub-section  (1)  of  section  13,  then,  the  Principal 

Commissioner  or  the  Commissioner  may  by  an  order  in  writing  cancel  the  registration  of  such  trust  or 

institution: 

Provided that the registration shall not be cancelled under this sub-section, if the trust or institution 

proves that there was a reasonable cause for the activities to be carried out in the said manner.] 

1. Ins. by Act 27 of 1999, s. 9 (w.e.f. 1-6-1999). 

2. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.r.e.f. 1-6-2013) 

3. Subs. by s. 4, ibid., for “Commissioner” (w.r.e.f. 1-6-2013) 

4. Ins. by Act 22 of 2007, s. 9 (w.e.f. 1-6-2007).  

5. Ins. by Act 7 of 2017, s. 10 (w.e.f. 1-4-2018). 

6. Ins. by Act 23 of 2004, s. 6 (w.e.f. 1-10-2004). 

7. Ins. by Act 14 of 2010, s. 7 (w.e.f. 1-6-2010). 

8. Ins. by Act 25 of 2014, s. 9 (w.e.f. 1-10-2014).  

132 

                                                           
1[13.  Section  11 not  to  apply  in  certain  cases.—(1)  2[Nothing  contained  in  section  11  or                  

section  12] shall  operate  so  as  to  exclude  from  the  total  income  of  the  previous  year  of  the  person  in 

receipt thereof— 

(a)  any  part  of  the  income  from  the  property  held  under  a  trust  for  private  religious  purposes 

which does not enure for the benefit of the public; 

(b) in the case of a trust for charitable purposes or a charitable institution created or established 
after  the  commencement  of  this  Act,  any  income  thereof  if  the  trust  or  institution  is  created  or 
established for the benefit of any particular religious community or caste; 

3* 

* 

* 

* 

*  

(c) in the case of a trust for charitable or religious purposes or a charitable or religious institution, 

any income thereof— 

(i) if such trust or institution has been created or established after the commencement of this 
Act and under the terms of the trust or the rules governing the institution, any part of such income 
enures, or 

(ii) if any part of such income or any property of the trust or the institution (whenever created 

or established) is during the previous year used or applied, 

directly or indirectly for the benefit of any person referred to in sub-section (3): 

Provided that  in  the  case  of  a  trust  or  institution  created  or  established  before  the 
commencement  of  this  Act,  the  provisions  of  sub-clause  (ii)  shall  not  apply  to  any  use  or 
application, whether directly or indirectly, of any part of such income or any property of the trust 
or institution for the benefit of any person referred to in sub-section (3), if such use or application 
is by way of compliance with a mandatory term of the trust or a mandatory rule governing the 
institution: 

Provided  further that  in  the  case  of  a  trust  for  religious  purposes  or  a  religious  institution 
(whenever  created  or  established)  or  a  trust  for  charitable  purposes  or  a  charitable  institution 
created  or  established  before  the  commencement  of  this  Act,  the  provisions  of  sub-clause  (ii) 
shall  not  apply  to  any  use  or  application,  whether  directly  or  indirectly,  of  any  part  of  such 
income  or  any  property  of  the  trust  or  institution  for  the  benefit  of  any  person  referred  to  in               
sub-section (3) insofar as such use or application relates to any period before the 1st day of June, 
1970; 

4[(d)  in  the  case  of  a  trust  for  charitable  or  religious  purposes  or  a  charitable  or  religious 

institution, any income thereof, if for any period during the previous year— 

(i)  any  funds  of  the  trust  or  institution  are  invested  or  deposited  after  the  28th  day  of 
February,  1983  otherwise  than  in  any  one  or  more  of  the  forms  or  modes  specified  in  
sub-section (5) of section 11; or 

(ii)  any  funds  of  the  trust  or  institution  invested  or  deposited  before  the  1st  day  of  March, 
1983  otherwise  than  in  any  one  or  more  of  the  forms  or  modes  specified  in  sub-section  (5)  of 
section 11 continue to remain so invested or deposited after the 30th day of November, 1983; or 

1. Restored by Act 3 of 1989, s. 95 (w.e.f. 1-4-1989). Earlier section 13 omitted by Act 4 of 1988, s. 7 (w.e.f. 1-4-1989). 
2. Subs. by Act 16 of 1972, s. 7, for “Nothing contained in section 11” (w.e.f. 1-4-1973). 
3. Clause (bb) omitted by Act 11 of 1983, s. 7 (w.e.f. 1-4-1984). 
4. Subs. by s. 7, ibid., for clause (d) (w.e.f. 1-4-1983). 

133 

 
 
 
 
 
 
 
                                                           
1[(iii) any shares in a company, other than— 

(A) shares in a public sector company; 

(B)  shares  prescribed  as  a  form  or  mode  of  investment  under  clause  (xii)  of  

sub-section (5) of section 11, 

are held by the trust or institution after the 30th day of November, 1983:] 

Provided that nothing in this clause shall apply in relation to— 

(i) any assets held by the trust or institution where such assets form part of the corpus of the trust 

or institution as on the 1st day of June, 1973 2***; 

3[(ia) any accretion to the shares, forming part of the corpus mentioned in clause (i), by way of 

bonus shares allotted to the trust or institution;] 

(ii) any assets (being debentures issued by, or on behalf of, any company or corporation) acquired 

by the trust or institution before the 1st day of March, 1983; 

4[(iia)  any  asset,  not  being  an  investment  or  deposit  in  any  of  the  forms  or  modes  specified  in  
sub-section (5) of section 11, where such asset is not held by the trust or institution, otherwise than in 
any of the forms or modes specified in sub-section (5) of section 11, after the expiry of one year from 
the  end  of  the  previous  year  in  which  such  asset  is  acquired  or  the  31st  day  of  March,  5[1993], 
whichever is later;] 

(iii)  any  funds  representing  the  profits  and  gains  of  business,  being  profits  and  gains  of  any 
previous  year  relevant  to  the  assessment  year  commencing  on  the  1st  day  of  April,  1984  or  any 
subsequent assessment year. 

Explanation.—Where the trust or institution has any other income in addition to profits and gains 
of business, the provisions of clause (iii) of this proviso shall not apply unless the trust or institution 
maintains separate books of account in respect of such business.] 

6[Explanation.—For the purposes of sub-clause (ii) of clause (c), in determining whether any part of 
the income or any property of any trust or institution is during the previous year used or applied, directly 
or indirectly, for the benefit of any person referred to in sub-section (3), insofar as such use or application 
relates to any period before the 1st day of July, 1972, no regard shall be had to the amendments made to 
this section by section 7 [other than sub-clause (ii) of clause (a) thereof] of the Finance Act, 1972.] 

(2)  Without  prejudice  to  the  generality  of  the  7[provisions  of  clause  (c)  and  clause  (d)]  of  
sub-section  (1),  the  income  or  the  property  of  the  trust  or  institution  or  any  part  of  such  income  or 
property shall, for the purposes of that clause, be deemed to have been used or applied for the benefit of a 
person referred to in sub-section (3),— 

(a) if any part of the income or property of the trust or institution is, or continues to be, lent to any 
person referred to in sub-section (3) for any period during the previous year without either adequate 
security or adequate interest or both; 

1. Subs. by Act 22 of 2007, s. 10, for sub-clause (iii) (w.e.f. 1-4-1999). 
2. The words “and such assets were not purchased by the trust or institution or acquired by it by conversion or in exchange 

for, any other asset” omitted by Act 18 of 1992, s. 5 (w.e.f. 1-4-1983). 

3. Ins. by s. 5, ibid. (w.e.f. 1-4-1983). 
4. Ins. by Act 49 of 1991, s. 8 (w.e.f. 1-4-1983). 
5. Subs. by Act 18 of 1992, s. 5, for “1992” (w.e.f. 1-4-1992). 
6. Ins. by Act 16 of 1972, s. 7 (w.e.f. 1-4-1973). 
7. Subs. by Act 11 of 1983, s. 7, for “provisions of clause (c)” (w.e.f. 1-4-1983). 

134 

                                                           
(b) if any land, building or other property of the trust or institution is, or continues to be, made 
available for the use of any person referred to in sub-section (3), for any period during the previous 
year without charging adequate rent or other compensation; 

(c) if any amount is paid by way of salary, allowance or otherwise during the previous year to any 
person  referred  to  in  sub-section  (3)  out  of  the  resources  of  the  trust  or  institution  for  services 
rendered by that person to such trust or institution and the amount so paid is in excess of what may be 
reasonably paid for such services; 

(d)  if  the  services  of  the  trust  or  institution  are  made  available  to  any  person  referred  to  in  

sub-section (3) during the previous year without adequate remuneration or other compensation; 

(e) if any share, security or other property is purchased by or on behalf of the trust or institution 
from  any  person  referred  to  in  sub-section  (3)  during  the  previous  year  for  consideration  which  is 
more than adequate; 

(f) if any share, security or other property is sold by or on behalf of the trust or institution to any 
person  referred  to  in  sub-section  (3)  during  the  previous  year  for  consideration  which  is  less  than 
adequate; 

1[(g) if any income or property of the trust or institution is diverted during the previous year in 

favour of any person referred to in sub-section (3): 

Provided that this clause shall not apply where the income, or the value of the property or, as the 
case may be, the aggregate of the income and the value of the property, so diverted does not exceed 
one thousand rupees;] 

(h)  if  any  funds  of  the  trust  or  institution  are,  or  continue  to  remain,  invested  for  any  period 
during the previous year (not being a period before the 1st day of January, 1971), in any concern in 
which any person referred to in sub-section (3) has a substantial interest. 

(3)  The  persons  referred  to  in  clause  (c)  of  sub-section  (1)  and  sub-section  (2)  are  the  following, 

namely:— 

(a) the author of the trust or the founder of the institution; 

2[(b) any person who has made a substantial contribution to the trust or institution, that is to say, 
any  person  whose  total  contribution  up  to  the  end  of  the  relevant  previous  year  exceeds  3[fifty 
thousand] rupees]; 

(c) where such author, founder or person is a Hindu undivided family, a member of the family; 

4[(cc) any trustee of the trust or manager (by whatever name called) of the institution;] 

1. Subs. by Act 16 of 1972, s. 7, for clause (g) (w.e.f. 1-4-1973). 
2. Subs. by Act 41 of 1975, s. 5, for clause (b) (w.e.f. 1-4-1977). 
3. Subs. by Act 32 of 1994, s. 9, for “twenty-five thousand” (w.e.f. 1-4-1995). 
4. Ins. by Act 16 of 1972, s. 7 (w.e.f. 1-4-1973). 

135 

 
 
                                                           
(d) any relative of any such author, founder, person, 1[member, trustee or manager] as aforesaid; 

(e) any concern in which any of the persons referred to in clauses (a), (b), 2[(c), (cc)] and (d) has a 

substantial interest. 

(4) Notwithstanding anything contained in clause (c) of sub-section (1) 3[but without prejudice to the 
provisions contained in clause (d) of that sub-section, in a case where] the aggregate of the funds of the 
trust  or  institution  invested  in  a  concern  in  which  any  person  referred  to  in  sub-section  (3)  has  a 
substantial  interest,  does  not  exceed  five  per  cent.  of  the  capital  of  that  concern,  the  exemption  under 
4[section 11 or section 12] shall not be denied in relation to any income other than the income arising to 
the  trust  or  the  institution  from  such  investment,  by  reason  only  that  the  5[funds  of  the  trust  or  the 
institution] have been invested in a concern in which such person has a substantial interest. 

6[(5)  Notwithstanding  anything  contained  in  clause  (d)  of  sub-section  (1),  where  any  assets  (being 
debentures issued by, or on behalf of, any company or corporation) are acquired by the trust or institution 
after  the  28th  day  of  February,  1983  but  before  the  25th  day  of  July,  1991,  the  exemption  under                
section 11 or section 12 shall not be denied in relation to any income other than the income arising to the 
trust or the institution from such assets, by reason only that the funds of the trust or the institution have 
been invested in such assets if such funds do not continue to remain so invested in such assets after the 
31st day of March, 1992.] 

7[(6) Notwithstanding anything contained in sub-section (1) or sub-section (2), but without prejudice 
to the provisions contained in sub-section (2) of section 12, in the case of a charitable or religious trust 
running an educational institution or a medical institution or a hospital, the exemption under section 11 or 
section  12 shall  not  be  denied  in  relation  to  any  income,  other  than  the  income  referred  to  in  
sub-section (2) of section 12, by reason only that such trust has provided educational or medical facilities 
to  persons  referred  to  in  clause  (a)  or  clause  (b)  or  clause  (c)  or  clause  (cc)  or  clause  (d)  of  
sub-section (3).] 

8[(7)  Nothing  contained  in  section  11 or  section  12 shall  operate  so  as  to  exclude  from  the  total 
income  of  the  previous  year  of  the  person  in  receipt  thereof,  any  anonymous  donation  referred  to  in 
section 115BBC on which tax is payable in accordance with the provisions of that section.] 

9[(8) Nothing contained in section 11 or section 12 shall operate so as to exclude any income from the 
total income of the previous year of the person in receipt thereof if the provisions of the first proviso to 
clause (15) of section 2 become applicable in the case of such person in the said previous year.] 

10[(9)  Nothing  contained in sub-section  (2)  of  section 11 shall  operate  so  as  to  exclude  any  income 

from the total income of the previous year of a person in receipt thereof, if— 

(i) the statement referred to in clause (a) of the said sub-section in respect of such income is not 
furnished on or before the due date specified under sub-section (1) of section 139 for furnishing the 
return of income for the previous year; or 

1. Subs. by Act 16 of 1972, s. 7, for “or member” (w.e.f. 1-4-1973). 
2. Subs. by s. 7, ibid., for “(c)” (w.e.f. 1-4-1973). 
3. Subs. by Act 11 of 1983, s. 7, for “, in a case where” (w.e.f. 1-4-1983). 
4. Subs. by Act 16 of 1972, s. 7, for “section 11” (w.e.f. 1-4-1973). 
5. Subs. by Act 32 of 1971, s. 6, for “money of the trust or the institution” (w.e.f. 1-4-1971). 
6. Ins. by Act 49 of 1991, s. 8 (w.e.f. 1-4-1983). 
7. Ins. by Act 10 of 2000, s. 10 (w.e.f. 1-4-2001). 
8. Ins. by Act 21 of 2006, s. 6 (w.e.f. 1-4-2007). 
9. Ins. by Act 23 of 2012, s. 6 (w.e.f. 1-4-2009). 
10. Ins. by Act 20 of 2015, s. 9 (w.e.f. 1-4-2016). 

136 

                                                           
(ii) the return of income for the previous year is not furnished by such person on or before the due 
date  specified  under  sub-section  (1)  of  section  139 for  furnishing  the  return  of  income  for  the  said 
previous year.] 

1[Explanation  1.—For  the  purposes  of  sections  11,  12,  12A and  this  section,  “trust”  includes  any 
other legal obligation and for the purposes of this section “relative”, in relation to an individual, means— 

(i) spouse of the individual; 

(ii) brother or sister of the individual; 

(iii) brother or sister of the spouse of the individual; 

(iv) any lineal ascendant or descendant of the individual; 

(v) any lineal ascendant or descendant of the spouse of the individual; 

(vi)  spouse  of  a  person  referred  to  in  sub-clause  (ii),  sub-clause  (iii),  sub-clause  (iv)  or  

sub-clause (v); 

(vii) any lineal descendant of a brother or sister of either the individual or of the spouse of the 

individual.] 

Explanation  2.—A  trust  or  institution  created  or  established  for  the  benefit  of  Scheduled  Castes, 
backward classes, Scheduled Tribes or women and children shall not be deemed to be a trust or institution 
created or established for the benefit of a religious community or caste within the meaning of clause (b) 
of sub-section (1). 

Explanation  3.—For  the  purposes  of  this  section,  a  person  shall  be  deemed  to  have  a  substantial 

interest in a concern,— 

(i) in a case where the concern is a company, if its shares (not being shares entitled to a fixed rate 
of  dividend  whether  with  or  without  a  further  right  to  participate  in  profits)  carrying  not  less  than 
twenty per cent. of the voting power are, at any time during the previous year, owned beneficially by 
such person or  partly  by  such  person  and  partly  by  one  or  more  of the  other  persons  referred to in  
sub-section (3); 

(ii) in the case of any other concern, if such person is entitled, or such person and one or more of 
the other persons referred to in sub-section (3) are entitled in the aggregate, at any time during the 
previous year, to not less than twenty per cent. of the profits of such concern.] 

2[13A. Special provision relating to incomes of political parties.—Any income of a political party 
which is chargeable under the head 3*** “Income from house property” or “Income from other sources” 
or 4[Capital gains or] any income by way of voluntary contributions received by a political party from any 
person shall not be included in the total income of the previous year of such political party: 

1. Subs. by Act 16 of 1972, s. 7, for Explanation 1 (w.e.f. 1-4-1973). 
2. Ins. by Act 29 of 1978, s. 2 (w.e.f. 1-4-1979). 
3. The words “Interest on securities” omitted by Act 26 of 1988, s. 7 (w.e.f. 1-4-1989). 
4. Ins. by Act 32 of 2003, s. 12 (w.e.f. 1-4-1979). 

137 

                                                           
Provided that— 

(a) such political party keeps and maintains such books of account and other documents as would 

enable the 1[Assessing Officer] to properly deduce its income therefrom; 

(b) in respect  of  each  such  voluntary  contribution  2[other than contribution  by  way  of  electoral 
bond]  in  excess  of  3[twenty  thousand  rupees],  such  political  party  keeps  and  maintains  a  record  of 
such contribution and the name and address of the person who has made such contribution; 4*** 

(c)  the  accounts  of  such  political  party  are  audited  by  an  accountant  as  defined  in 

the Explanation below sub-section (2) of section 288 2[; and] 

2[(d)  no  donation  exceeding  two  thousand  rupees  is  received  by  such  political  party  otherwise 
than by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic 
clearing system through a bank account or through electoral bond. 

Explanation.––For the purposes of this proviso, “electoral bond” means a bond referred to in the 

Explanation to sub-section (3) of section 31 of the Reserve Bank of India Act, 1934 (2 of 1934):] 

5[Provided further that if the treasurer of such political party or any other person authorised by that 
political  party  in  this  behalf  fails  to  submit  a  report  under  sub-section  (3)  of  section  29C  of  the 
Representation of the People Act, 1951 (43 of 1951) for a financial year, no exemption under this section 
shall be available for that political party for such financial year:] 

2[Provided  also  that  such  political  party  furnishes  a  return  of  income  for  the  previous  year  in 
accordance  with  the  provisions  of  sub-section (4B)  of  section  139  on  or  before  the  due  date  under that 
section.] 

6[Explanation.—For the purposes of this section, “political party” means a political party registered 

under section 29A of the Representation of the People Act, 1951 (43 of 1951).] 

7[13B. Special provisions relating to voluntary contributions received by electoral trust.—Any 
voluntary  contributions  received  by  an  electoral  trust  shall  not  be  included  in  the  total  income  of  the 
previous year of such electoral trust, if— 

(a)  such  electoral  trust  distributes  to  any  political  party,  registered  under  section  29A  of  the 

Representation  of  the  People  Act,  1951  (43  of  1951),  during  the  said  previous  year,  ninety-five                 
per  cent.  of  the  aggregate  donations  received  by  it  during  the  said  previous  year  along  with  the 
surplus, if any, brought forward from any earlier previous year; and 

(b) such electoral trust functions in accordance with the rules made by the Central Government.] 

1. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2. Ins. by Act 7 of 2017, s. 11 (w.e.f. 1-4-2018). 
3. Subs. by Act 46 of 2003, s. 8, for “ten thousand rupees” (w.e.f. 11-9-2003). 
4. The word “and” omitted by Act 7 of 2017, s. 11 (w.e.f. 1-4-2018). 
5. Ins. by Act 46 of 2003, s. 8 (w.e.f. 11-9-2003). 
6. Subs. by s. 8, ibid., for the Explanation (w.e.f . 11-9-2003). 
7. Ins. by Act 33 of 2009, s. 8 (w.e.f. 1-4-2010). 

138 

                                                           
CHAPTER IV 

COMPUTATION OF TOTAL INCOME 

Heads of income 

14. Heads of income.—Save as otherwise provided by this Act, all income shall, for the purposes of 
charge  of  income-tax  and  computation  of  total  income,  be  classified  under  the  following  heads  of         
income:— 

A.—Salaries. 

1* 

* 

* 

* 

* 

C.—Income from house property. 

D.—Profits and gains of business or profession. 

E.—Capital gains. 

F.—Income from other sources. 

2[14A. Expenditure incurred in relation to income not includible in total income.—3[(1)] For the 
purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of 
expenditure incurred by the assessee in relation to income which does not form part of the total income 
under this Act.] 

4[(2)  The  Assessing  Officer  shall  determine  the  amount  of  expenditure incurred  in  relation  to  such 
income which does not form part of the total income under this Act in accordance with such method as 
may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied 
with  the  correctness  of  the  claim  of  the  assessee  in  respect  of  such  expenditure  in  relation  to  income 
which does not form part of the total income under this Act. 

(3)  The provisions of sub-section (2) shall also apply in relation to a case where an assessee claims 
that no expenditure has been incurred by him in relation to income which does not form part of the total 
income under this Act:] 

5[Provided that  nothing  contained  in  this  section  shall  empower  the  Assessing  Officer  either  to 
reassess undersection 147 or pass an order enhancing the assessment or reducing a refund already made 
or otherwise increasing the liability of the assessee undersection 154, for any assessment year beginning 
on or before the 1st day of April, 2001.] 

A.—Salaries 

15. Salaries.—The following income shall be chargeable to income-tax under the head “Salaries”— 

(a) any salary due from an employer or a former employer to an assessee in the previous year, 

whether paid or not; 

(b) any salary paid or allowed to him in the previous year by or on behalf of an employer or a 

former employer though not due or before it became due to him; 

1. The letter or words “B. —Interest on securities” omitted by Act 26 of 1988, s. 8 (w.e.f. 1-4-1989). 
2. Ins. by Act 14 of 2001, s. 11 (w.e.f. 1-4-1962). 
3. Section 14A renumbered as sub-section (1) thereof by Act 21 of 2006, s. 7 (w.e.f. 1-4-2007). 
4. Ins. by s. 7, ibid. (w.e.f. 1-4-2007). 
5. Ins. by Act 20 of 2002, s. 10 (w.e.f. 11-5-2001). 

139 

 
 
 
 
 
 
 
                                                           
(c)  any  arrears  of  salary  paid  or  allowed  to  him  in  the  previous  year  by  or  on  behalf  of  an 

employer or a former employer, if not charged to income-tax for any earlier previous year. 
Explanation  1[1.]—For  the  removal  of  doubts,  it  is  hereby  declared  that  where  any  salary  paid  in 
advance is included in the total income of any person for any previous year it shall not be included again 
in the total income of the person when the salary becomes due. 

2[Explanation 2.—Any salary, bonus, commission or remuneration, by whatever name called, due to, 
or received by, a partner of a firm from the firm shall not be regarded as “salary” for the purposes of this 
section.] 

16. Deductions from salaries.—The income chargeable under the head “Salaries” shall be computed 

after making the following deductions, namely:— 

3[4* 
* 
5[(ia) a deduction of 6[fifty thousand] rupees or the amount of the salary, whichever is less;] 

* 

* 

* 

(ii)  a  deduction  in  respect  of  any  allowance  in  the  nature  of  an  entertainment  allowance 
specifically granted by an employer to the assessee who is in receipt of a salary from the Government, 
a sum equal to one-fifth of his salary (exclusive of any allowance, benefit or other perquisite) or five 
thousand rupees, whichever is less;] 

7[(iii) a deduction of any sum paid by the assessee on account of a tax on employment within the 

meaning of clause (2) of article 276 of the Constitution, leviable by or under any law.] 

8* 

* 

* 

* 

* 

17. “Salary”,  “perquisite”  and  “profits  in  lieu  of  salary”  defined.—For  the  purposes  of                

sections 15 and 16 and of this section,— 

(1) “salary” includes— 

(i) wages; 

(ii) any annuity or pension; 

(iii) any gratuity; 

(iv)  any  fees,  commissions,  perquisites  or  profits  in  lieu  of  or  in  addition  to  any  salary  or 

wages; 

(v) any advance of salary; 
9[(va) any payment received by an employee in respect of any period of leave not availed of 

by him;] 

(vi)  the  annual  accretion  to  the  balance  at  the  credit  of  an  employee  participating  in  a 
recognised provident fund, to the extent to which it is chargeable to tax under rule 6 of Part A of 
the Fourth Schedule; 

(vii) the aggregate of all sums that are comprised in the transferred balance as referred to in 
sub-rule  (2)  of  rule  11  of  Part  A  of  the  Fourth  Schedule  of  an  employee  participating  in  a 
recognised  provident  fund,  to  the  extent  to  which  it  is  chargeable  to  tax  under  sub-rule  (4) 
thereof; and 

1. Explanation renumbered as Explanation 1 thereof by Act 18 of 1992, s. 6 (w.e.f. 1-4-1993). 
2.  Ins.  by  s.  6,  ibid.  (w.e.f.  1-4-1993).  Earlier  inserted  by  Act  4  of  1988,  s.  8  (w.e.f.  1-4-1989)  and  later  omitted  by                      

Act 3 of 1989, s. 95 (w.e.f. 1-4-1989). 

3. Subs. by Act 14 of 2001, s. 12, for clause (i) and (ii) (w.e.f. 1-4-2002). 
4. Clause (i) omitted by Act 18 of 2005, s. 6 (w.e.f. 1-4-2006). 
5. Ins. by Act 13 of 2018, s. 7 (w.e.f. 1-4-2019). 
6. Subs. by Act 7 of 2019, s. 3, for “forty thousand” (w.e.f. 1-4-2020). 
7. Ins. by Act 13 of 1989, s. 5 (w.e.f. 1-4-1990). Earlier clause (iii) omitted by Act 20 of 1974, s. 4 (w.e.f. 1-4-1975). 
8. Clause (iv) and (v) omitted by Act 20 of 1974, s. 4 (w.e.f. 1-4-1975). 
9. Ins. by Act 67 of 1984, s.  7 (w.e.f. 1-4-1978). 

140 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
1[(viii)  the  contribution  made  by  the  2[Central  Government  or  any  other  employer]  in  the 
previous  year,  to  the  account  of  an  employee  under  a  pension  scheme  referred  to  insection 
80CCD;] 

(2) “perquisite” includes— 

(i) the value of rent-free accommodation provided to the assessee by his employer; 

(ii) the value of any concession in the matter of rent respecting any accommodation provided 

to the assessee by his employer; 

3[Explanation 1.—For the purposes of this sub-clause, concession in the matter of rent shall 

be deemed to have been provided if,— 

4[(a) in a case where an unfurnished accommodation is provided by any employer other 

than the Central Government or any State Government and— 

(i)  the  accommodation  is  owned  by  the  employer,  the  value  of  the  accommodation 
determined  at  the  specified  rate  in  respect  of  the  period  during  which  the  said 
accommodation was occupied by the assessee during the previous year, exceeds the rent 
recoverable from, or payable by, the assessee; 

(ii)  the  accommodation  is  taken  on  lease  or  rent  by  the  employer,  the  value  of  the 
accommodation being the actual amount of lease rental paid or payable by the employer 
or fifteen per cent. of salary, whichever is lower, in respect of the period during which the 
said accommodation was occupied by the assessee during the previous year, exceeds the 
rent recoverable from, or payable by, the assessee;] 

(b) in a case where a furnished accommodation is provided by the Central Government or 
any  State  Government,  the  licence  fee  determined  by  the  Central  Government  or  any  State 
Government  in  respect  of the  accommodation  in accordance  with  the  rules framed  by  such 
Government as increased by the value of furniture and fixtures in respect of the period during 
which  the  said  accommodation  was  occupied  by  the  assessee  during  the  previous  year, 
exceeds  the  aggregate  of  the  rent  re-coverable  from,  or  payable  by,  the  assessee  and  any 
charges paid or payable for the furniture and fixtures by the assessee; 

(c) in a case where a furnished accommodation is provided by an employer other than the 

Central Government or any State Government and— 

(i)  the  accommodation  is  owned  by  the  employer,  the  value  of  the  accommodation 
determined  under sub-clause  (i)  of clause  (a)  as  increased  by  the  value  of the furniture 
and fixtures in respect of the period during which the said accommodation was occupied 
by the assessee during the previous year, exceeds the rent recoverable from, or payable 
by, the assessee; 

(ii)  the  accommodation  is  taken  on  lease  or  rent  by  the  employer,  the  value  of  the 
accommodation determined under sub-clause (ii) of clause (a) as increased by the value 
of  the  furniture  and  fixtures  in  respect  of  the  period  during  which  the  said 
accommodation was occupied by the assessee during the previous year, exceeds the rent 
recoverable from, or payable by, the assessee; 

(d)  in  a  case  where  the  accommodation  is  provided by  the  employer  in  a  hotel  (except 
where  the  assessee  is  provided  such  accommodation  for  a  period  not  exceeding  in 
aggregatefifteen  days  on  his  transfer  from  one  place  to  another),  the  value  of  the 

1. Ins. by Act 23 of 2004, s. 7 (w.e.f. 1-4-2004). 
2. Subs. by Act 22 of 2007, s. 11, for “Central Government” (w.r.e.f. 1-4-2004). 
3. Ins. by s. 11, ibid. (w.r.e.f. 1-4-2002). 
4. Subs. by s. 11, ibid., for clause (a) (w.r.e.f. 1-4-2006). 

141 

                                                           
accommodation determined at the rate of twenty-four per cent. of salary paid or payable for 
the previous year or the actual charges paid or payable to such hotel, whichever is lower, for 
the period during which such accommodation is provided, exceeds the rent recoverable from, 
or payable by, the assessee. 

Explanation  2.—For  the  purposes  of this  sub-clause,  value  of furniture  and  fixture shall be 
ten per cent. per annum of the cost of furniture (including television sets, radio sets, refrigerators, 
other  household  appliances,  air-conditioning  plant  or  equipment  or  other  similar  appliances  or 
gadgets)  or if  such  furniture  is  hired from  a  third  party,  the  actual  hire  charges payable for the 
same as reduced by any charges paid or payable for the same by the assessee during the previous 
year. 

Explanation 3.—For the purposes of this sub-clause, “salary” includes the pay, allowances, 
bonus or commission payable monthly or otherwise or any monetary payment, by whatever name 
called,  from  one  or  more  employers,  as  the  case  may  be,  but  does  not  include  the  following, 
namely:— 

(a)  dearness  allowance  or  dearness  pay  unless  it  enters  into  the  computation  of 

superannuation or retirement benefits of the employee concerned; 

(b) employer’s contribution to the provident fund account of the employee; 

(c) allowances which are exempted from the payment of tax; 

(d) value of the perquisites specified in this clause; 

(e) any payment or expenditure specifically excluded under the proviso to this clause.] 

1[Explanation 4.—For the purposes of this sub-clause, “specified rate” shall be— 

(i) fifteen per cent. of salary in cities having population exceeding twenty-five lakhs as 

per 2001 census; 

(ii)  ten  per  cent.  of  salary  in  cities  having  population  exceeding  ten  lakhs  but  not 

exceeding twenty-five lakhs as per 2001 census; and 

(iii) seven and one-half per cent. of salary in any other place;] 

(iii) the value of any benefit or amenity granted or provided free of cost or at concessional 

rate in any of the following cases— 

(a) by a company to an employee who is a director thereof; 

(b)  by  a  company  to  an  employee  being  a  person  who  has  a  substantial  interest  in  the 

company; 

(c)  by  any  employer  (including  a  company)  to  an employee  to  whom  the  provisions of 
paragraphs  (a)  and  (b)  of  this  sub-clause  do  not  apply  and  whose  income  2[under  the  head 
“Salaries” (whether due from, or paid or allowed by, one or more employers), exclusive of 
the value of all benefits or amenities not provided for by way of monetary payment, exceeds 
3[fifty thousand rupees:]] 

4* 

* 

* 

* 

* 

1. Ins. by Act 22 of 2007, s. 11 (w.e.f. 1-4-2006). 
2. Subs. by Act 32 of 1985, s. 6, for certain words (w.e.f. 1-4-1986). 
3. Subs. by Act 14 of 2001, s.  13, for “twenty-four thousands rupees” (w.e.f. 1-4-2002). 
4.  The  proviso  omitted  by  Act  22  of  2007,  s.  11  (w.e.f.  1-4-2008).  Earlier  the  proviso  inserted  by  Act  10  of  2000,  s.  11 

(w.e.f. 1-4-2001). 

142 

 
 
 
 
 
 
                                                           
1[Explanation.—For the removal of doubts, it is hereby declared that the use of any vehicle 
provided  by  a  company  or  an  employer  for  journey  by  the  assessee  from  his  residence  to  his 
office or other place of work, or from such office or place to his residence, shall not be regarded 
as  a  benefit  or  amenity  granted  or  provided  to  him  free  of  cost  or  at  concessional  rate  for  the 
purposes of this sub-clause;] 

2* 

* 

 * 

* 

* 

(iv) any sum paid by the employer in respect of any obligation which, but for such payment, 

would have been payable by the assessee; 

(v)  any  sum  payable  by  the  employer,  whether  directly  or  through  a  fund,  other  than  a 
recognised  provident  fund  or  an  approved  superannuation  fund  3[or  a  Deposit-linked  Insurance 
Fund  established  under  section  3G  of  the  Coal  Mines  Provident  Fund  and  Miscellaneous 
Provisions  Act,  1948  (46  of  1948),  or,  as  the  case  may  be,  section  6C  of  the  Employees’ 
Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952)], to effect an assurance on 
the life of the assessee or to effect a contract for an 4[annuity;] 

5[(vi) the value of any specified security or sweat equity shares allotted or transferred, directly 
or  indirectly,  by  the  employer,  or  former  employer,  free  of  cost  or  at  concessional  rate  to  the 
assessee. 

Explanation.—For the purposes of this sub-clause,— 

(a) “specified security” means the securities as defined in clause (h) of section 2 of the 
Securities Contracts (Regulation) Act, 1956 (42 of 1956) and, where employees’ stock option 
has  been  granted  under  any  plan  or  scheme  therefor,  includes  the  securities  offered  under 
such plan or scheme; 

(b) “sweat equity shares” means equity shares issued by a company to its employees or 
directors  at  a  discount  or  for  consideration  other  than  cash  for  providing  know-how  or 
making  available  rights  in  the  nature  of  intellectual  property  rights  or  value  additions,  by 
whatever name called; 

(c)  the  value  of  any  specified  security  or  sweat  equity  shares  shall  be  the  fair  market 
value  of  the  specified  security  or  sweat  equity  shares,  as  the  case  may  be,  on  the  date  on 
which the option is exercised by the assessee as reduced by the amount actually paid by, or 
recovered from, the assessee in respect of such security or shares; 

(d)  “fair  market  value” means  the  value  determined  in  accordance  with  the  method  as 

may be prescribed; 

(e) “option” means a right but not an obligation granted to an employee to apply for the 

specified security or sweat equity shares at a predetermined price; 

(vii) the amount of any contribution to an approved superannuation fund by the employer in 

respect of the assessee, to the extent it exceeds 6[one lakh rupees]; and 

(viii) the value of any other fringe benefit or amenity as may be prescribed:] 

1. Ins. by Act 13 of 1989, s. 6 (w.e.f. 1-4-1990). 
2. Sub-clause (iiia) omitted by Act 10 of 2000, s. 11 (w.e.f 1-4-2001). 
3. Ins. by Act 99 of 1976, s. 40 (w.e.f. 1-8-1976). 
4. Subs. by Act 33 of 2009, s. 9, for “annuity; and” (w.e.f. 1-4-2010). 
5. Subs. by s. 9, ibid., for sub-clause (vi) (w.e.f. 1-4-2010). 
6. Subs. by Act 28 of 2016, s. 9, for “one lakh and fifty thousand rupees” (w.e.f. 1-4-2017). 

143 

 
 
 
 
 
 
                                                           
1[Provided that nothing in this clause shall apply to,— 

(i) the value of any medical treatment provided to an employee or any member of his 

family in any hospital maintained by the employer; 

2[(ii) any sum paid by the employer in respect of any expenditure actually incurred by 

the employee on his medical treatment or treatment of any member of his family— 

(a) in any hospital maintained by the Government or any local authority or any 
other hospital approved by the Government for the purposes of medical treatment of 
its employees; 

(b) in respect of the prescribed diseases or ailments, in any hospital approved by 
the 3[Principal  Chief  Commissioner  or  Chief  Commissioner]  having  regard  to  the 
prescribed guidelines: 

Provided that, in a case falling in sub-clause (b), the employee shall attach with his 
return  of  income  a  certificate  from  the  hospital  specifying  the  disease  or  ailment  for 
which  medical  treatment  was  required  and  the  receipt  for  the  amount  paid  to  the 
hospital;] 

(iii) any portion of the premium paid by an employer in relation to an employee, to 
effect or to keep in force an insurance on the health of such employee under any scheme 
approved  by  the  Central  Government  4[or  the  Insurance  Regulatory  and  Development 
Authority established under sub-section (1) of section 3 of the Insurance Regulatory and 
Development  Authority  Act,  1999  (41  of  1999),]  for  the  purposes  of  clause  (ib)  of               
sub-section (1) of section 36; 

(iv) any sum paid by the employer in respect of any premium paid by the employee to 
effect or to keep in force an insurance on his health or the health of any member of his 
family  under  any  scheme  approved  by  the  Central  Government  4[or  the  Insurance 
Regulatory and Development Authority established under sub-section (1) of section 3 of 
the  Insurance  Regulatory  and  Development  Authority  Act,  1999  (41  of  1999),]  for  the 
purposes of section 80D; 

5* 

* 

* 

* 

* 

(vi) any expenditure incurred by the employer on— 

(1)  medical  treatment  of  the  employee,  or  any  member  of  the  family  of  such 

employee, outside India; 

(2)  6[travel  and  stay]  abroad  of  the  employee  or  any  member  of  the  family  of 

such employee for medical treatment; 

(3)  travel  and  stay  abroad  of  one  attendant  who  accompanies  the  patient  in 

connection with such treatment, 

1. Ins. by Act 49 of 1991, s. 9 (w.e.f. 1-4-1991). 
2.  Subs.  by  Act  32  of  1994,  s.  10,  for  sub-clause  (ii)  (w.r.e.f.  1-4-1993).  Earlier  substituted  by  Act  18  of  1992,                            

s. 8 (w.e.f. 1-4-1993). 

3. Subs. by Act 25 of 2014, s.  4, for “Chief Commissioner” (w.e.f. 1-6-2013). 
4. Ins. by Act 21 of 2006, s. 8 (w.e.f. 1-4-2007). 
5. Clause (v) omitted by Act 13 of 2018, s. 8 (w.e.f. 1-4-2019). 
6. Subs. by Act 38 of 1993, s. 8, for “travel or stay” (w.e.f. 1-4-1993). 

144 

 
 
 
 
 
 
                                                           
1[subject to the condition that— 

(A) the expenditure on medical treatment and stay abroad shall be excluded from perquisite 

only to the extent permitted by the Reserve Bank of India; and 

(B)  the  expenditure  on  travel  shall  be  excluded  from  perquisite  only  in  the  case  of  an 
employee whose gross total income, as computed before including therein the said expenditure, 
does not exceed two lakh rupees;] 

(vii) any sum paid by the employer in respect of any expenditure actually incurred by 
the  employee  for  any  of  the  purposes  specified  in  clause  (vi)  subject  to  the  conditions 
specified in or under that clause: 

2[Provided  further that  for  the  assessment  year  beginning  on  the  1st  day  of  April, 
2002, nothing contained in this clause shall apply to any employee whose income under 
the  head “Salaries” (whether  due  from,  or  paid  or  allowed  by,  one  or  more  employers) 
exclusive of the value of all perquisites not provided for by way of monetary payment, 
does not exceed one lakh rupees.] 

Explanation.—For the purposes of clause (2),— 

(i) “hospital” includes a dispensary or a clinic 3[or a nursing home]; 

(ii)  “family”,  in  relation  to  an  individual,  shall  have  the  same  meaning  as  in  clause  (5)  of 

section 10; and 

(iii) “gross total income” shall have the same meaning as in clause (5) of section 80B;] 

4* 

* 

* 

* 

* 

(3) “profits in lieu of salary” includes— 

 (i) the amount of any compensation due to or received by an assessee from his employer or 
former employer at or in connection with the termination of his employment or the modification 
of the terms and conditions relating thereto; 

 (ii)  any  payment  [other  than  any  payment  referred  to  in  clause  (10]  5[,  clause  (10A)]            

6[, clause (10B)], clause (11), 7[clause (12) 8[ , clause (13)] or clause (13A)] of section 10], due to 
or received by an assessee from an employer or a former employer or from a provident or other 
fund 9***, to the extent to which it does not consist of contributions by the assessee or 10[interest 
on such contributions or any sum received under a Keyman insurance policy including the sum 
allocated by way of bonus on such policy. 

Explanation.—For the purposes of this sub-clause, the expression “Keyman insurance policy” 

shall have the meaning assigned to it in clause (10D) of section 10;] 

11[(iii)  any  amount  due  to  or  received,  whether  in  lump  sum  or  otherwise,  by  any  assessee 

from any person— 

(A) before his joining any employment with that person; or 

(B) after cessation of his employment with that person.] 

1. Subs. by Act 38 of 1993, s. 8, for certain words (w.e.f. 1-4-1993) 
2. Ins. by Act 20 of 2002, s. 11 (w.e.f,. 1-4-2002). 
3. Ins. by Act 18 of 1992, s. 8 (w.e.f. 1-4-1993). 
4. Sub-clause (vi) omitted by Act 32 of 1985, s. 7 (w.e.f. 1-4-1985). 
5. Ins.  by Act 15 of 1965, s. 4 (w.e.f. 1-4-1962). 
6. Ins. by Act 25 of 1975, s. 24 (w.e.f. 1-4-1976). 
7. Subs. by Act 31 of 1964, s. 4, for “or clause (12)” (w.e.f. 6-10-1964). 
8. Ins. by Act 22 of 1995, s. 6 (w.e.f. 1-4-1996). 
9. The brackets and words “(not being an approved superannuation fund)” omitted by s. 6, ibid. (w.e.f. 1-4-1996). 
10. Subs. by Act 33 of 1996, s. 8, for “interest on such contributions.” (w.e.f. 1-10-1996). 
11. Ins. by Act 14 of 2001, s. 13 (w.e.f. 1-4-2002). 

145 

 
 
 
 
 
 
 
                                                           
1* 

* 

* 

* 

* 

18. [Interest on securities.]—Omitted by the Finance Act, 1988 (26 of 1988), s. 10 (w.e.f. 1-4-1989). 

19. [Deductions from interest on securities.]—Omitted by s. 10, ibid. (w.e.f. 1-4-1989). 

20.  [Deductions  from  interest  on  securities  in  the  case  of  a  banking  company.]—Omitted  by  s.  10, 

ibid. (w.e.f. 1-4-1989). 

21. [Amounts not deductible from interest on securities.]—Omitted by s. 10, ibid. (w.e.f. 1-4-1989). 

C.—Income from house property 

22.  Income  from  house  property.—The  annual  value  of  property  consisting  of  any  buildings  or 
lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as 
he may occupy for the purposes of any business or profession carried on by him the profits of which are 
chargeable  to  income-tax,  shall  be  chargeable  to  income-tax  under  the  head  “Income  from  house 
property”. 

2[23. Annual value how determined.—(1) For the purposes of section 22, the annual value of any 

property shall be deemed to be— 

(a) the sum for which the property might reasonably be expected to let from year to year; or 

(b) where the property or any part of the property is let and the actual rent received or receivable 
by  the  owner  in  respect  thereof  is  in  excess  of  the  sum  referred  to  in  clause  (a),  the  amount  so 
received or receivable; or 

(c) where the property or any part of the property is let and was vacant during the whole or any 
part  of  the  previous  year  and  owing  to  such  vacancy  the  actual  rent  received  or  receivable  by  the 
owner  in  respect  thereof  is  less  than  the  sum  referred  to  in  clause  (a),  the  amount  so  received  or 
receivable: 

Provided that the taxes levied by any local authority in respect of the property shall be deducted 
(irrespective of the previous year in which the liability to pay such taxes was incurred by the owner 
according to the method of accounting regularly employed by him) in determining the annual value of 
the property of that previous year in which such taxes are actually paid by him. 

Explanation.—For  the  purposes  of  clause  (b)  or  clause  (c)  of  this  sub-section,  the  amount  of 
actual  rent  received  or  receivable  by  the  owner  shall  not  include,  subject  to  such  rules as  may  be 
made in this behalf, the amount of rent which the owner cannot realise. 

(2)  Where the property consists of a house or part of a house which— 

(a) is in the occupation of the owner for the purposes of his own residence; or 

(b) cannot actually be occupied by the owner by reason of the fact that owing to his employment, 
business or profession carried on at any other place, he has to reside at that other place in a building 
not belonging to him, 

the annual value of such house or part of the house shall be taken to be nil. 

(3)  The provisions of sub-section (2) shall not apply if— 

(a)  the  house  or  part  of  the  house  is  actually  let  during  the  whole  or  any  part  of  the  previous        

year; or 

(b) any other benefit therefrom is derived by the owner. 

(4) Where the property referred to in sub-section (2) consists of more than 3[two houses]— 

(a) the provisions of that sub-section shall apply only in respect of  4[two] of such houses, which 

the assessee may, at his option, specify in this behalf; 

1. The heading “B.—Interest on securities” omitted by Act 26 of 1988, s. 10 (w.e.f. 1-4-1989). 
2. Subs. by Act 14 of 2001, s. 14, for section 23 (w.e.f. 1-4-2002).   
3. Subs. by Act 7 of 2019, s. 4, for “one house” (w.e.f. 1-4-2020). 
4. Subs. by s. 4, ibid., for “one” (w.e.f. 1-4-2020). 

146 

 
 
 
 
 
 
 
                                                           
(b) the annual value of the house or houses, 1[other than the house or houses] in respect of which 
the assessee has exercised an option under clause (a), shall be determined under sub-section (1) as if 
such house or houses had been let.] 
2[(5)  Where  the  property  consisting  of  any  building  or  land  appurtenant  thereto  is  held  as                       

stock-in-trade and the property or any part of the property is not let during the whole or any part of the 
previous year, the annual value of such property or part of the property, for the period up to  3[two years] 
from the end of the financial year in which the certificate of completion of construction of the property is 
obtained from the competent authority, shall be taken to be nil.] 

4[24. Deductions from income from house property.—Income chargeable under the head “Income 

from house property” shall be computed after making the following deductions, namely:— 

(a) a sum equal to thirty per cent. of the annual value; 

(b)  where  the  property  has  been  acquired,  constructed,  repaired,  renewed  or  reconstructed  with 

borrowed capital, the amount of any interest payable on such capital: 

Provided that  in  respect  of  property  referred  to  in  sub-section  (2)  of section  23,  the  amount  of 
deduction 5[or, as the case may be, the aggregate of the amount of deduction] shall not exceed thirty 
thousand rupees: 

Provided further that where the property referred to in the first proviso is acquired or constructed 
with capital borrowed on or after the 1st day of April, 1999 and such acquisition or construction is 
completed  6[within 7[five years]  from  the end  of the financial  year in  which capital  was borrowed], 
the amount of deduction  5[or, as the case may be, the aggregate of the amounts of deduction] under 
this clause shall not exceed 8[two lakh rupees]. 

Explanation.—Where  the  property  has  been  acquired  or  constructed  with  borrowed  capital,  the 
interest, if any, payable on such capital borrowed for the period prior to the previous year in which 
the property has been acquired or constructed, as reduced by any part thereof allowed as deduction 
under any other provision of this Act, shall be deducted under this clause in equal instalments for the 
said previous year and for each of the four immediately succeeding previous years:] 

9[Provided  also that  no  deduction  shall  be  made  under  the  second  proviso  unless  the  assessee 
furnishes  a  certificate,  from  the  person  to  whom  any  interest  is  payable  on  the  capital  borrowed, 
specifying  the  amount  of  interest  payable  by  the  assessee  for  the  purpose  of  such  acquisition  or 
construction of the property, or, conversion of the whole or any part of the capital borrowed which 
remains to be repaid as a new loan. 

Explanation.—For the purposes of this proviso, the expression “new loan” means the whole or 
any  part  of  a  loan  taken  by  the  assessee  subsequent  to  the  capital  borrowed,  for  the  purpose  of 
repayment of such capital.] 

5[Provided also that the aggregate of the amounts of deduction under the first and second provisos 

shall not exceed two lakh rupees.] 

25.  Amounts  not  deductible  from  income  from  house  property.— Notwithstanding  anything 
contained in section 24, any  10*** interest chargeable under this Act which is payable outside India (not 
being interest on a loan issued for public subscription before the 1st day of April, 1938), on which tax has 
not been paid or deducted under Chapter XVII-B and in respect of which there is no person in India who 
may be treated as an agent under section 163 shall not be deducted in computing the income chargeable 
under the head “Income from house property”. 

1. Subs. by Act 7 of 2019, s. 4, for “other than the house” (w.e.f. 1-4-2020). 
2. Ins. by Act 7 of 2017, s. 12 (w.e.f. 1-4-2018) 
3. Subs. by Act 7 of 2019, s. 5, for “one year” (w.e.f. 1-4-2020). 
4. Subs. by Act 14 of 2001, s. 15, for section 24 (w.e.f. 1-4-2002).    
5. Ins. by Act 7 of 2019, s. 5 (w.e.f. 1-4-2020). 
6. Subs. by Act 20 of 2002, s. 12, for “before the 1st day of April, 2003” (w.e.f. 1-4-2003). 
7. Subs. by Act 28 of 2016, s. 10, for “three years” (w.e.f. 1-4-2017).  
8. Subs. by Act 25 of 2014, s. 10, for “one lakh fifty thousand rupees” (w.e.f. 1-4-2015).  
9. Ins. by Act 20 of 2002, s. 12 (w.e.f. 1-4-2003).  
10. The words “annual charge or” omitted by Act 14 of 2001, s. 16 (w.e.f. 1-4-2002). 

147 

                                                           
1[25A. Special provision for arrears of rent and unrealised rent received subsequently.—(1) The 
amount  of  arrears  of  rent  received  from  a  tenant  or  the  unrealised  rent  realised  subsequently  from  a 
tenant,  as  the  case  may  be,  by  an  assessee  shall  be  deemed  to  be  the  income  from  house  property  in 
respect of the financial year in which such rent is received or realised, and shall be included in the total 
income of the assessee under the head “Income from house property”, whether the assessee is the owner 
of the property or not in that financial year. 

(2)  A  sum  equal  to  thirty  per  cent.  of  the  arrears  of  rent  or  the  unrealised  rent  referred  to  in                    

sub-section (1) shall be allowed as deduction.] 

26. Property owned by co-owners.—Where property consisting of buildings or buildings and lands 
appurtenant  thereto  is  owned  by  two  or  more  persons  and  their  respective  shares  are  definite  and 
ascertainable, such persons shall not in respect of such property be assessed as an association of persons, 
but  the  share  of  each  such  person  in  the  income  from  the  property  as  computed  in  accordance  with 
sections 22 to 25 shall be included in his total income. 

2[Explanation.—For  the  purposes  of  this  section,  in  applying  the  provisions  of  sub-section  (2) 
of section 23 for computing the share of each such person as is referred to in this section, such share shall 
be computed, as if each such person is individually entitled to the relief provided in that sub-section. 

27. “Owner  of  house  property”,  “annual  charge”,  etc.,  defined.—For  the  purposes  of                    

sections 22 to 26— 

  (i) an individual who transfers otherwise than for adequate consideration any house property to 
his or her spouse, not being a transfer in connection with an agreement to live apart, or to a minor 
child  not  being  a  married  daughter,  shall  be  deemed  to  be  the  owner  of  the  house  property  so 
transferred; 

 (ii)  the  holder  of  an  impartible  estate  shall  be  deemed  to  be  the  individual  owner  of  all  the 

properties comprised in the estate ; 

3[(iii)  a  member  of  a  co-operative  society,  company  or  other  association  of  persons  to  whom  a 
building or part thereof is allotted or leased under a house building scheme of the society, company or 
association, as the case may be, shall be deemed to be the owner of that building or part thereof; 

(iiia) a person who is allowed to take or retain possession of any building or part thereof in part 

performance  of  a  contract  of  the  nature  referred  to  in  section  53A  of  the  Transfer  of  Property                  
Act, 1882 (4 of 1882), shall be deemed to be the owner of that building or part thereof; 

(iiib)  a  person  who  acquires  any  rights  (excluding  any  rights  by  way  of  a  lease  from  month  to 
month or for a period not exceeding one year) in or with respect to any building or part thereof, by 
virtue of any such transaction as is referred to in clause (f) of section 269 UA, shall be deemed to be 
the owner of that building or part thereof;] 

4* 
(vi) taxes levied by a local authority in respect of any property shall be deemed to include service 

     * 

* 

* 

* 

taxes levied by the local authority in respect of the property. 

28. Profits  and  gains  of  business  or  profession.—The  following  income  shall  be  chargeable  to 

income-tax under the head “Profits and gains of business or profession”,— 

(i) the profits and gains of any business or profession which was carried on by the assessee at any 

time during the previous year; 

(ii) any compensation or other payment due to or received by,— 

(a) any person, by whatever name called, managing the whole or substantially the whole of 
the affairs of an Indian company, at or in connection with the termination of his management or 
the modification of the terms and conditions relating thereto; 

1. Subs. by Act 28 of 2016, s. 11 for sections 25A, 25AA and 25B (w.e.f. 1-4-2017). 
2. Ins. by Act 41 of 1975, s. 7 (w.e.f. 1-4-1976). 
3. Subs. by Act 11 of 1987, s. 6, for clause (iii) (w.e.f. 1-4-1988). 
4. Clauses (iv) and (v) omitted by Act 14 of 2001, s. 20 (w.e.f. 1-4-2002). 

148 

 
 
 
 
 
 
 
                                                           
(b) any person, by whatever name called, managing the whole or substantially the whole of 
the affairs in India of any other company, at or in connection with the termination of his office or 
the modification of the terms and conditions relating thereto; 

(c)  any  person,  by  whatever  name  called,  holding  an  agency  in  India  for  any  part  of  the 
activities relating to the business of any other person, at or in connection with the termination of 
the agency or the modification of the terms and conditions relating thereto ; 

1[(d)  any  person,  for  or  in  connection  with  the  vesting  in  the  Government,  or  in  any 
corporation owned or controlled by the Government, under any law for the time being in force, of 
the management of any property or business;] 

2[(e)  any  person,  by  whatever  name  called,  at  or  in  connection  with  the  termination  or  the 

modification of the terms and conditions, of any contract relating to his business;] 

(iii)  income  derived  by  a  trade,  professional  or  similar  association  from  specific  services 

performed for its members ; 

3[(iiia) profits on sale of a licence granted under the Imports (Control) Order, 1955, made under 

the Imports and Exports (Control) Act, 1947 (18 of 1947);] 

4[(iiib)  cash assistance  (by  whatever  name  called) received  or receivable by  any  person  against 

exports under any scheme of the Government of India;] 

5[(iiic)  any  duty  of  customs  or  excise  re-paid  or  re-payable  as  drawback  to  any  person  against 

exports under the Customs and Central Excise Duties Drawback Rules, 1971;] 

6[(iiid)  any  profit  on  the  transfer  of  the  Duty  Entitlement  Pass  Book  Scheme,  being  the  Duty 
Remission Scheme under the export and import policy formulated and announced under section 5 of 
the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992);] 

7[(iiie)  any  profit  on  the  transfer  of  the  Duty  Free  Replenishment  Certificate,  being  the  Duty 
Remission Scheme under the export and import policy formulated and announced under section 5 of 
the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992);] 

8[(iv) the value of any benefit or perquisite, whether convertible into money or not, arising from 

business or the exercise of a profession;] 

9[(v) any interest, salary, bonus, commission or remuneration, by whatever name called, due to, or 

received by, a partner of a firm from such firm: 

Provided that where any interest, salary, bonus, commission or remuneration, by whatever name 
called,  or  any  part  thereof  has  not  been  allowed  to  be  deducted  under  clause  (b)  of section  40,  the 
income under this clause shall be adjusted to the extent of the amount not so allowed to be deducted;] 

10[(va) any sum, whether received or receivable, in cash or kind, under an agreement for— 

(a) not carrying out any activity in relation to any business 11[or profession]; or 

1. Ins. by Act 21 of 1973, s. 4 (w.e.f. 1-4-1972). 
2. Ins. by Act 13 of 2018, s. 9 (w.e.f. 1-4-2019). 
3. Ins. by Act 12 of 1990, s. 6 (w.e.f. 1-4-1962). 
4. Ins. by s. 6, ibid. (w.e.f. 1-4-1967).  
5. Ins. by s. 6, ibid.(w.e.f. 1-4-1972). 
6. Ins. by Act 55 of 2005, s. 3 (w.e.f. 1-4-1998).  
7. Ins. by s. 3, ibid. (w.e.f. 1-4-2001).  
8. Ins. by Act 5 of 1964, s. 7 (w.e.f. 1-4-1964). 
9. Ins. by Act 18 of 1992, s. 11 (w.e.f. 1-4-1993). Earlier clause (v) was inserted by Act 4 of 1988, s. 9 (w.e.f. 1-4-1989) and 

later omitted by Act 3 of 1989, s. 95 (w.e.f. 1-4-1989). 

10. Ins. by Act 20 of 2002, s. 13 (w.e.f. 1-4-2003). 
11. Ins. by Act  28 of 2016, s. 12 (w.e.f. 1-4-2017)   

149 

                                                           
(b) not sharing any know-how, patent, copyright, trade-mark, licence, franchise or any other 
business or commercial right of similar nature or information or technique likely to assist in the 
manufacture or processing of goods or provision for services: 

Provided that sub-clause (a) shall not apply to— 

(i) any sum, whether received or receivable, in cash or kind, on account of transfer of the 
right  to  manufacture,  produce  or  process  any  article  or  thing  or  right  to  carry  on  any 
business 1[or profession], which is chargeable under the head “Capital gains”; 

(ii)  any  sum  received  as  compensation,  from  the  multi-lateral  fund  of  the  Montreal 
Protocol on Substances that Deplete the Ozone layer under the United Nations Environment 
Programme, in accordance with the terms of agreement entered into with the Government of 
India. 

Explanation.—For the purposes of this clause,— 

(i) “agreement” includes any arrangement or understanding or action in concert,— 

(A) whether or not such arrangement, understanding or action is formal or in writing; or 

(B)  whether  or  not  such  arrangement,  understanding  or  action  is  intended  to  be 

enforceable by legal proceedings; 

(ii) “service” means service of any description which is made available to potential users and 
includes  the  provision  of  services  in  connection  with  business  of  any  industrial  or  commercial 
nature  such  as  accounting,  banking,  communication,  conveying  of  news  or  information, 
advertising,  entertainment,  amusement,  education,  financing,  insurance,  chit  funds,  real  estate, 
construction,  transport,  storage,  processing,  supply  of  electrical  or  other  energy,  boarding  and 
lodging;] 

2[(vi) any sum received under a Keyman insurance policy including the sum allocated by way of 

bonus on such policy. 

3[(via) the fair market value of inventory as on the date on which it is converted into, or treated 

as, a capital asset determined in the prescribed manner;] 

Explanation.—For the  purposes of this  clause, the expression  “Keyman  insurance  policy”  shall 

have the meaning assigned to it in clause (10D) of section 10;] 

4[(vii) any sum, whether received or receivable, in cash or kind, on account of any capital asset 
(other  than  land  or  goodwill  or  financial  instrument)  being  demolished,  destroyed,  discarded  or 
transferred,  if  the  whole  of  the  expenditure  on  such  capital  asset  has  been  allowed  as  a  deduction 
under section 35AD.] 

5* 

* 

* 

* 

* 

Explanation 2.—Where speculative transactions carried on by an assessee are of such a nature as 
to  constitute  a  business,  the  business  (hereinafter  referred  to  as  “speculation  business”)  shall  be 
deemed to be distinct and separate from any other business. 

1. Ins. by Act 28 of 2016, s. 12 (w.e.f. 1-4-2017). 
2. Ins. by Act 33 of 1996, s. 10 (w.e.f. 1-10-1996). 
3. Ins. by Act 13 of 2018, s. 9 (w.e.f. 1-4-2019). 
4. Ins. by Act 33 of 2009, s. 10 (w.e.f. 1-4-2010). 
5. Explanation 1 omitted by 4 of 1988, s. 9 (w.e.f. 1-4-1989). 

150 

 
 
 
 
 
 
 
                                                           
29.  Income  from  profits  and  gains  of  business  or  profession,  how  computed.—The  income 
referred  to  in  section  28 shall  be  computed  in  accordance  with  the  provisions  contained  in  sections 
30 to 1[43D]. 

30. Rent, rates, taxes, repairs and insurance for buildings.—In respect of rent, rates, taxes, repairs 
and insurance for premises, used for the purposes of the business or profession, the following deductions 
shall be allowed— 

(a) where the premises are occupied by the assessee— 

(i) as a tenant, the rent paid for such premises; and further if he has undertaken to bear the 

cost of repairs to the premises, the amount paid on account of such repairs; 

(ii) otherwise than as a tenant, the amount paid by him on account of current repairs to the 

premises; 

(b) any sums paid on account of land revenue, local rates or municipal taxes; 

(c) the amount of any premium paid in respect of insurance against risk of damage or destruction 

of the premises. 

2[Explanation.—For the removal of doubts, it is hereby declared that the amount paid on account of 
the cost of repairs referred to in sub-clause (i), and the amount paid on account of current repairs referred 
to in sub-clause (ii), of clause (a), shall not include any expenditure in the nature of capital expenditure.] 

31. Repairs and insurance of machinery, plant and furniture.—In respect of repairs and insurance 
of  machinery,  plant  or  furniture  used  for  the  purposes  of  the  business  or  profession,  the  following 
deductions shall be allowed— 

(i) the amount paid on account of current repairs thereto; 

(ii) the amount of any premium paid in respect of insurance against risk of damage or destruction 

thereof. 

3[Explanation.—For the removal of doubts, it is hereby declared that the amount paid on account of 

current repairs shall not include any expenditure in the nature of capital expenditure.] 

32. Depreciation.—(1) 4[In respect of depreciation of— 

(i) buildings, machinery, plant or furniture, being tangible assets; 

(ii)  know-how,  patents,  copyrights,  trade  marks,  licences,  franchises  or  any  other  business  or 
commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 
1998, 

owned,  wholly  or  partly,  by  the  assessee  and  used  for  the  purposes  of  the  business  or  profession,  the 
following deductions shall be allowed— 

5[(i) in the case of assets of an undertaking engaged in generation or generation and distribution 

of power, such percentage on the actual cost thereof to the assessee as may be prescribed;] 

1. Subs. by Act 49 of 1991, s. 10, for “43C” (w.e.f. 1-4-1992). 
2. Ins. by Act 32 of 2003, s. 14 (w.e.f. 1-4-2004). 
3. Ins. by s. 15, ibid. (w.e.f. 1-4-2004). 
4. Subs. by Act 21 of 1998, s. 9, for certain words and figures (w.e.f. 1-4-1999). 
5. Ins. by Act 7 of 1998, s. 2 (w.e.f. 1-4-1998). 

151 

                                                           
 (ii) 1[in the case of any block of assets, such percentage on the written down value thereof as may 

be prescribed:] 

2* 

* 

* 

* 

* 

3[Provided 4*** that no deduction shall be allowed under this clause in respect of— 

(a) any motor car manufactured outside India, where such motor car is acquired by the assessee 

after the 28th day of February, 1975 5[but before the 1st day of April, 2001], unless it is used— 

(i) in a business of running it on hire for tourists; or 

(ii) outside India in his business or profession in another country; and 

(b)  any  machinery  or  plant  if  the  actual  cost  thereof  is  allowed  as  a  deduction  in  one  or  more 

years under an agreement entered into by the Central Government undersection 42:] 

6[Provided further that where an asset referred to in clause (i)  7[or clause (ii) or clause (iia)] 8[or the 
first proviso to clause (iia)], as the case may be, is acquired by the assessee during the previous year and 
is put to use for the purposes of business or profession for a period of less than one hundred and eighty 
days in that previous year, the deduction under this sub-section in respect of such asset shall be restricted 
to  fifty  per  cent.  of  the  amount  calculated  at  the  percentage  prescribed  for  an  asset  under  clause  (i)  
7[or clause (ii) or clause (iia)], as the case may be:] 

8[Provided also that where an asset referred to in clause (iia) or the first proviso to clause (iia), as the 
case may be, is acquired by the assessee during the previous year and is put to use for the purposes of 
business for a period of less than one hundred and eighty days in that previous year, and the deduction 
under this sub-section in respect of such asset is restricted to fifty per cent. of the amount calculated at the 
percentage  prescribed  for  an  asset  under  clause  (iia)  for  that  previous  year,  then,  the  deduction  for  the 
balance  fifty  per  cent.  of  the  amount  calculated  at  the  percentage  prescribed  for  such  asset  under                 
clause (iia) shall be allowed under this sub-section in the immediately succeeding previous year in respect 
of such asset:] 

9[Provided also that where an asset being commercial vehicle is acquired by the assessee on or  after 
the 1st day of October, 1998 but before the 1st day of April, 1999 and is put to use before the 1st day of 
April,  1999  for  the  purposes  of  business  or  profession,  the  deduction  in  respect  of  such  asset  shall  be 
allowed on such percentage on the written down value thereof as may be prescribed. 

1. Subs. by Act 46 of 1986, s. 5, for the opening paragraph (w.e.f. 1-4-1988). 
2. The first proviso omitted by Act 22 of 1995, s. 7 (w.e.f. 1-4-1996). 
3. Subs. by Act 49 of 1991, s. 11, for the second proviso (w.e.f. 1-4-1992). 
4. The word “further” omitted by Act 22 of 1995, s. 7 (w.e.f. 1-4-1996). 
5. Ins. by Act 14 of 2001, s. 21 (w.e.f. 1-4-2002). 
6. Subs. by Act 7 of 1998, s. 2, for the second proviso (w.e.f. 1-4-1998). 
7. Subs. by Act 20 of 2002, s. 14, for “or clause (ii)” (w.e.f. 1-4-2003). 
8. Ins. by Act 20 of 2015, s. 10 (w.e.f. 1-4-2016). 
9. Ins. by Act 11 of 1999, s. 5 (w.e.f. 1-4-1999). 

152 

 
 
 
 
 
 
 
                                                           
Explanation.—For the purposes of this proviso,— 

(a) the expression “commercial vehicle” means “heavy goods vehicle”, “heavy passenger motor 
vehicle”, “light motor vehicle”, “medium goods vehicle” and “medium passenger motor vehicle” but 
does not include “maxi-cab”, “motor-cab”, “tractor” and “road-roller”; 

(b)  the  expressions  “heavy  goods  vehicle”,  “heavy  passenger  motor  vehicle”,  “light  motor 
vehicle”,  “medium  goods  vehicle”,  “medium  passenger  motor  vehicle”,  “maxi-cab”,  “motor-cab”, 
“tractor” and “road roller” shall have the meanings respectively as assigned to them in section 2 of 
the Motor Vehicles Act, 1988 (59 of 1988):] 

1[Provided also that, in respect of the previous year relevant to the assessment year commencing 
on the 1st day of April, 1991, the deduction in relation to any block of assets under this clause shall, 
in  the  case  of  a  company,  be  restricted  to  seventy-five  per  cent.  of  the  amount  calculated  at  the 
percentage, on the written down value of such assets, prescribed under this Act immediately before 
the commencement of the Taxation Laws (Amendment) Act, 1991 (2 of 1991):] 

2[Provided also that the aggregate deduction, in respect of depreciation of buildings, machinery, 
plant  or  furniture,  being  tangible  assets  or  know-how,  patents,  copyrights,  trademarks,  licences, 
franchises  or  any  other  business  or  commercial  rights  of  similar  nature,  being  intangible  assets 
allowable to the predecessor and the successor in the case of succession referred to in  3[clause (xiii), 
clause (xiiib) and clause (xiv)] of section 47 or section 170 or to the amalgamating company and the 
amalgamated company in the case of amalgamation, or to the demerged  company and the resulting 
company  in  the  case  of  demerger,  as  the  case  may  be,  shall  not  exceed  in  any  previous  year  the 
deduction calculated at the prescribed rates as if the succession or the amalgamation or the demerger, 
as  the  case  may  be,  had  not  taken  place,  and  such  deduction  shall  be  apportioned  between  the 
predecessor and the successor, or the amalgamating company and the amalgamated company, or the 
demerged company and the resulting company, as the case may be, in the ratio of the number of days 
for which the assets were used by them.] 

4[Explanation 1.—Where the business or profession of the assessee is carried on in a building not 
owned by him but in respect of which the assessee holds a lease or other right of occupancy and any 
capital expenditure is incurred by the assessee for the purposes of the business or profession on the 
construction of any structure or doing of any work in or in relation to, and by way of renovation or 
extension of, or improvement to, the building, then, the provisions of this clause shall apply as if the 
said structure or work is a building owned by the assessee. 

Explanation  2.—5[For  the  purposes  of  this  sub-section]  “written  down  value  of  the  block  of 

assets” shall have the same meaning as in clause (c) of sub-section (6) of section 43.] 

6[Explanation 3.—For the purposes of this sub-section, 7[the expression “assets”] shall mean— 

(a) tangible assets, being buildings, machinery, plant or furniture; 

1. Ins. by Act 2 of 1991, s. 4 (w.e.f. 15-1-1991). Later Act 2 of 1991 repealed by Act 23 of 2016, s. 2 and the First Schedule 

(except s. 6) (w.e.f. 6-5-2016). 

2. Subs. by Act 27 of 1999, s. 12, for the fourth proviso (w.e.f. 1-4-2000). 
3. Subs. by Act 14 of 2010, s. 8, for “clause (xiii) and clause (xiv)” (w.e.f. 1-4-2011). 
4. Ins. by Act 46 of 1986, s. 5 (w.e.f. 1-4-1988). 
5. Subs. by Act 20 of 2002, s. 14, for “For the purposes of this clause” (w.e.f. 1-4-2003). 
6. Ins. by Act 21 of 1998, s. 9 (w.e.f. 1-4-1999). 
7. Subs. by Act 33 of 2009, s. 11, for ‘the expressions “assets” and “block of assets” (w.e.f. 1-4-2010). 

153 

                                                           
(b) intangible assets, being know-how, patents, copyrights, trade marks, licences, franchises 

or any other business or commercial rights of similar nature. 

Explanation 4.—For the purposes of this sub-section, the expression “know-how” means any 
industrial information or technique likely to assist in the manufacture or processing of goods or in 
the  working  of  a  mine,  oil-well  or  other  sources  of  mineral  deposits  (including  searching  for 
discovery or testing of deposits for the winning of access thereto).] 

1[Explanation 5.—For the removal of doubts, it is hereby declared that the provisions of this  
sub-section  shall  apply  whether  or  not  the  assessee  has  claimed  the  deduction  in  respect  of 
depreciation in computing his total income;] 

2[(iia) in the case of any new machinery or plant (other than ships and aircraft), which has been 
acquired and installed after the 31st day of March, 2005, by an assessee engaged in the business of 
manufacture or production of any article or thing 3[4[or in the business of generation, transmission or 
distribution] of power], a further sum equal to twenty per cent. of the actual cost of such machinery or 
plant shall be allowed as deduction under clause (ii): 

5[Provided that  where  an  assessee,  sets  up  an  undertaking  or  enterprise  for  manufacture  or 
production of any article or thing, on or after the 1st day of April, 2015 in any backward area notified 
by the Central Government in this behalf, in the State of Andhra Pradesh or in the State of Bihar or in 
the State of Telangana or in the State of West Bengal, and acquires and installs any new machinery or 
plant (other than ships and aircraft) for the purposes of the said undertaking or enterprise during the 
period beginning on the 1st day of April, 2015 and ending before the 1st day of April, 2020 in the 
said backward area, then, the provisions of clause (iia) shall have effect, as if for the words “twenty 
per cent.”, the words “thirty-five per cent.” had been substituted:] 

6[Provided further] that no deduction shall be allowed in respect of— 

(A)  any  machinery  or  plant  which,  before  its  installation  by  the  assessee,  was  used  either 

within or outside India by any other person; or 

(B) any machinery or plant installed in any office premises or any residential accommodation, 

including accommodation in the nature of a guest-house; or 

(C) any office appliances or road transport vehicles; or 

(D) any machinery or plant, the whole of the actual cost of which is allowed as a deduction 
(whether  by  way  of  depreciation  or  otherwise)  in  computing  the  income  chargeable  under  the 
head “Profits and gains of business or profession” of any one previous year;] 

7[(iii) in the case of any building, machinery, plant or furniture in respect of which depreciation is 
claimed  and  allowed  under  clause  (i)  and  which  is  sold,  discarded,  demolished  or  destroyed  in  the 
previous year (other than the previous year in which it is first brought into use), the amount by which 

1. Ins. by Act 14 of 2001, s. 21 (w.e.f. 1-4-2002). 
2. Subs. by Act 18 of 2005, s. 8, for clause (iia) (w.e.f. 1-4-2006). 
3. Ins. by Act 23 of 2012, s. 7 (w.e.f. 1-4-2013). 
4. Subs. by Act 28 of 2016, s. 13, for “or in the business of generation or generation and distribution” (w.e.f. 1-4-2017). 
5. Ins. by Act 20 of 2015, s. 10 (w.e.f. 1-4-2016). 
6. Subs. by s. 10, ibid., for “Provided” (w.e.f. 1-4-2016). 
7. Ins. by Act 21 of 1998, s. 9 (w.e.f. 1-4-1998). 

154 

                                                           
the  moneys  payable  in  respect  of  such  building,  machinery,  plant  or  furniture,  together  with  the 
amount of scrap value, if any, fall short of the written down value thereof: 

Provided that such deficiency is actually written off in the books of the assessee. 

Explanation.—For the purposes of this clause,— 

(1) “moneys payable” in respect of any building, machinery, plant or furniture includes— 

(a) any insurance, salvage or compensation moneys payable in respect thereof; 

(b) where the building, machinery, plant or furniture is sold, the price for which it is sold, 

so,  however,  that  where  the  actual  cost  of  a  motor  car  is,  in  accordance  with  the  proviso  to  
clause (1) of section 43, taken to be twenty-five thousand rupees, the moneys payable in respect 
of such motor car shall be taken to be a sum which bears to the amount for which the motor car is 
sold  or,  as  the  case  may  be,  the  amount  of  any  insurance,  salvage  or  compensation  moneys 
payable in respect thereof (including the amount of scrap value, if any) the same proportion as the 
amount of twenty-five thousand rupees bears to the actual cost of the motor car to the assessee as 
it would have been computed before applying the said proviso; 

(2) “sold” includes a transfer by way of exchange or a compulsory acquisition under any law 
for the time being in force but does not include a transfer, in a scheme of amalgamation, of any 
asset  by  the  amalgamating  company  to  the  amalgamated  company  where  the  amalgamated 
company  is  1[an  Indian  company  or  in  a  scheme  of  amalgamation  of  a  banking  company,  as 
referred  to in  clause  (c)  of  section  5  of the  Banking  Regulation  Act,  1949  (10 of  1949)  with a 
banking institution as referred to in sub-section (15) of section 45 of the said Act, sanctioned and 
brought into force by the Central Government under sub-section (7) of section 45 of that Act of 
any asset by the banking company to the banking institution].] 

2* 

3* 

* 

* 

* 

* 

* 

* 

* 

* 

4[(2) Where,  in  the  assessment  of  the  assessee,  full  effect  cannot  be  given  to  any  allowance  under  
sub-section (1) in any previous year, owing to there being no profits or gains chargeable for that previous 
year,  or  owing  to  the  profits  or  gains  chargeable  being  less  than  the  allowance,  then,  subject  to  the 
provisions of sub-section (2) of section 72 and sub-section (3) of section 73, the allowance or the part of 
the allowance to which effect has not been given, as the case may be, shall be added to the amount of the 
allowance for depreciation for the following previous year and deemed to be part of that allowance, or if 
there is no such allowance for that previous year, be deemed to be the allowance for that previous year, 
and so on for the succeeding previous years.] 

1. Subs. by Act 18 of 2005, s. 8, for “an Indian Company” (w.e.f. 1-4-2005). 

2. Clauses (iv), (v) and (vi) omitted by Act 46 of 1986, s. 5 (w.e.f. 1-4-1988). 

3. Subs-section (1A) omitted by s. 5, ibid. (w.e.f. 1-4-1988). 

4. Subs. by Act 14 of 2001, s. 21, for sub-section (2) (w.e.f. 1-4-2002). 

155 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
1[32A. Investment allowance.—(1) In respect of a ship or an aircraft or machinery or plant specified 
in sub-section (2), which is owned by the assessee and is wholly used for the purposes of the business 
carried on by him, there shall, in accordance with and subject to the provisions of this section, be allowed 
a deduction, in respect of the previous year in which the ship or aircraft was acquired or the machinery or 
plant  was  installed  or,  if  the  ship,  aircraft,  machinery  or  plant  is  first  put  to  use  in  the  immediately 
succeeding previous year, then, in respect of that previous year, of a sum by way of investment allowance 
equal to twenty-five per cent.. of the actual cost of the ship, aircraft, machinery or plant to the assessee: 

2[Provided that in respect of a ship or an aircraft or machinery or plant specified in sub-section (8B), 
this sub-section shall have effect as if for the words “twenty-five per cent.”, the words “twenty per cent.” 
had been substituted: 

Provided further that] no deduction shall be allowed under this section in respect of— 

(a)  any  machinery  or  plant  installed  in  any  office  premises  or  any  residential  accommodation, 

including any accommodation in the nature of a guest-house ; 

(b) anyoffice appliances or road transport vehicles; 

(c) any ship, machinery or plant in respect of which the deduction by way of development rebate 

is allowable under section 33; and 

(d)  any  machinery  or  plant,  the  whole  of  the  actual  cost  of  which  is  allowed  as  a  deduction 
(whether by way of depreciation or otherwise) in computing the income chargeable under the head 
“Profits and gains of business or profession” of any one previous year. 

2[Explanation.—For the purposes of this sub-section, “actual cost” means the actual cost of the 
ship, aircraft, machinery or plant to the assessee as reduced by that part of such cost which has been 
met out of the amount released to the assessee under sub-section (6) of section 32AB.] 

(2)  The  ship  or aircraft  or  machinery  or  plant referred  to  in sub-section  (1)  shall  be the following, 

namely:— 

(a) a new ship or new aircraft acquired after the 31st day of March, 1976, by an assessee engaged 

in the business of operation of ships or aircraft ; 

(b) any new machinery or plant installed after the 31st day of March, 1976,— 

 (i) for the purposes of business of generation or distribution of electricity or any other form 

of power; or 

3[(ii)  in  a  small-scale  industrial  undertaking  for  the  purposes  of  business  of  manufacture  or 

production of any article or thing ; or 

(iii)  in  any  other  industrial  undertaking  for  the  purposes  of  business  of  construction, 
manufacture or productionof any article or thing, not being an article or thing specified in the list 
in the Eleventh Schedule:] 

2[Provided that nothing contained in clauses (a) and (b) shall apply in relation to,— 

(i) a new ship or new aircraft acquired, or 

1. Ins. by Act 66 of 1976, s. 8 (w.e.f. 1-4-1976). 
2. Ins. by Act 3 of 1989, s. 6 (w.e.f. 1-4-1989). 
3. Subs. by Act 29 of 1977, s. 9, for sub-clauses (ii) and (iii) (w.e.f. 1-4-1978). 

156 

                                                           
(ii) any new machinery or plant installed, 

after  the  31st  day  of  March,  1987  but  before  the  1st  day  of  April,  1988,  unless  such  ship  or 
aircraft  is  acquired  or  such  machinery  or  plant  is  installed  in  the  circumstances  specified  in   
clause  (a)  of  sub-section  (8B)  and  the  assessee  furnishes  evidence  to  the  satisfaction  of  the 
Assessing Officer as specified in that clause;] 

1[(c) any new machinery or plant installed after the 31st day of March, 1983, but before the  2[1st 
day of April, 1987,] for the purposes of business of repairs to ocean-going vessels or other powered 
craft if the business is carried on by an Indian company and the business so carried on is for the time 
being approved for the purposes of this clause by the Central Government.] 

Explanation.—For the purposes of 3[this sub-section and sub-sections (2B), (2C) and (4)],— 

4[(1)  (a)  “new  ship”  or  “new  aircraft”  includes  a  ship  or  aircraft  which  before  the  date  of 
acquisition by the assessee was used by any other person, if it was not at any time previous to the 
date of such acquisition owned by any person resident in India; 

(b) “new machinery or plant” includes machinery or plant which before its installation by the 
assessee  was  used  outside  India  by  any  other  person,  if  the  following  conditions  are  fulfilled, 
namely:— 

(i) such machinery or plant was not, at any time previous to the date of such installation 

by the assessee, used in India; 

(ii) such machinery or plant is imported into India from any country outside India; and 

(iii)  no deduction  on  account  of  depreciation in respect of such  machinery  or plant  has 
been allowed or is allowable under the provisions of the Indian Income-tax Act, 1922 (11 of 
1922), or this Act in computing the total income of any person for any period prior to the date 
of the installation of the machinery or plant by the assessee,] 

(2) an industrial undertaking shall be deemed to be a small-scale industrial undertaking, if the 
aggregate value of the machinery and plant (other than tools, jigs, dies and moulds) installed, as 
on the last day of the previous year, for the purposes of 5[the business of the undertaking does not 
exceed,— 

6[(i) in a case where the previous year ends before the 1st day of August, 1980, ten lakh 

rupees; 

(ii) in a case where the previous year ends after the 31st day of July, 1980, but before the 

18th day of March, 1985, twenty lakh rupees; and 

(iii) in a case where the previous year ends after the 17th day of March, 1985, thirty-five 

lakh rupees,]] 

and for this purpose the value of any machinery or plant shall be,— 

(a) in the case of any machinery or plant owned by the assessee, the actual cost thereof to the 

assessee; and 

1. Ins. by Act 11 of 1983, s. 11 (w.e.f. 1-4-1984). 
2. Subs. by Act 23 of 1986, s. 7, for “1st day of April, 1988,” (w.e.f. 1-4-1987). 
3. Subs. by Act 11 of 1983, s. 11, for “this sub-section and sub-sections (2B) and (4)” (w.e.f. 1-6-1983). 
4. Subs. by Act 46 of 1986, s. 32, for clause (1) (w.e.f. 1-4-1988). 
5. Subs. by Act 16 of 1981, s. 5, for certain words (w.e.f. 1-4-1981). 
6. Subs.by Act 23 of 1986, s. 7, for sub-clause (i) (w.e.f. 1-4-1985). 

157 

                                                           
(b) in the case of any machinery or plant hired by the assessee, the actual cost thereof as in 

the case of the owner of such machinery or plant. 

1[(2A) The deduction under sub-section (1) shall not be denied in respect of any machinery or 
plant  installed  and  used  mainly  for  the  purposes  of  business  of  construction,  manufacture  or 
production of any article or thing, not being an article or thing specified in the list in the Eleventh 
Schedule, by reason only that such machinery or plant is also used for the purposes of business of 
construction, manufacture or production of any article or thing specified in the said list. 

(2B) Where any new machinery or plant is installed after the 30th day of June, 1977,  2[but 
before the 1st day of April, 1987], for the purposes of business of manufacture or production of 
any article or thing and such article or thing— 

(a) is manufactured or produced by using any technology (including any process) or other             

know how developed in, or 

(b) is an article or thing invented in, 

a  laboratory  owned  or  financed  by  the  Government,  or  a  laboratory  owned  by  a  public  sector 
company  or  a  University  or  by  an  institution  recognised  in  this  behalf  by  the  prescribed 
authority,the provisions of sub-section (1) shall have effect in relation to such machinery or plant 
as if for the words “twenty-five per cent..”, the words “thirty-five per cent..” had been substituted, 
if the following conditions are fulfilled, namely:— 

 (i)  the  right  to  use  such  technology  (including  any  process)  or  other  know-how  or  to 
manufacture or produce such article or thing has been acquired from the owner of such laboratory 
or any person deriving title from such owner ; 

 (ii) the assessee furnishes, along with his return of income for the assessment year for which 
the deduction is claimed, a certificate from the prescribed authority to the effect that such article 
or thing is manufactured or produced by using such technology (including any process) or other 
knowhow developed in such laboratory or is an article or thing invented in such laboratory; and 

(iii)  the  machinery  or  plant  is  not  used  for  the  purpose  of  business  of  manufacture  or 

production of any article or thing specified in the list in the Eleventh Schedule. 

Explanation.—For the purposes of this sub-section,— 

(a)  “laboratory  financed  by  the  Government”  means  a  laboratory  owned  by  any  body 
including  a  society  registered  under  the  Societies  Registration  Act,  1860  (21  of  1860)  and 
financed wholly or mainly by the Government; 

3* 

* 

* 

* 

* 

(c)  “University”  means  a  University  established  or  incorporated  by  or  under  a  Central, 
State or Provincial Act and includes an institution declared under section 3 of the University 
Grants Commission Act, 1956 (3 of 1956) to be a University for the purposes of that Act.] 

4[(2C) Where any new machinery or plant, being machinery or plant which would assist in 
control of pollution or protection of environment and which has been notified in this behalf by the 
Central  Government  in  the  Official  Gazette,  is  installed  after  the  31st  day  of  May,  1983  but 

1. Ins. by Act 29 of 1977, s. 9 (w.e.f. 1-4-1978). 
2. Subs. by Act 14 of 1982, s. 8, for “but before the 1st day of April, 1982” (w.e.f. 1-4-1982). 
3. Clause (b) omitted by Act 11 of 1987, s. 74 (w.e.f. 1-4-1987). 
4. Ins. by Act 11 of 1983, s. 11 (w.e.f. 1-6-1983). 

158 

 
 
 
 
 
 
                                                           
before  the  1st  day  of  April,  1987,  in  any  industrial  undertaking  referred  to  in  sub-clause  (i)  or 
sub-clause (ii) or sub-clause (iii) of clause (b) of sub-section (2), the provisions of sub-section (1) 
shall have effect in relation to such machinery or plant as if for the words “twenty-five per cent.”, 
the words “thirty-five per cent..” had been substituted.] 

(3) Where the total income of the assessee assessable for the assessment year relevant to the 
previous year in which the ship or aircraft was acquired or the machinery or plant was installed, 
or,  as  the  case  may  be,  the  immediately  succeeding  previous  year  (the  total  income  for  this 
purpose being computed after deduction of the allowances under  section 33 and section 33A, but 
without  making  any  deduction  under  sub-section  (1)  of  this  section  or  any  deduction  under 
Chapter VI-A) is nil or is less than the full amount of the investment allowance,— 

(i) the sum to be allowed by way of investment allowance for that assessment year under 
sub-section  (1)  shall  be  only  such  amount  as  is  sufficient  to  reduce  the  said  total  income 
to nil; and 

(ii)  the  amount  of  the  investment  allowance,  to  the  extent  to  which  it  has  not  been 
allowed  as  aforesaid,  shall  be  carried  forward  to  the  following  assessment  year,  and  the 
investment allowance to be allowed for the following assessment year shall be such amount 
as is sufficient to reduce the total income of the assessee assessable for that assessment year, 
computed in the manner aforesaid, to nil, and the balance of the investment allowance, if any, 
still  outstanding  shall  be  carried  forward  to  the  following  assessment  year  and  so  on,  so, 
however, that no portion of the investment allowance shall be carried forward for more than 
eight assessment years immediately succeeding the assessment year relevant to the previous 
year in which the ship or aircraft was acquired or the machinery or plant was installed or, as 
the case may be, the immediately succeeding previous year. 

Explanation.—Where  for  any  assessment  year,  investment  allowance  is  to  be  allowed  in 
accordance with the provisions of this sub-section in respect of any ship or aircraft acquired or 
any  machinery  or  plant  installed  in  more  than  one  previous  year,  and  the  total  income  of  the 
assessee  assessable  for  that  assessment  year  (the  total  income  for  this  purpose  being  computed 
after  deduction  of  the  allowances  under   section  33 and  section  33A,  but  without  making  any 
deduction under sub-section (1) of this section or any deduction under Chapter VI-A) is less than 
the  aggregate  of  the  amounts  due  to  be  allowed  in  respect  of  the  assets  aforesaid  for  that 
assessment year, the following procedure shall be followed,  namely:— 

(a) the allowance under clause (ii) shall be made before any allowance under clause (i) is 

made; and 

(b)  where  an  allowance  has  to  be  made  under  clause  (ii)  in  respect  of  amounts  carried 
forward  from  more  than  one  assessment  year,  the  amount  carried  forward  from  an  earlier 
assessment year shall be allowed before any amount carried forward from a later assessment 
year. 

(4)  The deduction under sub-section (1) shall be allowed only if the following conditions are 

fulfilled, namely:— 

(i) the particulars prescribed in this behalf have been furnished by the assessee in respect 

of the ship or aircraft or machinery or plant; 

(ii) an amount equal to seventy-five per cent. of the investment allowance to be actually 
allowed is debited to the profit and loss account of 1[any previous year in respect of which the 
deduction  is  to  be  allowed  under  sub-section  (3)  or  any  earlier  previous  year  (being  a 
previous  year  not  earlier  than  the  year  in  which  the  ship  or  aircraft  was  acquired  or  the 

1. Subs. by Act 12 of 1990, s. 7, for “the previous year in respect of which the deduction is to be allowed” (w.e.f. 1-4-1976). 

159 

                                                           
machinery or plant was installed or the ship, aircraft, machinery or plant was first put to use)] 
and credited to a reserve account (to be called the “Investment Allowance Reserve Account”) 
to be utilised— 

(a)  for  the  purposes  of  acquiring,  before  the  expiry  of  a  period  of  ten  years  next 
following the previous year in which the ship or aircraft was acquired or the machinery or 
plant was installed, a new ship or a new aircraft or new machinery or plant [other than 
machinery  or  plant  of  the  nature  referred  to  in  clauses  (a),  (b)  and  (d)  of  1[the  second 
proviso] to sub-section (1)] for the purposes of the business of the undertaking; and 

(b) until the acquisition of a new ship or a new aircraft or new machinery or plant as 
aforesaid, for the purposes of the business of the undertaking other than for distribution 
by way of dividends or profits or for remittance outside India as profits or for the creation 
of any asset outside India: 

Provided that  this  clause  shall  have  effect  in  respect  of  a  ship  as  if  for  the  word 

“seventy-five”, the word “fifty” had been substituted. 

Explanation.—Where the amount  debited to the  profit  and  loss account and  credited  to  the 
Investment  Allowance  Reserve  Account  under  this  sub-section  is  not  less  than  the  amount 
required  to  be  so  credited  on  the  basis  of  the  amount  of  deduction  in  respect  of  investment 
allowance claimed in the return made by the assessee under section 139, but a higher deduction in 
respect of the investment allowance is admissible on the basis of the total income as proposed to 
be  computed  by  the  2[Assessing  Officer]  under section  143,  the  2[Assessing  Officer]  shall,  by 
notice  in  writing  in  this  behalf,  allow  the  assessee  an  opportunity  to  credit  within  the  time 
specified in the notice or within such further time as the 2[Assessing Officer] may allow, a further 
amount to the Investment Allowance Reserve Account out of the profits and gains of the previous 
year  in  which  such  notice  is  served  on  the  assessee  or  of  the  immediately  preceding  previous 
year, if the accounts for that year have not been made up; and, if the assessee credits any further 
amount to such account within the time aforesaid, the amount so credited shall be deemed to have 
been  credited  to  the  Investment  Allowance  Reserve  Account  of  the  previous  year  in  which  the 
deduction  is  admissible  and  such  amount  shall  not  be  taken  into  account  in  determining  the 
adequacy of the reserve required to be created by the assessee in respect of the previous year in 
which such further credit is made: 

Provided that  such  opportunity  shall  not  be  allowed  by  the  2[Assessing  Officer]  in  a  case 
where the difference in the total income as proposed to be computed by him and the total income 
as  returned  by  the  assessee  arises  out  of  the  application  of  the  proviso  to  sub-section  (1)  of  
section  145 or  sub-section  (2)  of  that  section  or  the  omission  by  the  assessee  to  disclose  his 
income fully and truly. 

(5)  Any  allowance  made  under  this  section  in  respect  of  any  ship,  aircraft,  machinery  or 

plant shall be deemed to have been wrongly made for the purposes of this Act— 

(a) if the ship, aircraft, machinery or plant is sold or otherwise transferred by the assessee 
to any person at any time before the expiry of eight years from the end of the previous year in 
which it was acquired or installed; or 

(b)  if  at  any  time  before  the  expiry  of  ten  years  from  the  end  of  the  previous  year  in 
which the ship or aircraft was acquired or the machinery or plant was installed, the assessee 
does  not  utilise  the  amount  credited  to  the  reserve  account  under  sub-section  (4)  for  the 
purposes  of  acquiring  a  new  ship  or  a  new  aircraft  or  new  machinery  or  plant  [other  than 

1. Subs. by Act 3 of 1989, s. 6, for “the proviso” (w.e.f. 1-4-1989). 
2. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 

160 

                                                           
machinery or plant of the nature referred to in clauses (a), (b) and (d) of 1[the second proviso] 
to sub-section (1)] for the purposes of the business of the undertaking; or 

(c)  if  at  any  time  before  the  expiry  of  the  ten  years  aforesaid,  the  assesseeutilises  the 
amount  credited  to  the  reserve  account  under  sub-section  (4)  for  distribution  by  way  of 
dividends or profits or for remittance outside India as profits or for the creation of any assets 
outside  India  or  for  any  other  purpose  which  is  not  a  purpose  of  the  business  of  the 
undertaking, 

and the provisions of sub-section (4A) of section 155 shall apply accordingly: 

Provided that nothing in clause (a) shall apply— 

(i) where the ship, aircraft, machinery or plant is sold or otherwise transferred by the assessee 
to the Government, a local authority, a corporation established by a Central, State or Provincial 
Act or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956); 
or 

(ii) where the sale or transfer of the ship, aircraft, machinery or plant is made in connection 

with the amalgamation or succession, referred to in sub-section (6) or sub-section (7). 

(6)  Where,  in  a  scheme  of  amalgamation,  the  amalgamating  company  sells  or  otherwise 
transfers to the amalgamated company any ship, aircraft, machinery or plant, in respect of which 
investment allowance has been allowed to the amalgamating company under sub-section (1),— 

(a)  the  amalgamated  company  shall  continue  to  fulfil  the  conditions  mentioned  in               

sub-section (4) in respect of the reserve created by the amalgamating company and in respect 
of  the  period  within  which  such  ship,  aircraft,  machinery  or  plant  shall  not  be  sold  or 
otherwise  transferred  and  in  default  of  any  of  these  conditions,  the  provisions  of                
sub-section (4A) of section 155 shall apply to the amalgamated company as they would have 
applied to the amalgamating company had it committed the default; and 

(b)  the  balance  of  investment  allowance,  if  any,  still  outstanding  to  the  amalgamating 
company  in  respect  of  such  ship,  aircraft,  machinery  or  plant,  shall  be  allowed  to  the 
amalgamated company in accordance with the provisions of sub-section (3), so, however, that 
the total period for which the balance of investment allowance shall be carried forward in the 
assessments of the amalgamating company and the amalgamated company shall not exceed 
the period of eight years specified in sub-section (3) and the amalgamated company shall be 
treated as the assessee in respect of such ship, aircraft, machinery or plant for the purposes of 
this section. 

(7)  Where a firm is succeeded to by a company in the business carried on by it as a result of 
which the firm sells or otherwise transfers to the company any ship, aircraft, machinery or plant, 
the provisions of clauses (a) and (b) of sub-section (6) shall, so far as may be, apply to the firm 
and the company. 

Explanation.—The provisions of this sub-section shall apply only where— 

(i) all the property of the firm relating to the business immediately before the succession 

becomes the property of the company; 

1. Subs. by Act 3 of 1989, s. 6, for “the proviso” (w.e.f. 1-4-1989). 

161 

                                                           
(ii) all the liabilities of the firm relating to the business immediately before the succession 

become the liabilities of the company; and 

(iii) all the shareholders of the company were partners of the firm immediately before the 

succession. 

(8)  The  Central  Government,  if  it  considers  necessary  or  expedient  so  to  do,  may,  by 
notification in the Official Gazette, direct that the deduction allowable under this section shall not 
be  allowed  in  respect  of  any  ship  or  aircraft  acquired  or  any  machinery  or  plant  installed  after 
such date 1*** as may be specified therein. 

2[(8A)  The  Central  Government,  if  it  considers  necessary  or  expedient  so  to  do,  may,  by 
notification  in  the  Official  Gazette,  omit  any  article  or  thing  from  the  list  of  articles  or  things 
specified in the Eleventh Schedule.] 

3[(8B)  Notwithstanding  anything  contained  in  sub-section  (8)  or  the  notification  of  the 
Government of India in the Ministry of Finance (Department of Revenue) No. GSR 870(E), dated 
the 12th June, 1986, issued thereunder, the provisions of this section shall apply in respect of,— 

(a) (i) a new ship or new aircraft acquired after the 31st day of March, 1987 but before 
the  1st  day  of  April,  1988,  if  the  assessee  furnishes  evidence  to  the  satisfaction  of  the 
Assessing Officer that he had, before the 12th day of June, 1986, entered into a contract for 
the purchase of such ship or aircraft with the builder or manu-facturer or owner thereof, as the 
case may be; 

 (ii) any new machinery or plant installed after the 31st day of March, 1987 but before the 
1st day of April, 1988, if the assessee furnishes evidence to the satisfaction of the Assessing 
Officer that before the 12th day of June, 1986, he had purchased such machinery or plant or 
had entered into a contract for the purchase of such machinery or plant with the manufacturer 
or owner of, or a dealer in, such machinery or plant, or had, where such machinery or plant 
has  been  manufactured  in  an  undertaking  owned  by  the  assessee,  taken  steps  for  the 
manufacture of such machinery or plant: 

Provided that  nothing  contained  in  sub-section  (1)  shall  entitle  the  assessee  to  claim 
deduction in respect of a ship or aircraft or machinery or plant referred to in this clause in any 
previous year except the previous year relevant to the assessment year commencing on the 1st 
day of April, 1989; 

(b)    a new ship or new aircraft acquired or any new machinery or plant installed after the 
31st  day  of  March,  1988,  but  before  such  date  as  the  Central  Government,  if  it  considers 
necessary or expedient so to do, may, by notification in the Official Gazette, specify in this 
behalf. 

(8C) Subject to the provisions of clause (ii) of sub-section (3), where a deduction has been 
allowed  to  an  assessee  under  sub-section  (1)  in  any  assessment  year,  no  deduction  shall  be 
allowed to the assessee under section 32AB in the said assessment year (hereinafter referred to as 
the  initial  assessment  year)  and  a  block  of  further  period  of  four  years  beginning  with  the 
assessment year immediately succeeding the initial assessment year.] 

4* 

* 

* 

* 

* 

1.  The  words  “,  not  being  earlier  than  three  years  from  the  date  of  such  notification,”  omitted  by  Act  23  of  1986,  s.  7                 

(w.e.f. 1-4-1986). 

2. Ins. by Act 29 of 1977, s. 9 (w.e.f. 1-4-1978). 
3. Subs. by Act 3 of 1989, s. 6, for sub-section (8B) (w.e.f. 1-4-1989). 
4. Sub-section (9) omitted by Act 12 of 1990, s. 7 (w.e.f. 1-4-1976). 

162 

 
 
 
 
 
 
 
                                                           
1[32AB.  Investment deposit account.—(1) Subject to the other provisions of this section, where an 
assessee,  whose  total  income  includes  income  chargeable  to  tax  under  the  head  “Profits  and  gains  of 
business or profession”, has, out of such income,— 

(a) deposited any amount in an account (hereafter in this section referred to as deposit account) 
maintained by him with the Development Bank before the expiry of six months from the end of the 
previous year or before furnishing the return of his income, whichever is earlier; or 

(b) utilised any amount during the previous year for the purchase of any new ship, new aircraft, 

new machinery or plant, without depositing any amount in the deposit account under clause (a), 

in accordance with, and for the purposes specified in, a scheme (hereafter in this section referred to as the 
scheme)  to  be  framed  by  the  Central  Government,  or  if  the  assessee  is  carrying  on  the  business  of 
growing and manufacturing tea in India, to be approved in this behalf by the Tea Board, the assessee shall 
be  allowed  a  2[deduction  (such  deduction  being  allowed  before  the  loss,  if  any,  brought  forward  from 
earlier years is set off under section 72) of]— 

(i) a sum equal to the amount, or the aggregate of the amounts, so deposited and any amount so 

utilised; or 

(ii) a sum equal to twenty per cent. of the profits of  3*** business or profession as computed in 

the accounts of the assessee audited in accordance with sub-section (5), 

whichever is less: 

4[Provided that  where  such  assessee  is  a  firm,  or  any  association  of  persons  or  any  body  of 
individuals, the deduction under this section shall not be allowed in the computation of the income of any 
partner, or as the case may be, any member of such firm, association of persons or body of individuals:] 

5[Provided  further that  no  such  deduction  shall  be  allowed  in  relation  to  the  assessment  year 

commencing on the 1st day of April, 1991, or any subsequent assessment year.] 

(2)  For the purposes of this section,— 

6* 

* 

* 

*              

        * 

7[(ii) “new ship” or “new aircraft” includes a ship or aircraft which before the date of acquisition 
by the assessee was used by any other person, if it was not at any time previous to the date of such 
acquisition owned by any person resident in India; 

(iii)  “new  machinery  or  plant”  includes  machinery  or  plant  which  before  its  installation  by  the 

assessee  was  used  outside  India  by  any  other  person,  if  the  following  conditions  are  fulfilled,            
namely :— 

(a) such machinery or plant was not, at any time previous to the date of such installation by 

the assessee, used in India; 

(b) such machinery or plant is imported into India from any country outside India; and 

(c) no deduction on account of depreciation in respect  of such machinery or plant has been 
allowed or is allowable under this Act in computing the total income of any person for any period 
prior to the date of the installation of the machinery or plant by the assessee; 

1. Ins. by Act 23 of 1986, s. 8 (w.e.f. 1-4-1987). 
2. Subs. by Act 11 of 1987, s. 7, for “deduction of” (w.e.f. 1-4-1987). 
3. The word “eligible” omitted by Act 13 of 1989, s. 7 (w.e.f. 1-4-1991).  
4. Ins. by Act 11 of 1987, s. 7 (w.e.f. 1-4-1987). 
5. Ins. by Act 12 of 1990, s. 8 (w.e.f. 1-4-1990). 
6. Clause (i) omitted by Act 13 of 1989, s. 7 (w.e.f. 1-4-1991). 
7. Subs. by Act 11 of 1987, s. 7 for clause (ii) (w.e.f. 1-4-1987). 

163 

 
 
 
 
 
 
                                                           
(iv)  “Tea  Board”  means 

the  Tea  Board  established  under  section  4  of 

the  Tea                             

Act, 1953 (29 of 1953).] 

(3)  1[The profits of business or profession of an assessee for the purposes of sub-section (1) shall] be 
an amount arrived at after deducting  an amount equal to the depreciation computed in accordance with 
the provisions of sub-section (1) of section 32 from the amounts of profits computed in accordance with 
the  requirements  of  Parts  II  and  III  of  the  2[Schedule  VI]  to  the  Companies  Act,  1956  (1  of  1956),                 
3[as increased by the aggregate of— 

(i) the amount of depreciation; 

(ii) the amount of income-tax paid or payable, and provision therefor; 

(iii) the amount of surtax paid or payable under the Companies (Profits) Surtax Act, 1964  (7 of 

1964); 

(iv) the amounts carried to any reserves, by whatever name called; 

(v)  the  amount  or  amounts  set  aside  to  provisions  made  for  meeting  liabilities,  other  than 

ascertained liabilities; 

(vi) the amount by way of provision for losses of subsidiary companies; and 

(vii) the amount or amounts of dividends paid or proposed, 

if any debited to the profit and loss account; and as reduced by any amount or amounts withdrawn from 
reserves or provisions, if such amounts are credited to the profit and loss account 4***.] 

 5*   

* 

* 

* 

* 

(4)  No  deduction  under  sub-section  (1)  shall  be  allowed  in  respect  of  any  amount  utilised  for  the 

purchase of— 

(a) any machinery or plant to be installed in any office premises or residential accommodation, 

including any accommodation in the nature of a guest-house; 

(b) any office appliances (not being computers); 

(c) any road transport vehicles; 

(d)  any  machinery  or  plant,  the  whole  of  the  actual  cost  of  which  is  allowed  as  a  deduction 
(whether by way of depreciation or otherwise) in computing the income chargeable under the head 
“Profits and gains of business or profession” of any one previous year; 

6[(e) any new machinery or plant to be installed in an industrial undertaking, other than a small-
scale  industrial  undertaking,  as  defined  in  section  80HHA,  for  the  purposes  of  business  of 
construction,  manufacture  or  production  of  any  article  or  thing  specified  in  the  list  in  the  Eleventh 
Schedule.] 

(5)  The deduction under sub-section (1) shall not be admissible unless the accounts of the business or 
profession of the assessee for the previous year relevant to the assessment year for which the deduction is 
claimed  have  been  audited  by  an  accountant  as  defined  in  the Explanation below  sub-section  (2) 
of section 288 and the assessee furnishes, along with his return of income, the report of such audit in the 
prescribed form duly signed and verified by such accountant: 

1. Subs. by Act 13 of 1989, s. 7, for certain words (w.e.f. 1-4-1991). 
2. Subs. by s. 7, ibid., for “Sixth Schedule” (w.e.f. 1-4-1991). 
3. Subs. by Act 11 of 1987, s. 7, for certain words (w.e.f. 1-4-1987). 
4. The word “and” omitted by Act 13 of 1989, s. 7 (w.e.f. 1-4-1991). 
5. Clause (b) omitted by s. 7, ibid. (w.e.f. 1-4-1991). 
6. Ins. by s. 7, ibid. (w.e.f. 1-4-1991). 

164 

 
 
 
 
 
 
 
                                                           
Provided that in a case where the assessee is required by or under any other law to get his accounts 
audited, it shall be sufficient compliance with the provisions of this sub-section if such assessee gets the 
accounts of such business or profession audited under such law and furnishes the report of the audit as 
required under such other law and a further report in the form prescribed under this sub-section. 

1[(5A) Any amount standing to the credit of the assessee in the deposit account shall not be allowed to 
be withdrawn before the expiry of a period of five years from the date of deposit except for the purposes 
specified in the 2[scheme or] in the circumstances specified below :— 

(a) closure of business; 

(b) death of an assessee; 

(c) partition of a Hindu undivided family; 

(d) dissolution of a firm; 

(e) liquidation of a company. 

3[Explanation.—For the removal of doubts, it is hereby declared that nothing contained in this sub-
section shall affect the operation of the provisions of sub-section (5AA) or sub-section (6) in relation to 
any withdrawals made from the deposit account either before or after the expiry of a period of five years 
from the date of deposit.] 

 3[(5AA) Where any amount, standing to the credit of the assessee in the deposit account, is withdrawn 

during  any  previous  year  by  the  assessee  in  the  circumstance  specified  in  clause  (a)  or  clause  (d)  of             
sub-section (5A), the  whole  of  such  amount  shall  be deemed  to  be  the  profits  and  gains  of  business  or 
profession of that previous year and shall accordingly be chargeable to income-tax as the income of that 
previous year, as if the business had not closed or, as the case may be, the firm had not been dissolved.] 

(5B) Where any amount standing to the credit of the assessee in the deposit account is utilised by the 
assessee  for  the  purposes  of  any  expenditure  in  connection  with  the  4***  business  or  profession  in 
accordance with the scheme, such expenditure shall not be allowed in computing the income chargeable 
under the head “Profits and gains of business or profession”.] 

(6)  Where any amount, standing to the credit of the assessee in the deposit account, released during 
any previous year by the Development Bank for being utilised by the assessee for the purposes specified 
in the scheme or at the closure of the account 5[in circumstances other than the circumstances specified in 
clauses  (b),  (c)  and  (e)  of  sub-section  (5A)],  6[is  not  utilised  in  accordance  with  and  within  the  time 
specified in, the scheme], either wholly or in part, 7*** the whole of such amount or, as the case may be, 
part thereof which is not so utilised shall be deemed to be the profits and gains of business or profession 
of that previous year and shall accordingly be chargeable to income-tax as the income of that previous 
year. 

(7)  Where any asset acquired in accordance with the scheme is sold or otherwise transferred in any 
previous year by the assessee to any person at any time before the expiry of eight years from the end of 
the  previous  year  in  which  it  was  acquired,  such  part  of  the  cost  of  such  asset  as  is  relatable  to  the 
deductions  allowed  under  sub-section  (1)  shall  be  deemed  to  be  the  profits  and  gains  of  business  or 
profession of the previous year in which the asset is sold or otherwise transferred and shall accordingly be 
chargeable to income-tax as the income of that previous year: 

1. Ins. by Act 11 of 1987, s. 7 (w.e.f. 1-4-1987). 
2. Subs. by Act 13 of 1989, s. 7, for “scheme and” (w.e.f. 1-4-1987).  
3. Ins. by s. 7, ibid. (w.e.f. 1-4-1987).  
4. The word “eligible” omitted by s. 7, ibid. (w.e.f. 1-4-1991).  
5. Ins. by s. 7, ibid. (w.e.f. 1-4-1987).  
6. Subs. by Act 11 of 1987, s. 7 for “is not utilised in accordance with the scheme” (w.e.f. 1-4-1987). 
7. The words “within the previous year” omitted by s. 7, ibid. (w.e.f 1-4-1987). 

165 

                                                           
Provided that nothing in this sub-section shall apply— 

 (i)  where  the  asset  is  sold  or  otherwise  transferred  by  the  assessee  to  Government,  a  local 
authority, a corporation established by or under a Central, State or Provincial Act or a Government 
company as defined in section 617 of the Companies Act, 1956 (1 of 1956); or 

(ii) where the sale or transfer of the asset is made in connection with the succession of a firm by a 
company  in  the  business  or  profession  carried  on  by the firm  as  a  result of  which  the  firm  sells or 
otherwise transfers to the company any asset and the scheme continues to apply to the company in the 
manner applicable to the firm. 

Explanation.—The provisions of clause (ii) of the proviso shall apply only where— 

(i) all the properties of the firm relating to the business or profession immediately before the 

succession become the properties of the company; 

(ii) all the liabilities of the firm relating to the business or profession immediately before the 

succession become the liabilities of the company; and 

(iii)  all  the  shareholders  of  the  company  were  partners  of  the  firm  immediately  before  the 

succession. 

(8) The Central Government may, if it considers it necessary or expedient so to do, by notification in 
the Official Gazette, omit any article or thing from the list of articles or things specified in the Eleventh 
Schedule. 

(9) The Central Government may, after making such inquiry as it may think fit, direct, by notification 
in the Official Gazette, that the provisions of this section shall not apply to any class of assessees, with 
effect from such date as it may specify in the notification. 

1[(10) Where a deduction has been allowed to an assessee under this section in any assessment year, 
no deduction shall be allowed to the assessee under sub-section (1) of section 32A in the said assessment 
year  (hereinafter  referred  to  as  the  initial  assessment  year)  and  a  block  of  further  period  of  four  years 
beginning with the assessment year immediately succeeding the initial assessment year.] 

Explanation.—In this section,— 

(a) “computers” does not include calculating machines and calculating devices; 

(b) “Development Bank” means— 

   (i)  in  the  case  of  an  assessee  carrying  on  business  of  growing  and  manufacturing  tea  in 
India, the National Bank for Agriculture and Rural Development established under section 3 of 
the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981); 

 (ii)  in  the  case  of  other  assessees,  the  Industrial  Development  Bank  of  India  established 
under the Industrial Development Bank of India Act, 1964 (18 of 1964) and includes such bank 
or institution as may be specified in the scheme in this behalf. 

1. Subs. by Act 3 of 1989, s. 7, for sub-section (10) (w.e.f. 1-4-1989).  

166 

                                                           
1[32AC.  Investment  in  new  plant  or  machinery.—(1)  Where  an  assessee,  being  a  company, 
engaged in the business of  manufacture or production of  any article or thing, acquires and installs new 
asset after the 31st day of March, 2013 but before the 1st day of April, 2015 and the aggregate amount of 
actual  cost  of  such  new  assets  exceeds  one  hundred  crore  rupees,  then,  there  shall  be  allowed  a 
deduction,— 

(a) for the assessment year commencing on the 1st day of April, 2014, of a sum equal to fifteen 
per cent. of the actual cost of new assets acquired and installed after the 31st day of March, 2013 but 
before the 1st day of April, 2014, if the aggregate amount of actual cost of such new assets exceeds 
one hundred crore rupees; and 

(b) for the assessment year commencing on the 1st day of April, 2015, of a sum equal to fifteen 
per cent. of the actual cost of new assets acquired and installed after the 31st day of March, 2013 but 
before  the  1st  day  of  April,  2015,  as  reduced  by  the  amount  of  deduction  allowed,  if  any,  under   
clause (a). 

2[(1A) Where an assessee, being a company, engaged in the business of manufacture or production of 
any  article  or  thing,  acquires  and  installs  new  assets and  the  amount  of  actual  cost  of  such  new  assets  
3[acquired during any previous year exceeds twenty-five crore rupees and such assets are installed on or 
before the 31st day of March, 2017], then, there shall be allowed a deduction of a sum equal to fifteen per 
cent. of the actual cost of such new assets for the assessment year relevant to that previous year: 

4[Provided that where the installation of the new assets are in a year other than the year of acquisition, 

the deduction under this sub-section shall be allowed in the year in which the new assets are installed:] 

5[Provided further that] no deduction under this sub-section shall be allowed for the assessment year 
commencing  on  the  1st  day  of  April,  2015  to  the  assessee,  which  is  eligible  to  claim  deduction  under   
sub-section (1) for the said assessment year. 

(1B) No deduction under sub-section (1A) shall be allowed for any assessment year commencing on 

or after the 1st day of April, 2018.] 

(2)  If any new asset acquired and installed by the assessee is sold or otherwise transferred, except in 
connection  with  the  amalgamation  or  demerger,  within  a  period  of  five  years  from  the  date  of  its 
installation,  the  amount  of  deduction  allowed  under  sub-section  (1) 6[or  sub-section  (1A)]  in  respect  of 
such new asset shall be deemed to be the income of the assessee chargeable under the head “Profits and 
gains  of  business  or  profession”  of  the  previous  year  in  which  such  new  asset  is  sold  or  otherwise 
transferred, in addition to taxability of gains, arising on account of transfer of such new asset. 

(3)  Where  the  new  asset  is  sold  or  otherwise  transferred  in  connection  with  the  amalgamation  or 
demerger within a period of five years from the date of its installation, the provisions of sub-section (2) 
shall  apply  to  the  amalgamated  company  or  the  resulting  company,  as  the  case  may  be,  as  they  would 
have applied to the amalgamating company or the demerged company. 

(4)  For the purposes of this section, “new asset” means any new plant or machinery (other than ship 

or aircraft) but does not include— 

 (i) any plant or machinery which before its installation by the assessee was used either within or 

outside India by any other person; 

(ii)  any  plant  or  machinery  installed  in  any  office  premises  or  any  residential  accommodation, 

including accommodation in the nature of a guest house; 

1. Ins. by Act 17 of 2013, s. 6 (w.e.f. 1-4-2014). 
2. Ins. by Act 25 of 2014, s. 11 (w.e.f. 1-4-2015). 
3. Subs. by Act 28 of 2016, s. 14, for “acquired and installed during any previous year exceeds twenty-five crore rupees” 

(w.e.f. 1-4-2016). 

4. The proviso inserted by s. 14, ibid. (w.e.f. 1-4-2016). 
5. Subs. by s. 14, ibid., for “Provided that” (w.e.f. 1-4-2016). 
6. Ins. by Act 25 of 2014, s. 11 (w.e.f. 1-4-2015). 

167 

                                                           
(iii) any office appliances including computers or computer software; 

(iv) any vehicle; or 

(v)  any  plant  or  machinery,  the  whole  of  the  actual  cost  of  which  is  allowed  as  deduction 
(whether by way of depreciation or otherwise) in computing the income chargeable under the head 
“Profits and gains of business or profession” of any previous year.] 

1[32AD.  Investment  in  new  plant  or  machinery  in  notified  backward  areas  in  certain        

States.— (1)  Where  an  assessee,  sets  up  an  undertaking  or  enterprise  for  manufacture  or  production  of 
any article or thing, on or after the 1st day of April, 2015 in any backward area notified by the Central 
Government  in  this  behalf,  in  the  State  of  Andhra  Pradesh  or  in  the  State  of  Bihar  or  in  the  State  of 
Telangana or in the State of West Bengal, and acquires and installs any new asset for the purposes of the 
said  undertaking  or  enterprise  during  the  period  beginning  on  the  1st  day  of  April,  2015  and  ending 
before the 1st day of April, 2020 in the said backward area, then, there shall be allowed a deduction of a 
sum equal to fifteen per cent. of the actual cost of such new asset for the assessment year relevant to the 
previous year in which such new asset is installed. 

(2) If any new asset acquired and installed by the assessee is sold or otherwise transferred, except in 
connection with the amalgamation or demerger or re-organisation of business referred to in clause (xiii) or 
clause (xiiib) or clause (xiv) of section 47, within a period of five years from the date of its installation, 
the amount of deduction allowed under sub-section (1) in respect of such new asset shall be deemed to be 
the income of the assessee chargeable under the head “Profits and gains of business or profession” of the 
previous year in which such new asset is sold or otherwise transferred, in addition to taxability of gains, 
arising on account of transfer of such new asset. 

(3)  Where  the  new  asset  is  sold  or  otherwise  transferred  in  connection  with  the  amalgamation  or 
demerger  or  re-organisation  of  business  referred  to  in  clause  (xiii)  or  clause  (xiiib)  or  clause  (xiv)  of 
section 47 within a period of five years from the date of its installation, the provisions of sub-section (2) 
shall  apply  to  the  amalgamated  company  or  the  resulting  company  or  the  successor  referred  to  in           
clause (xiii) or clause (xiiib) or clause (xiv) of section 47, as the case may be, as they would have applied 
to the amalgamating company or the demerged company or the predecessor referred to in clause (xiii) or 
clause (xiiib) or clause (xiv) of section 47. 

(4) For the purposes of this section, “new asset” means any new plant or machinery (other than a ship 

or aircraft) but does not include— 

(a) any plant or machinery, which before its installation by the assessee, was used either within or 

outside India by any other person; 

(b)  any  plant  or  machinery  installed  in  any  office  premises  or  any  residential  accommodation, 

including accommodation in the nature of a guest house; 

(c) any office appliances including computers or computer software; 

(d) any vehicle; or 

(e)  any  plant  or  machinery,  the  whole  of  the  actual  cost  of  which  is  allowed  as  deduction 
(whether by way of depreciation or otherwise) in computing the income chargeable under the head 
“Profits and gains of business or profession” of any previous year.] 

1. Ins. by Act 20 of 2015, s. 11 (w.e.f. 1-4-2016). 

168 

                                                           
33. Development rebate.—1[(1) (a) In respect of a new ship or new machinery or plant (other than 
office appliances or road transport vehicles) which is  owned by the assessee and is wholly used for the 
purposes of the business carried on by him, there shall, in accordance with and subject to the provisions 
of this section and of section 34, be allowed a deduction, in respect of the previous year in which the ship 
was acquired or the machinery or plant was installed or, if the ship, machinery or plant is first put to use 
in  the  immediately  succeeding  previous  year,  then,  in  respect  of  that  previous  year,  a  sum  by  way  of 
development rebate as specified in clause (b). 

(b)   The sum referred to in clause (a) shall be— 

(A) in the case of a ship, forty per cent. of the actual cost thereof to the assessee; 

(B) in the case of machinery or plant,— 

(i)  where  the  machinery  or  plant  is  installed  for  the  purposes  of  business  of  construction, 
manufacture or production of any one or more of the articles or things specified in the list in the 
Fifth Schedule,— 

(a) thirty-five per cent. of the actual cost of the machinery or plant to the assessee, where 

it is installed before the 1st day of April, 1970, and 

(b)  twenty-five  per  cent.  of  such  cost,  where  it  is  installed  after  the  31st  day  of        

March, 1970; 

(ii) where the machinery or plant is installed after the 31st day of March, 1967, by an assessee 
being an Indian company in premises used by it as a hotel and such hotel is for the time being 
approved in this behalf by the Central Government,— 

(a) thirty-five per cent. of the actual cost of the machinery or plant to the assessee, where 

it is installed before the 1st day of April, 1970, and 

(b)  twenty-five  per  cent.  of  such  cost,  where  it  is  installed  after  the  31st  day  of        

March, 1970; 

(iii)  where  the  machinery  or  plant  is  installed  after  the  31st  day  of  March,  1967,  being  an 
asset  representing  expenditure  of  a  capital  nature  on  scientific  research  related  to  the  business 
carried on by the assessee,— 

(a) thirty-five per cent. of the actual cost of the machinery or plant to the assessee, where 

it is installed before the 1st day of April, 1970, and 

(b)  twenty-five  per  cent.  of  such  cost,  where  it  is  installed  after  the  31st  day  of        

March, 1970; 

(iv) in any other case,— 

(a) twenty per cent. of the actual cost of the machinery or plant to the assessee, where it is 

installed before the 1st day of April, 1970, and 

(b) fifteen per cent. of such cost, where it is installed after the 31st day of March, 1970.] 

2[(1A) (a) An assessee who, after the 31st day of March, 1964, acquires any ship which before the 
date of acquisition by him was used by any other person shall, subject to the provisions of section 34, also 

1. Subs. by Act 20 of 1967, s. 33 and the Third Schedule, for sub-section (1) (w.e.f. 1-4-1968). 
2. Ins. by Act 5 of 1964, s. 8 (w.e.f. 1-4-1964). 

169 

                                                           
be allowed as a deduction a sum by way of development rebate at such rate or rates as may be prescribed, 
provided that the following conditions are fulfilled, namely:— 

(i) such ship was not previous to the date of such acquisition owned at any time by any person 

resident in India; 

(ii) such ship is wholly used for the purposes of the business carried on by the assessee; and 

(iii) such other conditions as may be prescribed. 

(b)  An assessee who installs any machinery or plant (other than office appliances or road transport 
vehicles) which before such installation by the assessee was used outside India by any other person shall, 
subject  to  the  provisions  of section  34,  also  be  allowed  as  a  deduction  a  sum  by  way  of  development 
rebate  at  such  rate  or  rates  as  may  be  prescribed,  provided  that  the  following  conditions  are  fulfilled, 
namely:— 

(i)  such  machinery  or  plant  was  not  used  in  India  at  any  time  previous  to  the  date  of  such 

installation by the assessee; 

(ii) it is imported in India by the assessee from any country outside India; 

(iii) no deduction on account of depreciation or development rebate in respect of such machinery 
or plant has been allowed or is allowable under the provisions of the Indian Income-tax Act, 1922 (11 
of 1922), or this Act in computing the total income of any person for any period prior to the date of 
the installation of the machinery or plant by the assessee; 

(iv)  such  machinery  or  plant  is  wholly  used  for  the  purposes  of  the  business  carried  on  by  the 

assessee; and 

(v) such other conditions as may be prescribed. 

(c) The development rebate under this sub-section shall be allowed as a deduction in respect of the 
previous  year  in  which  the  ship  was  acquired  or  the  machinery  or  plant  was  installed  or,  if  the  ship, 
machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that 
previous year.] 

(2)  In  the  case  of  a  ship  acquired  or  machinery  or  plant  installed  after  the  31st  day  of           

December, 1957, where the total income of the assessee assessable for the assessment year relevant to the 
previous  year  in  which  the  ship  was  acquired  or  the  machinery  or  plant  installed  or  the  immediately 
succeeding previous year, as the case may be 1[(the total income for this purpose being computed without 
making  any  allowance  under  sub-section  (1)  or  sub-section  (1A)  of  this  section  or  sub-section  (1) 
of section  33A  or  any  deduction  under  Chapter  VIA  2***]  is nil or  is  less  than  the  full  amount  of  the 
development rebate calculated 3[at the rate applicable thereto 4[under sub-section (1) or sub-section (1A), 
as the case may be],— 

(i)  the  sum  to  be  allowed  by  way  of  development  rebate  for  that  assessment  year  4[under             

sub-section (1) or sub-section (1A)] shall be only such amount as is sufficient to reduce the said total 
income to nil; and 

(ii)  the  amount  of  the  development  rebate,  to  the  extent  to  which  it  has  not  been  allowed  as 
aforesaid, shall be carried forward to the following assessment year, and the development rebate to be 

1. Ins. by Act 20 of 1967, s. 33 and the third Schedule, for certain brackets, words, figures and letters (w.e.f. 1-4-1968). 
2. The words, figures and letter “or section 280-O” omitted by Act 26 of 1988, s. 54 (w.e.f. 1-4-1988). 
3. Subs. by Act 5 of 1964, s. 8, for “at the rate applicable thereto under that sub-section” (w.e.f. 1-4-1965). 
4. Subs. by s. 8, ibid., for “under sub-section (1)” (w.e.f. 1-4-1965). 

170 

                                                           
allowed  for  the  following  assessment  year  shall  be  such  amount  as  is  sufficient  to  reduce  the  total 
income of the assessee assessable for that assessment year, computed in the manner aforesaid, to nil, 
and  the  balance  of  the  development  rebate,  if  any,  still  outstanding  shall  be  carried  forward  to  the 
following assessment year and so on, so however, that no portion of the development rebate shall be 
carried  forward  for  more  than  eight  assessment  years  immediately  succeeding  the  assessment  year 
relevant to the previous year in which the ship was acquired or the machinery or plant installed or the 
immediately succeeding previous year, as the case may be. 

Explanation.—Where for any assessment year development rebate is to be allowed in accordance 
with the provisions of sub-section (2) in respect of ships acquired or machinery or plant installed in 
more than one previous year, and the total income of the assessee assessable for that assessment year 
1[(the  total  income  for  this  purpose  being  computed  without  making  any  allowance  under               
sub-section (1) or sub-section (1A) of this section or sub-section (1) of section 33A or any deduction 
under Chapter VI-A 2***] is less than the aggregate of the amounts due to be allowed in respect of the 
assets aforesaid for that assessment year, the following procedure shall be followed, namely :— 

(i)  the  allowance  under  clause  (ii)  of  sub-section  (2)  shall  be  made  before  any  allowance 

under clause (i) of that sub-section is made; and 

(ii)  where  an  allowance  has  to  be  made  under  clause  (ii)  of  sub-section  (2)  in  respect  of 
amounts carried forward from more than one assessment year, the amount carried forward from 
an  earlier  assessment  year  shall  be  allowed  before  any  amount  carried  forward  from  a  later 
assessment year. 

3[(3)  Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfers to 
the amalgamated company any ship, machinery or plant in respect of which development rebate has been 
allowed to the amalgamating company under sub-section (1) or sub-section (1A),— 

(a) the amalgamated company shall continue to fulfil the conditions mentioned in sub-section (3) 
of section  34 in  respect  of  the  reserve  created  by  the  amalgamating  company  and  in  respect  of  the 
period within which such ship, machinery or plant shall not be sold or otherwise transferred and in 
default of any of these conditions, the provisions of sub-section (5) of section 155 shall apply to the 
amalgamated company as they would have applied to the amalgamating company had it committed 
the default; and 

(b) the balance of development rebate, if any, still outstanding to the amalgamating company in 
respect of such ship, machinery or plant shall be allowed to the amalgamated company in accordance 
with  the  provisions  of  sub-section  (2),  so,  however,  that  the  total  period  for  which  the  balance  of 
development rebate shall be carried forward in the assessments of the amalgamating company and the 
amalgamated company shall not exceed the period of eight years specified in sub-section (2) and the 
amalgamated company shall be treated as the assessee in respect of such ship, machinery or plant for 
the purposes of this section and section 34.] 

(4)  Where a firm is succeeded to by a company in the business carried on by it as a result of which 
the  firm  sells  or  otherwise  transfers  to  the  company  any  ship,  machinery  or  plant,  the  provisions  of 
clauses (a) and (b) of sub-section (3) shall, so far as may be, apply to the firm and the company. 

1. Subs. by Act 20 of 1967, s. 33 and the Third Schedule, for certain brackets, words, figures and letters (w.e.f. 1-4-1968). 
2. The words, figures and letter “or section 280-O” omitted by Act 26 of 1988, s. 54 (w.e.f. 1-4-1988). 
3. Subs. by Act 20 of 1967, s. 9, for sub-section (3) (w.e.f. 1-4-1967). 

171 

                                                           
Explanation.—The provisions of this clause shall apply only where— 

(i)  all  the  property  of  the  firm  relating  to  the  business  immediately  before  the  succession 

becomes the property of the company; 

(ii)  all  the  liabilities  of  the  firm  relating  to  the  business  immediately  before  the  succession 

become the liabilities of the company; and 

(iii)  all  the  shareholders  of  the  company  were  partners  of  the  firm  immediately  before  the 

succession. 

1[(5) The Central Government, if it considers it necessary or expedient so to do, may, by notification 
in  the  Official  Gazette,  direct  that  the  deduction  allowable  under  this  section  shall  not  be  allowed  in 
respect of a ship acquired or machinery or plant installed after such date, not being earlier than three years 
from the date of such notification, as may be specified therein.] 

2[(6)  Notwithstanding anything contained in the foregoing provisions of this section, no deduction by 
way of development rebate shall be allowed in respect of any machinery or plant installed after the 31st 
day  of  March,  1965,  in  any  office  premises  or  any  residential  accommodation,  including  any 
accommodation in the nature of a guest-house:] 

3[Provided that the provisions of this sub-section shall not apply in the case of an assessee being an 
Indian  company,  in  respect  of  any  machinery  or  plant  installed  by  it  in  premises  used  by  it  as  a  hotel, 
where the hotel is for the time being approved in this behalf by the Central Government.] 

4[33A. Development allowance.—(1) In respect of planting of tea bushes on any land in India owned 
by  an  assessee  who  carries  on  business  of  growing  and  manufacturing  tea  in  India,  a  sum  by  way  of 
development allowance equivalent to— 

(i) where tea bushes have been planted on any land not planted at any time with tea bushes or on 

any land which had been previously abandoned, 5[fifty per cent..] of the actual cost of planting; and 

(ii)  where  tea  bushes  are  planted  in  replacement  of  tea  bushes  that  have  died  or  have  become 

permanently useless on any land already planted, 6[thirty per cent..] of the actual cost of planting, 

shall,  subject  to  the  provisions  of  this  section,  7[be  allowed  as  a  deduction  in  the  manner  specified 
hereunder, namely:— 

(a)  the  amount  of  the  development  allowance  shall,  in  the  first  instance,  be  computed  with 
reference to that portion of the actual cost of planting which is incurred during the previous year in 
which the land is  prepared  for  planting  or  replanting,  as  the  case  may  be,  and  in  the  previous  year 
next  following,  and  the  amount  so  computed  shall  be  allowed  as  a  deduction  in  respect  of  such 
previous year next following; and 

1. Ins. by Act 5 of 1964, s. 8 (w.e.f. 1-4-1964). 
2. Ins. by Act 10 of 1965, s. 8 (w.e.f. 1-4-1965). 
3. Ins. by Act 20 of 1967, s. 33 and the Third Schedule (w.e.f. 1-4-1968). 
4. Ins. by Act 10 of 1965, s. 9 (w.e.f. 1-4-1965). 
5. Subs. by Act 13 of 1966, s. 8, for “forty per cent.” (w.e.f. 1-4-1966). 
6. Subs. by s. 8, ibid., for “twenty per cent.” (w.e.f. 1-4-1966). 
7.  Subs.  by  s.  3,  ibid.,  for  “be  allowed  as  a  deduction  in  respect  of  the  third  secceeding  previous  year  next  following  he 

previous year in which the land is prepared for planting or replanting, as the case may be” (w.e.f. 1-4-1966). 

172 

                                                           
(b)  thereafter,  the  development  allowance  shall  again  be  computed  with  reference  to  the  actual 
cost of planting, and if the sum so computed exceeds the amount allowed as a deduction under clause 
(a),  the  amount  of  the  excess  shall  be  allowed  as  a  deduction  in  respect  of  the  third  succeeding 
previous year next following the previous year in which the land has been prepared for planting or 
replanting, as the case may be:] 

1[Provided that  no  deduction  under  clause  (i)  shall  be  allowed  unless  the  planting  has  commenced 

after the 31st day of March, 1965, and been completed before the 1st day of April, 1990: 

Provided  further that  no  deduction  shall  be  allowed  under  clause  (ii)  unless  the  planting  has 

commenced after the 31st day of March, 1965, and been completed before the 1st day of April, 1970.] 

(2)  Where  the  total  income  of  the  assessee  assessable  for  the  assessment  year  relevant  to                      

2[the  previous  year  in  respect  of  which  the  deduction  is  required  to  be  allowed  under  sub-section  (1)] 
3[(the total income for this purpose being computed after deduction of the allowance under sub-section (1) 
or sub-section (1A) or clause (ii) of sub-section (2) of section 33, but without making any deduction under 
sub-section (1) of this section or any deduction under Chapter VI-A  4***)] is nil or is less than the full 
amount  of  the  development  allowance  5[calculated  at  the  rates  and  in  the  manner  specified  in                               
sub-section (1)]— 

(i)  the  sum  to  be  allowed  by  way  of  development  allowance  for  that  assessment  year  under             

sub-section (1) shall be only such amount as is sufficient to reduce the said total income to nil; and 

(ii) the amount of the development allowance, to the extent to which it has not been allowed as 
aforesaid, shall be carried forward to the following assessment year, and the development allowance 
to be allowed for the following assessment year shall be such amount as is sufficient to reduce the 
total income of the assessee assessable for that assessment year, computed in the manner aforesaid, 
to nil, and the balance of the development allowance, if any, still outstanding shall be carried forward 
to  the  following  assessment  year  and  so  on,  so,  however,  that  no  portion  of  the  development 
allowance shall be carried forward for more than eight assessment years immediately succeeding the 
assessment year in which the deduction was first allowable. 

Explanation.—Where  for  any  assessment  year  development  allowance  is  to  be  allowed  in 
accordance with the provisions of sub-section (2) in respect of more than one previous year, and the 
total income of the assessee assessable for that assessment year  3[(the total income for this purpose 
being  computed  after  deduction  of  the  allowance  under  sub-section  (1)  or  sub-section  (1A)  or          
clause (ii) of sub-section (2) of section 33, but without making any deduction under sub-section (1) of 
this section or any deduction under Chapter VIA  4*** )] is less than the amount of the development 
allowance  due  to  be  made  in  respect  of  that  assessment  year,  the  following  procedure  shall  be 
followed, namely:— 

(i) the allowance under clause (ii) of sub-section (2) of this section shall be made before any 

allowance under clause (i) of that sub-section is made; and 

1. Subs. by Act 12 of 1990, s. 9, for the proviso (w.e.f. 1-4-1990). 
2. Subs. by Act 13 of 1966, s. 8, for “the third succeeding previous year next following the previous year in which the land 

has been prepared” (w.e.f. 1-4-1966). 

3.  Subs.  by  Act  20  of  1967,  s.  33  and  the  third  Schedule,  for  “(the  total  income  for  this  purpose  being  computed  after 
making the allowance under sub-section (1) or sub-section (1A) or clause (ii) of sub-section (2) of section 33 but without 
making any allowance under sub-section (1) of this section” (w.e.f. 1-4-1968). 

4. The words, figures and letter “or section 280-O” omitted by Act 26 of 1988, s. 54 (w.e.f. 1-4-1988). 
5. Subs. by Act 13 of 1966, s. 8, for “calculated at the rates specified in sub-section (1)” (w.e.f. 1-4-1966). 

173 

                                                           
(ii) where an allowance has to be made under clause (ii) of sub-section (2) of this section in 
respect  of  amounts  carried  forward  from  more  than  one  assessment  year,  the  amount  carried 
forward from an earlier assessment year shall be allowed before any amount carried forward from 
a later assessment year. 

(3)  The  deduction  under  sub-section  (1)  shall  be  allowed  only  if  the  following  conditions  are 

fulfilled, namely:— 

(i) the particulars prescribed in this behalf have been furnished by the assessee; 

(ii)  an  amount  equal  to  seventy-five  per  cent.  of  the  development  allowance  to  be  actually 
allowed is debited to the profit and loss account of the relevant previous year and credited to a reserve 
account to be utilised by the assessee during a period of eight years next following for the purposes of 
the business of the undertaking, other than— 

(a) for distribution by way of dividends or profits; or 

(b) for remittance outside India as profits or for the creation of any asset outside India; and 

(iii) such other conditions as may be prescribed. 

(4)  If any such land is sold or otherwise transferred by the assessee to any person at any time before 
the expiry of eight years from the end of the previous year in which the deduction under sub-section (1) 
was  allowed,  any  allowance  under  this  section  shall  be  deemed  to  have  been  wrongly  made  for  the 
purposes of this Act, and the provisions of sub-section (5A) of section 155 shall apply accordingly: 

Provided that this sub-section shall not apply— 

(i) where the land is sold or otherwise transferred by the assessee to the Government, a local 
authority,  a  corporation  established  by  a  Central,  State  or  Provincial  Act,  or  a  Government 
company as defined in section 617 of the Companies Act, 1956 (1 of 1956); or 

(ii)  where  the  sale  or  transfer  of  the  land  is  made  in  connection  with  the  amalgamation  or 

succession referred to in sub-section (5) or sub-section (6). 

1[(5)  Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfers to 
the amalgamated company any land in respect of which development allowance has been allowed to the 
amalgamating company under sub-section (1),— 

(a) the amalgamated company shall continue to fulfil the conditions mentioned in sub-section (3) 
in respect  of  the reserve  created  by  the  amalgamating  company  and  in  respect  of  the  period  within 
which such land shall not be sold or otherwise transferred and in default of any of these conditions, 
the  provisions  of  sub-section  (5A)  of  section  155 shall  apply  to  the  amalgamated  company  as  they 
would have applied to the amalgamating company had it committed the default; and 

(b) the balance of development allowance, if any, still outstanding to the amalgamating company 
in  respect  of  such  land  shall  be  allowed  to  the  amalgamated  company  in  accordance  with  the 
provisions of sub-section (2), so, however, that the total period for which the balance of development 
allowance  shall  be  carried  forward  in  the  assessments  of  the  amalgamating  company  and  the 
amalgamated company shall not exceed the period of eight years specified in sub-section (2) and the 
amalgamated company shall be treated as the assessee in respect of such land for the purposes of this 
section. 

1. Subs. by Act 20 of 1967, s. 10, for sub-section (5) (w.e.f. 1-4-1967). 

174 

                                                           
(6)  Where a firm is succeeded to by a company in the business carried on by it as a result of which 
the firm sells or otherwise transfers to the company any land on which development allowance has been 
allowed, the provisions of clauses (a) and (b) of sub-section (5) shall, so far as may be, apply to the firm 
and the company. 

Explanation.—The  provisions  of  this  sub-section  shall  apply  if  the  conditions  laid  down  in 

the Explanation to sub-section (4) of section 33 are fulfilled. 

(7)  For the purposes of this section, “actual cost of planting” means the aggregate of— 

 (i) the cost of preparing the land; 

 (ii) the cost of seeds, cutting and nurseries; 

(iii) the cost of planting and replanting; and 

(iv) the cost of upkeep thereof for the previous year in which the land has been prepared and the 

three successive previous years next following such previous year, 

reduced by that portion of the cost, if any, as has been met directly or indirectly by any other person or 
authority: 

1[Provided that where such cost exceeds— 

(i)  forty  thousand  rupees  per  hectare  in  respect  of  land  situate  in  a  hilly  area  comprised  in  the 

district of Darjeeling; or 

(ii) thirty-five thousand rupees per hectare in respect of land situate in a hilly area comprised in 

an area other than the district of Darjeeling; or 

(iii) thirty thousand rupees per hectare in any other area, 

then, the excess shall be ignored. 

Explanation.—For  the  purposes  of  this  proviso,  “district  of  Darjeeling”  means  the  district  of 
Darjeeling as on the 28th day of February, 1981, being the date of introduction of the Finance Bill, 1981, 
in the House of the People.] 

(8) The  Board  may,  having  regard  to  the  elevation  and  topography,  by  general  or  special  order, 
declare any areas to be hilly areas for the purposes of this section and such order shall not be questioned 
before any court of law or any other authority. 

2[Explanation.—For  the  purposes  of  this  section,  an  assessee  having  a  leasehold  or  other  right  of 
occupancy in any land shall be deemed to own such land and where the assessee transfers such right, he 
shall be deemed to have sold or otherwise transferred such land.] 

1. Subs. by Act 16 of 1981, s. 6, for the proviso and Explanation (w.e.f. 1-4-1982). 
2. Ins. by Act 25 of 1975, s. 5 (w.e.f. 1-4-1962). 

175 

                                                           
1[33AB.  Tea  development  account  2[,  coffee  development  account  and  rubber  development 
account].—(1) Where an assessee carrying on business of  3[growing and manufacturing tea or coffee or 
rubber] in India has, before the expiry of six months from the end of the previous year or before 4[the due 
date of furnishing the return of his income], 5[whichever is earlier,— 

(a)  deposited  with  the  National  Bank  any  amount  or  amounts  in  an  account  (hereafter  in  this 
section referred to as the special account) maintained by the assessee with that Bank in accordance 
with, and for the purposes specified in, a scheme (hereafter in this section referred to as the scheme) 
6[approved in this behalf by the Tea Board or the Coffee Board or the Rubber Board]; or 

(b)  7[deposited  any  amount  in  an  account  (hereafter  in  this  section  referred  to  as  the  Deposit 
Account)  opened  by  the  assessee  in  accordance  with,  and  for  the  purposes  specified  in,  a  scheme 
framed by the Tea Board or the Coffee Board or the Rubber Board, as the case may be (hereafter in 
this  section  referred  to  as  the  deposit  scheme),  with  the  previous  approval  of  the  Central 
Government,] 

the assessee shall, subject to the provisions of this section,] be allowed a deduction (such deduction being 
allowed before the loss, if any, brought forward from earlier years is set off under section 72 ) of— 

(a) a sum equal to the amount or the aggregate of the amounts so deposited; or 

(b)  8[a  sum  equal  to  forty  per  cent..  of  the  profits]  of  such  business  (computed  under  the  head 

“Profits and gains of business or profession” before making any deduction under this section), 

whichever is less: 

Provided that where such assessee is a firm, or any association of persons or any body of individuals, 
the deduction under this section shall not be allowed in the computation of the income of any partner, or 
as the case may be, any member of such firm, association of persons or body of individuals: 

Provided further that where any deduction, in respect of any amount deposited in the special account 
9[,  or  in  the  10[Deposit  Account],  has  been  allowed  under  this  sub-section  in  any  previous  year,  no 
deduction shall be allowed in respect of such amount in any other previous year. 

(2) The deduction under sub-section (1) shall not be admissible unless the accounts of such business 
of the assessee for the previous year relevant to the assessment year for which the deduction is claimed 
have  been audited  by  an accountant  as  defined in the Explanation below sub-section  (2) of section  288 
and  the  assessee  furnishes,  along  with  his  return  of  income,  the  report  of  such  audit  in  the  prescribed 
formduly signed and verified by such accountant: 

Provided that in a case where the assessee is required by or under any other law to get his accounts 
audited, it shall be sufficient compliance with the provisions of this sub-section if such assessee gets the 
accounts of such business audited under such law and furnishes the report of the audit as required under 
such other law and a further report in the form prescribed under this sub-section. 

1. Subs. by Act 12 of 1990, s. 10, for section 33AB (w.e.f. 1-4-1991). 
2. Ins. by Act 32 of 2003, s. 16 (w.e.f. 1-4-2004). 
3. Subs. by s. 16, ibid., for “growing and manufacturing tea” (w.e.f. 1-4-2004).  
4. Subs. by s. 16, ibid., for “furnishing the return of his income” (w.e.f. 1-4-2004). 
5. Subs. by Act 32 of 1994, s. 12, for certain words (w.e.f. 1-4-1995). 
6. Subs. by Act 32 of 2003, s. 16, for “approved in this behalf by the Tea Board” (w.e.f. 1-4-2004). 
7. Subs. by s. 16, ibid., for certain words (w.e.f. 1-4-2004). 
8. Subs.by Act 14 of 2001, s. 22, for “a sum equal to twenty per cent. of the profits” (w.e.f. 1-4-2002). 
9. Ins. by Act 32 of 1994, s. 12 (w.e.f. 1-4-1995). 
10. Subs. by Act 32 of 2003, s. 16, for “Tea Deposit Account” (w.e.f. 1-4-2004). 

176 

                                                           
(3)  Any  amount  standing  to  the  credit  of  the  assessee  in  1[the  special  account  or  the  2[Deposit 
Account] shall not be allowed to be withdrawn except for the purposes specified in the scheme or, as the 
case may be, in the deposit scheme] or in the circumstances specified below:— 

(a) closure of business; 

(b) death of an assessee; 

(c) partition of a Hindu undivided family; 

(d) dissolution of a firm; 

(e) liquidation of a company. 

3[(4)  Notwithstanding anything contained in sub-section (3), where any amount standing to the credit 
of the assessee in the special account or in the Deposit Account is  released during any previous year by 
the National Bank or withdrawn by the assessee from the Deposit Account, and such amount is utilised 
for the purchase of— 

(a) any machinery or plant to be installed in any office premises or residential accommodation, 

including any accommodation in the nature of a guest-house; 

(b) any office appliances (not being computers); 

(c)  any  machinery  or  plant,  the  whole  of  the  actual  cost  of  which  is  allowed  as  a  deduction 
(whether by way of depreciation or otherwise) in computing the income chargeable under the head 
“Profits and gains of business or profession” of any one previous year; 

(d)  any  new  machinery  or  plant  to  be  installed  in  an industrial  undertaking  for  the  purposes of 
business of construction, manufacture or production of any article or thing specified in the list in the 
Eleventh Schedule, 

the  whole  of  such  amount  so  utilised  shall  be  deemed  to  be  the  profits  and  gains  of  business  of  that 
previous year and shall accordingly be chargeable to income-tax as the income of that previous year.] 

(5) Where  any  amount,  standing  to  the  credit  of  the  assessee  in  the  special  account  4[or  in  the 
2[Deposit Account]], is withdrawn during any previous year by the assessee in the circumstance specified 
in clause (a) or clause (d) of sub-section (3), the whole of such amount shall be deemed to be the profits 
and gains of business or profession of that previous year and shall accordingly be chargeable to income-
tax as the income of that previous year, as if the business had not closed or, as the case may be, the firm 
had not been dissolved. 

(6) Where  any  amount  standing  to  the  credit  of  the  assessee  in  the  special  account  4[or  in  the 
2[Deposit  Account]]  is  utilised  by  the  assessee  for  the  purposes  of  any  expenditure  in  connection  with 
such  business  in  accordance  with  the  scheme  4[or  the  deposit  scheme],  such  expenditure  shall  not  be 
allowed in computing the income chargeable under the head “Profits and gains of business or profession. 

(7) Where  any  amount,  standing  to  the  credit  of  the  assessee  in  the  special  account  4[or  in  the 
2[Deposit  Account]],  which  is  released  during  any  previous  year  by  the  National  Bank  4[or  which  is 
withdrawn by the assessee from the 2[Deposit Account]]for being utilised by the assessee for the purposes 
of such business in accordance with the scheme  4[or the deposit scheme] is not so utilised, either wholly 
or in part, within that previous year, the whole of such amount or, as the case may be, part thereof which 
is  not  so  utilised  shall  be  deemed  to  be  profits  and  gains  of  business  and  accordingly  chargeable  to 
income-tax as the income of that previous year: 

1. Subs. by  Act 32 of 1994, s. 12, for “the special  account shall not be allowed to be withdrawn  except  for the purposes 

specified in the scheme” (w.e.f. 1-4-1995). 

2. Subs. by Act 32 of 2003, s. 16, for “Tea Deposit Account” (w.e.f. 1-4-2004). 
3. Subs. by s. 16, ibid., for sub-section (4) (w.e.f. 1-4-2004). 
4. Ins. by Act 32 of 1994, s. 12 (w.e.f. 1-4-1995). 

177 

                                                           
Provided that  this  sub-section  shall  not  apply  in  a  case  where  such  amount  is  released  during  any 
previous  year  at  the  closure  of  the  account  in  circumstances  specified  in  clauses  (b),  (c)  and  (e)  of  
sub-section (3). 

(8)  Where  any  asset  acquired  in  accordance  with  the  scheme  1[or  the  deposit  scheme]  is  sold  or 
otherwise transferred in any previous year by the assessee to any person at any time before the expiry of 
eight years from the end of the previous year in which it was acquired, such part of the cost of such asset 
as is relatable to the deduction allowed under sub-section (1) shall be deemed to be the profits and gains 
of business or profession of the previous year in which the asset is sold or otherwise transferred and shall 
accordingly be chargeable to income-tax as the income of that previous year: 

Provided that nothing in this sub-section shall apply— 

(i)  where  the  asset  is  sold  or  otherwise  transferred  by  the  assessee  to  Government,  a  local 
authority, a corporation established by or under a Central, State or Provincial Act or a Government 
company as defined in section 617 of the Companies Act, 1956 (1 of 1956); or 

(ii) where the sale or transfer of the asset is made in connection with the succession of a firm by a 
company  in  the  business  or  profession  carried  on  by the firm  as  a  result of  which  the  firm  sells or 
otherwise transfers to the company any asset and the scheme  1[or the deposit scheme] continues to 
apply to the company in the manner applicable to the firm. 

Explanation.—The provisions of clause (ii) of the proviso shall apply only where— 

(i)  all  the  properties  of  the  firm  relating  to  the  business  or  profession  immediately  before  the 

succession become the properties of the company; 

(ii)  all  the  liabilities  of  the  firm  relating  to  the  business  or  profession  immediately  before  the 

succession become the liabilities of the company ; and 

(iii)  all  the  shareholders  of  the  company  were  partners  of  the  firm  immediately  before  the 

succession. 

(9) The Central Government, if it considers necessary or expedient so to do, may, by notification in 
the Official Gazette, direct that the deduction allowable under this section shall not be allowed after such 
date as may be specified therein. 

Explanation.—In this section,— 

2[(a)  “Coffee  Board”  means  the  Coffee  Board  constituted  under  section  4  of  the  Coffee                 

Act, 1942 (7 of 1942); 

(aa)  “National  Bank”  means  the  National  Bank  for  Agriculture  and  Rural  Development 

established  under  section  3  of  the  National  Bank  for  Agriculture  and  Rural  Development                
Act, 1981 (61 of 1981); 

(ab) “Rubber Board” means the Rubber Board constituted under sub-section (1) of section 4 of 

the Rubber Act, 1947 (24 of 1947);] 

1. Ins. by Act 32 of 1994, s. 12 (w.e.f. 1-4-1995). 
2. Subs. by Act 32 of 2003, s. 16, for clause (a) (w.e.f. 1-4-2004). 

178 

                                                           
(b)  “Tea  Board”  means  the  Tea  Board  established  under  section  4  of  the  Tea  Act,  1953  

(29 of 1953).] 

1[33ABA. Site Restoration Fund.—(1) Where an assessee is carrying on business consisting of the 
prospecting for, or extraction or production of, petroleum or natural gas or both in India and in relation to 
which the Central Government has entered into an agreement with such assessee for such business, has 
before the end of the previous year— 

(a)  deposited with the State Bank of India any amount or amounts in an account (hereafter in this 
section referred to as the special account) maintained by the assessee with that Bank in accordance 
with, and for the purposes specified in, a scheme (hereafter in this section referred to as the scheme) 
approved in this behalf by the Government of India in the Ministry of Petroleum and Natural Gas; or 

(b)   deposited  any  amount  in  an  account  (hereafter  in  this  section  referred  to  as  the  Site 
Restoration Account) opened by the assessee in accordance with, and for the purposes specified in, a 
scheme  framed  by  the  Ministry  referred to in  clause (a)  (hereafter  in  this section  referred  to as the 
deposit scheme), 

the assessee shall, subject to the provisions of this section, be allowed a deduction (such deduction being 
allowed before the loss, if any, brought forward from earlier years is set off under section 72) of— 

(i)  a sum equal to the amount or the aggregate of the amounts so deposited; or 

(ii)  a  sum  equal  to  twenty  per  cent.  of  the  profits  of  such  business  (computed  under  the  head 

“Profits and gains of business or profession” before making any deduction under this section), 

whichever is less: 

Provided that where such assessee is a firm, or any association of persons or any body of individuals, 
the deduction under this section shall not be allowed in the computation of the income of any partner or, 
as the case may be, any member of such firm, association of persons or body of individuals: 

Provided further that where any deduction, in respect of any amount deposited in the special account, 
or  in  the  Site  Restoration  Account,  has  been  allowed  under  this  sub-section  in  any  previous  year,  no 
deduction shall be allowed in respect of such amount in any other previous year: 

Provided also that any amount credited in the special account or the Site Restoration Account by way 

of interest shall be deemed to be a deposit. 

(2) The deduction under sub-section (1) shall not be admissible unless the accounts of such business 
of the assessee for the previous year relevant to the assessment year for which the deduction is claimed 
have  been audited  by  an accountant  as  defined in the Explanation below sub-section  (2) of section  288 
and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form 
duly signed and verified by such accountant: 

Provided that in a case where the assessee is required by or under any other law to get his accounts 
audited, it shall be sufficient compliance with the provisions of this sub-section if such assessee gets the 
accounts of such business audited under such law and furnishes the report of the audit as required under 
such other law and a further report in the form prescribed under this sub-section. 

(3) Any amount standing to the credit of the assessee in the special account or the Site Restoration 
Account shall not be allowed to be withdrawn except for the purposes specified in the scheme or, as the 
case may be, in the deposit scheme. 

1. Ins. by Act 21 of 1998, s. 10 (w.e.f. 1-4-1999). 

179 

                                                           
(4) Notwithstanding anything contained in sub-section (3), no deduction under sub-section (1) shall 

be allowed in respect of any amount utilised for the purchase of— 

(a)  any machinery or plant to be installed in any office premises or residential accommodation, 

including any accommodation in the nature of a guest-house; 

(b)  any office appliances (not being computers); 

(c)   any  machinery  or  plant,  the  whole  of  the  actual  cost  of  which  is  allowed  as  a  deduction 
(whether by way of depreciation or otherwise) in computing the income chargeable under the head 
“Profits and gains of business or profession” of any one previous year; 

(d)  any new machinery or plant to be installed in an industrial undertaking for the purposes of 
business of construction, manufacture or production of any article or thing specified in the list in the 
Eleventh Schedule. 

(5)  Where  any  amount  standing  to  the  credit  of  the  assessee  in  the  special  account  or  in  the  Site 
Restoration Account is withdrawn on closure of the account during any previous year by the assessee, the 
amount  so  withdrawn  from  the  account,  as  reduced  by  the  amount,  if  any,  payable  to  the  Central 
Government by way of profit or production share as provided in the agreement referred to in section 42, 
shall  be  deemed  to  be  the  profits  and  gains  of  business  or  profession  of  that  previous  year  and  shall 
accordingly be chargeable to income-tax as the income of that previous year. 

Explanation.—Where any amount is withdrawn on closure of the account in a previous year in which 
the business carried on by the assessee is no longer in existence, the provisions of this sub-section shall 
apply as if the business is in existence in that previous year. 

(6)  Where  any  amount  standing  to  the  credit  of  the  assessee  in  the  special  account  or  in  the  Site 
Restoration  Account  is  utilised  by  the  assessee  for  the  purposes  of  any  expenditure  in  connection  with 
such business in accordance with the scheme or the deposit scheme, such expenditure shall not be allowed 
in computing the income chargeable under the head “Profits and gains of business or profession”. 

(7)  Where  any  amount,  standing  to  the  credit  of  the  assessee  in  the  special  account  or  in  the  Site 
Restoration Account, which is released during any previous year by the State Bank of India or which is 
withdrawn  by  the  assessee  from  the  Site  Restoration Account  for  being  utilised by  the  assessee  for the 
purposes of such business in accordance with the scheme or the deposit scheme is not so utilised, either 
wholly or in part, within that previous year, the whole of such amount or, as the case may be, part thereof 
which is not so utilised shall be deemed to be profits and gains of business and accordingly chargeable to 
income-tax as the income of that previous year. 

1* 

* 

* 

* 

* 

(8)  Where  any  asset  acquired  in  accordance  with  the  scheme  or  the  deposit  scheme  is  sold  or 
otherwise transferred in any previous year by the assessee to any person at any time before the expiry of 
eight years from the end of the previous year in which it was acquired, such part of the cost of such asset 
as is relatable to the deduction allowed under sub-section (1) shall be deemed to be the profits and gains 
of business or profession of the previous year in which the asset is sold or otherwise transferred and shall 
accordingly be chargeable to income-tax as the income of that previous year: 

1. The proviso omitted by Act 27 of 1999, s. 13 (w.e.f. 1-4-1999). 

180 

 
 
 
 
 
 
 
 
                                                           
Provided that nothing in this sub-section shall apply— 

(i)   where  the  asset  is  sold  or  otherwise  transferred  by  the  assessee  to  Government,  a  local 
authority, a corporation established by or under a Central, State or Provincial Act or a Government 
company as defined in section 617 of the Companies Act, 1956 (1 of 1956); or 

(ii)  where the sale or transfer of the asset is made in connection with the succession of a firm by 
a company in the business or profession carried on by the firm as a result of which the firm sells or 
otherwise transfers to the company any asset and the scheme or the deposit scheme continues to apply 
to the company in the manner applicable to the firm. 

Explanation.—The provisions of clause (ii) of the proviso shall apply only where— 

(i) all  the  properties  of  the  firm  relating  to  the  business  or  profession  immediately  before  the 

succession become the properties of the company; 

(ii) all  the  liabilities  of  the  firm  relating  to  the  business  or  profession  immediately  before  the 

succession become the liabilities of the company; and 

(iii)  all  the  shareholders  of  the  company  were  partners  of  the  firm  immediately  before  the 

succession. 

(9) The Central Government may, if it considers necessary or expedient so to do, by notification in 
the Official Gazette, direct that the deduction allowable under this section shall not be allowed after such 
date as may be specified therein. 

Explanation.—For the purposes of this section,— 

(a) “State Bank of India” means the State Bank of India constituted under the State Bank of India 

Act, 1955 (23 of 1955); 

(b) the expression “amount standing to the credit of the assessee in the special account or the Site 

Restoration Account” includes interest accrued to such accounts.] 

1[33AC.  Reserves  for  shipping  business.—(1)  2[In  the  case  of  an  assessee,  being  a  Government 
company  or  a  public  company  formed  and  registered  in  India  with  the  main  object  of  carrying  on  the 
business of operation of ships, there shall, in accordance with and subject to the provisions of this section, 
be allowed a deduction of an amount not exceeding fifty per cent. of profits derived from the business of 
operation  of  ships  (computed  under  the  head  “Profits  and  gains  of  business  or  profession”  and  before 
making any deduction under this section), as is debited to the profit and loss account of the previous year 
in respect of which the deduction is to be allowed and credited to a reserve account, to be utilised in the 
manner laid down in sub-section (2):] 

3[Provided that where the aggregate of the amounts carried to such reserve account from time to time 
exceeds twice the aggregate of the amounts of the paid-up share capital, the general reserves and amount 
credited to the share premium account of the assessee, no allowance under this sub-section shall be made 
in respect of such excess:] 

4[Provided further that for five assessment years commencing on or after the 1st day of April, 2001 
and ending before the 1st day of April, 2006, the provisions of this sub-section shall have effect as if for 
the words “an amount not exceeding fifty per cent.. of profits”, the words “an amount not exceeding the 
profits” had been substituted:] 

1. Ins. by Act 36 of 1989, s. 5 (w.e.f. 1-4-1990). 
2. Subs. by Act 22 of 1995, s. 8, for certain words, brackets and figures (w.e.f. 1-4-1996). 
3. Subs. by Act 20 of 2002, s. 15, for the first proviso (w.e.f. 1-4-2003). 
4. Ins. by Act 10 of 2000, s. 15 (w.e.f. 1-4-2001). 

181 

                                                           
1[Provided  also that  no  deduction  shall  be  allowed  under  this  section  for  any  assessment  year 

commencing on or after the 1st day of April, 2005.] 

(2) The amount credited to the reserve account under sub-section (1) shall be utilised by the assessee 
before the expiry  of  a  period  of eight  years  next following  the  previous  year in  which the  amount  was 
credited— 

(a)  for acquiring a new ship for the purposes of the business of the assessee; and 

(b)  until the acquisition of a new ship, for the purposes of the business of the assessee other than 
for  distribution  by  way  of  dividends  or  profits  or  for  remittance  outside  India  as  profits  or  for  the 
creation of any asset outside India. 

(3) Where any amount credited to the reserve account under sub-section (1),— 

(a)   has  been  utilised  for  any  purpose  other  than  that  referred  to  in  clause  (a)  or  clause  (b)  of  

sub-section (2), the amount so utilised; or 

(b)  has not been utilised for the purpose specified in clause (a) of sub-section (2), the amount not 

so utilised; or 

(c)   has  been  utilised  for  the  purpose  of  acquiring  a  new  ship  as  specified  in  clause  (a)  of  
sub-section  (2),  but  such  ship  is  2[sold  or  otherwise  transferred,  other  than  in  any  scheme  of 
demerger] by the assessee to any person at any time before the expiry of  3[three years] from the end 
of the previous year in which it was acquired, the amount so utilised in acquiring the ship, 

shall be deemed to be the profits,— 

(i)  in a case referred to in clause (a), in the year in which the amount was so utilised; or 

(ii)  in a case referred to in clause (b), in the year immediately following the period of eight years 

specified in sub-section (2); or 

(iii) in a case referred to in clause (c), in the year in which the sale or transfer took place, 

and shall be charged to tax accordingly. 

4[(4) Where the ship is sold or otherwise transferred (other than in any scheme of demerger) after the 
expiry of the period specified in clause (c) of sub-section (3) and the sale proceeds are not utilised for the 
purpose of acquiring a new ship within a period of one year from the end of the previous year in which 
such sale or transfer took place,  5[so much of such sale proceeds which represent the amount credited to 
the  reserve  account  and  utilised  for  the  purposes  mentioned  in  clause  (c)  of  sub-section  (3)]  shall  be 
deemed to be the profits of the assessment year immediately following the previous year in which the ship 
is sold or transferred.] 

Explanation.—For the purposes of this section,— 

(a)   “public  company”  shall  have  the  meaning  assigned  to  it  in  section  3  of  the  Companies  

Act, 1956 (1 of 1956); 

1. Ins. by Act 23 of 2004, s. 9 (w.e.f. 1-4-2005). 
2. Subs. by Act 27 of 1999, s. 14, for “sold or otherwise transferred” (w.e.f. 1-4-2000). 
3. Subs. by Act 32 of 2003, s. 17, for “eight years” (w.e.f. 1-4-2004). 
4. Ins. by s. 17, ibid. (w.e.f. 1-4-2004). 
5. Subs. by Act 18 of 2005, s. 9, for “such sale proceeds” (w.e.f. 1-4-2004). 

182 

                                                           
1[(aa)  “Government  company”  shall  have  the  meaning  assigned  to  it  in  section  617  of  the 

Companies Act, 1956 (1 of 1956);] 

(b)  “new ship” shall have the same meaning as in clause (ii) of sub-section (2) of section 32AB.] 

2[33B.  Rehabilitation  allowance.—Where  the  business  of  any  industrial  undertaking  carried  on  in 
India  is  discontinued  in  any  previous  year  by  reason  of  extensive  damage  to,  or  destruction  of,  any 
building, machinery, plant or furniture owned by the assessee and used for the purposes of such business 
as a direct result of— 

(i)  flood, typhoon, hurricane, cyclone, earthquake or other convulsion of nature; or 

(ii)  riot or civil disturbance; or 

(iii) accidental fire or explosion; or 

(iv)  action  by  an  enemy  or  action  taken  in  combating  an  enemy  (whether  with  or  without  a 

declaration of war), 

and,  thereafter,  at  any  time  before  the  expiry  of  three  years  from  the  end  of  such  previous  year,  the 
business  is  re-established, reconstructed  or revived  by  the  assessee,  he  shall,  in  respect  of  the  previous 
year in which the business is so re-established, reconstructed or revived, be allowed a deduction of a sum 
by way of rehabilitation allowance equivalent to sixty per cent.. of the amount of the deduction allowable 
to  him  under  clause  (iii)  of  sub-section  (1)  of  section  32in  respect  of  the  building,  machinery,  plant  or 
furniture so damaged or destroyed: 

3[Provided that  no  deduction  under  this  section  shall  be  allowed  in  relation  to  the  assessment  year 

commencing on the 1st day of April, 1985, or any subsequent assessment year.] 

Explanation.—In  this  section,  “industrial  undertaking”  means  any  undertaking  which  is  mainly 
engaged in the business of generation or distribution of electricity or any other form of power or in the 
construction of ships or in the manufacture or processing of goods or in mining.] 

34. Conditions for depreciation allowance and development rebate.—4* 

* 

* 

* 

* 

(3)  (a)  The  deduction  referred  to  in   section  33  shall  not  be  allowed  unless  an  amount  equal  to 
seventy-five per cent.. of the development rebate to be actually allowed is debited to the profit and loss 
account of 5[any previous year in respect of which the deduction is to be allowed under sub-section (2) of 
that section or any earlier previous year (being a previous year not earlier than the year in which the ship 
was acquired or the machinery or plant was installed or the ship, machinery or plant was first put to use)] 
and  credited  to  a  reserve  account  to  be  utilised  by  the  assessee  during  a  period  of  eight  years  next 
following for the purposes of the business of the undertaking, other than— 

(i)  for distribution by way of dividends or profits; or 

(ii)  for remittance outside India as profits or for the creation of any asset outside India: 

Provided that this clause shall not apply where the assessee is a company, being a licensee within 
the meaning of the Electricity (Supply) Act, 1948 (54 of 1948), or where the ship has been acquired 
or the machinery or plant has been installed before the 1st day of January, 1958: 

6[Provided further that where a ship has been acquired after the 28th day of February, 1966, this 
clause shall have effect in respect of such ship as if for the words “seventy-five”, the word “fifty” had 
been substituted.] 

1. Ins. by Act 18 of 1992, s. 12 (w.e.f. 1-4-1993). 
2. Ins. by Act 20 of 1967, s. 11 (w.e.f. 1-4-1967).  
3. Ins. by Act 21 of 1984, s. 5 (w.e.f. 1-4-1985). 
4. Sub-sections (1) and (2) omitted by 46 of 1986, s. 6 (w.e.f. 1-4-1988). 
5. Subs. by Act 12 of 1990, s. 11, for “the relevant previous year” (w.e.f. 1-4-1962). 
6. Ins. by Act 13 of 1966, s. 9 (w.e.f. 1-4-1966). 

183 

                                                           
1* 

* 

* 

* 

* 

(b) If any ship, machinery or plant is sold or otherwise transferred by the assessee to any person at 
any time before the expiry of eight years from the end of the previous year in which it was acquired or 
installed,  any  allowance  made  under  section  33or  under  the  corresponding  provisions  of  the  Indian 
Income-tax Act, 1922 (11 of 1922), in respect of that ship, machinery or plant shall be deemed to have 
been wrongly made for the purposes of this Act, and the provisions of sub-section (5) of section 155shall 
apply accordingly: 

Provided that this clause shall not apply— 

(i)  where the ship has been acquired or the machinery or plant has been installed before the 1st 

day of January, 1958; or 

(ii)   where  the  ship,  machinery  or  plant  is  sold  or  otherwise  transferred  by  the  assessee  to  the 
Government,  a  local  authority,  a  corporation  established  by  a  Central,  State  or  Provincial  Act  or  a 
Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956); or 

(iii)  where  the  sale  or  transfer  of  the  ship,  machinery  or  plant  is  made  in  connection  with  the 

amalgamation or succession, referred to in sub-section (3) or sub-section (4) of section 33. 

2[34A.  Restriction  on  unabsorbed  depreciation  and  unabsorbed  investment  allowance  for 
limited period in case of certain domestic companies.—(1) In computing the profits and gains of the 
business  of  a  domestic  company  in  relation  to  the  previous  year  relevant  to  the  assessment  year 
commencing  on  the  1st  day  of  April,  1992,  where  effect  is  to  be  given  to  the  unabsorbed  depreciation 
allowance  or  unabsorbed  investment  allowance  or  both  in  relation  to  any  previous  year  relevant  to  the 
assessment year commencing on or before the 1st day of April, 1991, the deduction shall be restricted to 
two-third of such allowance or allowances and the balance,— 

(a)  where  it  relates  to  depreciation  allowance,  be  added  to  the  depreciation  allowance  for  the 
previous  year  relevant  to  the  assessment  year  commencing  on  the  1st  day  of  April,  1993  and  be 
deemed to be part of that allowance or if there is no such allowance for that previous year, be deemed 
to be the allowance for that previous year and so on for the succeeding previous years; 

(b) where  it  relates  to  investment  allowance,  be  carried  forward  to  the  assessment  year 
commencing on the 1st day of April, 1993 and the balance of the investment allowance, if any, still 
outstanding shall be carried forward to the following assessment year and where the period of eight 
years  has  expired  before  the  portion  of  such  balance  is  adjusted,  the  said  period  shall  be  extended 
beyond eight years till such time the portion of the said balance is absorbed in the profits and gains of 
the business of the domestic company. 

(2)  For  the  assessment  year  commencing  on  the  1st  day  of  April,  1992,  the  provisions  of  
sub-section (2) of section 32 and sub-section (3) of section 32Ashall apply to the extent such provisions 
are not inconsistent with the provisions of sub-section (1) of this section. 

(3)  Nothing  contained  in  sub-section  (1)  shall  apply  where  the  amount  of  unabsorbed  depreciation 
allowance  or  of  the  unabsorbed  investment  allowance,  as  the  case  may  be,  or  the  aggregate  amount  of 
such allowances in the case of a domestic company is less than one lakh rupees. 

(4) Nothing contained in sections 234B and 234Cshall apply to any shortfall in the payment of any 
tax due on the assessed tax or, as the case may be, returned income where such shortfall is on account of 
restricting  the  amount  of  depreciation  allowance  or  investment  allowance  under  this  section  and  the 
assessee has paid the amount of shortfall before furnishing the return of income under sub-section (1) of 
section 139.] 

1. The Explanation omitted by Act 12 of 1990, s. 11 (w.e.f. 1-4-1962). 
2. Ins. by Act 18 of 1992, s. 13 (w.e.f. 1-4-1992). 

184 

 
 
 
 
 
 
 
 
                                                           
1[35. Expenditure on scientific research.—(1) In respect of expenditure on scientific research, the 

following deductions shall be allowed— 

(i)   any  expenditure  (not  being  in  the  nature  of  capital  expenditure)  laid  out  or  expended  on 

scientific research related to the business. 

2[Explanation.—Where  any  such  expenditure  has  been  laid  out  or  expended  before  the 
commencement  of  the  business  (not  being  expenditure  laid  out  or  expended  before  the  1st  day  of 
April,  1973)  on  payment  of  any  salary  [as  defined  in Explanation  2 below  sub-section  (5)  of 
section 40A] to an employee engaged in such scientific research or on the purchase of materials used 
in such scientific research, the aggregate of the expenditure so laid out or expended within the three 
years immediately preceding the commencement of the business shall, to the extent it is certified by 
the prescribed authorityto have been laid out or expended on such scientific research, be deemed to 
have been laid out or expended in the previous year in which the business is commenced;] 

(ii)  3[an amount equal to  4[one and one half] times of any sum paid] to a  5[research association] 
which  has  as  its  object  the  undertaking  of  scientific  research  or  to  a  university,  college  or  other 
institution to be used for scientific research: 

6[Provided that  such  association,  university,  college  or  other  institution  for  the  purposes  of  this 

clause— 

(A)   is  for  the  time  being  approved,  in  accordance  with  the  guidelines,  in  the  manner  and 

subject to such conditions as may be prescribed; and 

(B) such  association,  university,  college  or  other  institution  is  specified  as  such,  by 

notification in the Official Gazette, by the Central Government;] 

7[Provided  further that  where  any  sum  is  paid  to  such  association,  university,  college  or                  

other institution in a previous year relevant to the assessment year beginning on or after the 1st day of 
April, 2021, the deduction under this clause shall be equal to the sum so paid;] 

8[(iia) 9*** any sum paid to a company to be used by it for scientific research: 

Provided that such company— 

(A) is registered in India, 

(B) has as its main object the scientific research and development, 

(C) is, for the purposes of this clause, for the time being approved by the prescribed authority 

in the prescribed manner, and 

(D) fulfils such other conditions as may be prescribed;] 

1. Restored by Act 3 of 1989, s. 95 (w.e.f. 1-4-1989). Earlier omitted by Act 4 of 1988, s. 10 (w.e.f. 1-4-1989).  
2. Ins. by Act 26 of 1974, s. 5 (w.e.f. 1-4-1974). 
3. Subs. by Act 27 of 1999, s. 15, for “any sum paid” (w.e.f. 1-4-2000). 
4. Subs. by Act 28 of 2016, s. 15 for “one and three fourth” (w.e.f. 1-4-2018). 
5. Subs. by Act 14 of 2010, s. 9, for “scientific research association” (w.e.f. 1-4-2011). 
6. Subs. by Act 29 of 2006, s. 5, for the proviso (w.e.f. 1-4-2006). 
7. Ins. by Act 28 of 2016, s. 15 (we.f. 1-4-2018). 
8. Ins. by Act 18 of 2008, s. 7 (w.e.f. 1-4-2009). 
9. The words “an amount equal to one and one-fourth times of” omitted by Act 28 of 2016, s. 15 (w.e.f. 1-4-2018). 

185 

                                                           
1[(iii)  2[3***  4[any  sum  paid]  to  a  research  association  which  has  as  its  object  the  undertaking  of 
research in social science or statistical research or to a university], college or other institution to be used 
for research in social science or statistical research: 

5[Provided that  6[such  association,  university],  college  or  other  institution  for  the  purposes  of  this 

clause— 

(A)  is for the time being approved, in accordance with the guidelines, in the manner and subject 

to such conditions as may be prescribed; and 

(B) 6[such association, university], college or other institution is specified as such, by notification 

in the Official Gazette, by the Central Government.]] 

7[Explanation.—The deduction, to which the assessee is entitled in respect of any sum paid to a 
8[research  association],  university,  college  or  other  institution  to  which  clause  (ii)  or  clause  (iii) 
applies, shall not be denied merely on the ground that, subsequent to the payment of such sum by the 
assessee, the approval granted to the association, university, college or other institution referred to in 
clause (ii) or clause (iii) has been withdrawn;] 

(iv)  in  respect  of  any  expenditure  of  a  capital  nature  on  scientific  research  related  to  the  business 

carried on by the assessee, such deduction as may be admissible under the provisions of sub-section (2): 

9[Provided that  the  8[research  association],  university,  college  or  other  institution  referred  to  in       

clause (ii) or clause (iii)  shall  make  an  application in  the  prescribed  form  and manner  to the  10[Central 
Government] 
thereof,  under  
clause (ii) or, as the case may be, clause (iii): 

the  purpose  of  grant  of 

approval,  or 

continuance 

for 

Provided further that the  10[Central Government] may, before granting approval under clause (ii) or 
clause  (iii),  call  for  such  documents  (including  audited  annual  accounts)  or  information  from  the 
8[research  association],  university,  college  or  other  institution  as  it  thinks  necessary  in  order  to  satisfy 
itself  about  the  genuineness  of  the  activities  of  the  8[research  association],  university,  college  or  other 
institution and that 11[Government] may also make such inquiries as it may deem necessary in this behalf: 

Provided  also that  any  12[notification  issued,  by  the  Central  Government  under  clause  (ii)  or       

clause (iii), before the date on which the Taxation Laws (Amendment) Bill, 2006 receives the assent of 
the President, shall, at any one time, have effect for such assessment year or years, not exceeding three 
assessment  years]  (including  an  assessment  year  or  years  commencing  before  the  date  on  which  such 
notification is issued) as may be specified in the notification:] 

1. Subs. by Act 49 of 1991, s. 12, for clause (iii) (w.e.f. 1-4-1992). 
2. Subs. by Act 27 of 1999, s. 15, for “any sum paid” (w.e.f. 1-4-2000). 
3. The words “an amount equal to one and one-fourth times of” omitted by Act 28 of 2016, s. 15 (w.e.f. 1-4-2018). 
4. Subs. by Act 14 of 2010, s. 9, for “any sum paid to a university” (w.e.f. 1-4-2011). 
5. Subs. by Act 29 of 2006, s. 5, for the proviso (w.e.f. 1-4-2006). 
6. Subs. by Act 14 of 2010, s. 9, for “such university” (w.e.f. 1-4-2011). 
7. Ins. by Act 29 of 2006, s. 5 (w.e.f. 1-4-2006). 
8. Subs. by Act 14 of 2010, s. 9, for “scientific research association” (w.e.f. 1-4-2011). 
9. Ins. by Act 3 of 1989, s. 8 (w.e.f. 1-4-1989). 
10. Subs. by Act 27 of 1999, s. 15, for “prescribed authority” (w.e.f. 1-4-2000). 
11. Subs. by Act 29 of 2006, s. 5, for “authority” (w.e.f. 1-4-2006). 
12. Subs. by s. 5, ibid., for “notification issued by the Central Government under clause (ii) or clause (iii) shall, at any one 

time, have effect for such assessment year or years, not exceeding three assessment years” (w.e.f. 1-4-2006). 

186 

                                                           
1[Provided also that where an application under the first proviso is made on or after the date on which 
the Taxation Laws (Amendment) Bill, 2006 receives the assent of the President, every notification under 
clause (ii) or clause (iii) shall be issued or an order rejecting the application shall be passed within the 
period of twelve months from the end of the month in which such application was received by the Central 
Government.] 

(2) For the purposes of clause (iv) of sub-section (1),— 

2[(i)   in  a  case  where  such  capital  expenditure  is  incurred  before  the  1st  day  of  April,  1967,  
one-fifth of the capital expenditure incurred in any previous year shall be deducted for that previous 
year; and the balance of the expenditure shall be deducted in equal instalments for each of the four 
immediately succeeding previous years; 

(ia) in a case where such capital expenditure is incurred after the 31st day of  March, 1967, the 
whole of such capital expenditure incurred in any previous year shall be deducted for that previous 
year:] 

3[Provided that no deduction shall be admissible under this clause in respect of any expenditure 
incurred  on  the  acquisition  of  any  land,  whether  the  land  is  acquired  as  such  or  as  part  of  any 
property, after the 29th day of February, 1984.] 

4[Explanation 1].—Where any capital expenditure has been incurred before the commencement 
of  the  business,  the  aggregate  of  the  expenditure  so  incurred  within  the  three  years  immediately 
preceding the commencement of the business shall be deemed to have been incurred in the previous 
year in which the business is commenced. 

3[Explanation 2.—For the purposes of this clause,— 

(a) “land” includes any interest in land ; and 

(b) the acquisition of any land shall be deemed to have been made by the assessee on the date 
on which the instrument of transfer of such land to him has been registered under the Registration 
Act, 1908 (16 of 1908), or where he has taken or retained the possession of such land or any part 
thereof in part performance of a contract of the nature referred to in section 53A of the Transfer 
of Property Act, 1882 (4 of 1882), the date on which he has so taken or retained possession of 
such land or part;] 

(ii) notwithstanding anything contained in clause (i), where an asset representing expenditure of a 
capital nature  5[incurred before the 1st day of April, 1967], ceases to be used in a previous year for 
scientific  research  related  to  the  business  and  the  value  of  the  asset  at  the  time  of  the  cessation, 
together  with  the  aggregate  of  deductions  already  allowed  under  clause  (i)  falls  short  of  the  said 
expenditure, then— 

(a) there  shall  be  allowed  a  deduction  for  that  previous  year  of  an  amount  equal  to  such 

deficiency, and 

1. Ins. by Act 29 of 2006, s. 5 (w.e.f. 1-4-2006). 
2. Subs. by Act 20 of 1967, s. 33 and the Third Schedule, for clause (i) (w.e.f. 1-4-1968).  
3. Ins. by Act 21 of 1984, s. 6 (w.e.f. 1-4-1984). 
4. The Explanation numbered as Explanation 1 by s. 6, ibid. (w.e.f. 1-4-1984). 
5. Ins. by Act 20 of 1967, s. 33 and the Third Schedule (w.e.f. 1-4-1968). 

187 

                                                           
(b)   no  deduction  shall  be  allowed  under  that  clause  for  that  previous  year  or  for  any 

subsequent previous year; 

(iii) if the asset mentioned in clause (ii) is sold, without having been used for other purposes, in 
the  year  of  cessation,  the  sale  price  shall  be  taken  to  be  the  value  of  the  asset  at  the  time  of  the 
cessation ; and if the asset is sold, without having been used for other purposes, in a previous year 
subsequent to the year of cessation, and the sale price falls short of the value of the asset taken into 
account at the time of cessation, an amount equal to the deficiency shall be allowed as a deduction for 
the previous year in which the sale took place; 

(iv)  where  a  deduction  is  allowed  for  any  previous  year  under  this  section  in  respect  of 
expenditure represented wholly or partly by an asset, no deduction shall be allowed under 1[clause (ii) 
of sub-section (1)] of section 32 2[for the same or any other previous year] in respect of that asset; 

(v) 3[where the asset mentioned in clause (ii)is used] in the business after it ceases to be used for 
scientific  research  related  to  that  business,  depreciation  shall  be  admissible  under  4[clause  (ii)  of  
sub-section (1)] of section 32. 

5[(2A) 6[Where, before the 1st day of March, 1984,the assessee pays any sum] 7[(being any sum paid 
with  a  specific  direction  that  the  sum  shall  not  be  used  for  the  acquisition  of  any  land  or  building  or 
construction  of  any  building)]  to  a  scientific  research  association  or  university  or  college  or  other 
institution  referred  to  in  clause  (ii)  of  sub-section  (1)  8[or  to  a  public  sector  company]  to  be  used  for 
scientific  research  undertaken  under  a  programme  approved  in  this  behalf  by  the  prescribed  authority 
having regard to the social, economic and industrial needs of India, then,— 

(a)  there shall be allowed a deduction of a sum equal to one and one-third times the sum so paid; 

and 

(b)  no deduction in respect of such sum shall be allowed under clause (ii) of sub-section (1) for 

the same or any other assessment year.] 

8[Explanation.—For  the  purposes  of  this  sub-section, “public  sector  company”  shall  have  the  same 

meaning as in clause (b) of the Explanation below sub-section (2B) of section 32A.] 

9[(2AA) Where the assessee pays any sum to a National Laboratory  10[or a 11[University or an Indian 
Institute of  Technology or a specified person] with a specific direction that the said sum shall be used for 
scientific  research  undertaken  under  a  programme  approved  in  this  behalf  by  the  prescribed  authority, 
then— 

(a)  there shall be allowed a deduction of a sum equal to  12[one and one-half times] the sum so 

paid; and 

1.  Subs.  by  Act  46  of  1986,  s.  32,  for  “clauses  (i),  (ii),  (iia),  (iii)  and  (iv)  of  sub-section  (1)  or  under  sub-section  (1A)”              

(w.e.f. 1-4-1988). 

2. Subs. by Act 44 of 1980, s. 7, for “for the same previous year” (w.e.f. 1-4-1962). 
3. Subs. by Act 20 of 1967, s. 33 and the Third Schedule, for “where the asset is used” (w.e.f. 1-4-1968). 
4. Subs. by Act 46 of 1986, s. 32, for “clauses (i), (ii) and (iii) of sub-section (1)” (w.e.f. 1-4-1988). 
5. Ins. by Act 26 of 1974, s. 5 (w.e.f. 1-4-1974). 
6. Subs. by Act 21 of 1984, s. 6, for “Where the assessee pays any sum” (w.e.f. 1-4-1984). 
7. Ins. by Act 11 of 1983, s. 12 (w.e.f. 1-4-1984). 
8. Ins. by Act 44 of 1980, s. 7 (w.e.f. 1-9-1980). 
9. Ins. by Act 38 of 1993, s. 9 (w.e.f. 1-4-1994). 
10. Ins. by Act 32 of 1994, s. 13 (w.e.f. 1-4-1995). 
11. Subs. by Act 14 of 2001, s. 23, for “University or an Indian Institute of Technology” (w.e.f. 1-4-2002). 
12. Subs. by Act 28 of 2016, s. 15, for “two times” (w.e.f. 1-4-2018).  

188 

                                                           
(b)  no deduction in respect of such sum shall be allowed under any other provision of this Act: 

1[Provided that  the  prescribed  authority  shall,  before  granting  approval,  satisfy  itself  about  the 
feasibility  of  carrying  out  the  scientific  research  and  shall  submit  its  report  to  the 2[Principal  Chief 
Commissioner or Chief Commissioner or] 3[Principal Director General or Director General] in such form 
as may be prescribed.] 

4[Provided  further that  where  any  sum  is  paid  to  such  National  Laboratory  or  university  or  Indian 
Institute of Technology or specified person in a previous year relevant to the assessment year beginning 
on or after the 1st day of April, 2021, the deduction under this sub-section shall be equal to the sum so 
paid.] 

5[Explanation  1.—The  deduction,  to  which  the  assessee  is  entitled  in  respect  of  any  sum  paid  to  a 
National  Laboratory,  University,  Indian  Institute  of  Technology  or  a  specified  person  for  the  approved 
programme referred to in this sub-section, shall not be denied merely on the ground that, subsequent to 
the payment of such sum by the assessee, the approval granted to,— 

(a)  such Laboratory, or specified person has been withdrawn; or 

(b)   the  programme,  undertaken  by  the  National  Laboratory,  University,  Indian  Institute  of 

Technology or specified person, has been withdrawn.] 

6[7[Explanation 2].—For the purposes of this section,— 

(a)  “National  Laboratory”  means  a  scientific  laboratory  functioning  at the national level  under 
the aegis of the Indian Council of Agricultural Research, the Indian Council of Medical Research, the 
Council of Scientific and Industrial Research, the Defence Research and Development Organisation, 
the  Department  of  Electronics,  the  Department  of  Bio-Technology  or  the  Department  of  Atomic 
Energy and which is approved as a National Laboratory by the prescribed authority in such manner as 
may be prescribed; 

(b)  “University” shall have the same meaning as in Explanation to clause (ix) of section 47; 

(c)   “Indian  Institute  of  Technology”  shall  have  the  same  meaning  as  that  of  “Institute”  in  

clause (g) of section 3 of the Institutes of Technology Act, 1961 (59 of 1961);] 

8[(d) “specified person” means such person as is approved by the prescribed authority.] 

9[(2AB) (1) Where a company  10[engaged in the business of bio-technology or in  11[any business of 
manufacture or production of any article or thing, not being an article or thing specified in the list of the 

1. Subs. by Act 33 of 1996, s. 12, for the provisos (w.e.f. 1-10-1996). 
2. Ins. by Act 20 of 2015, s. 12 (w.e.f. 1-4-2016). 
3. Subs. by Act 25 of 2014, s. 4, for “Director General” (w.e.f. 1-6-2013). 
4. Ins. by Act 28 of 2016, s. 15 (w.e.f. 1-4-2018). 
5. The Explanation inserted by Act 29 of 2006, s. 5 (w.e.f. 1-4-2006). 
6. Subs. by Act 32 of 1994, s. 13, for the Explanation (w.e.f. 1-4-1995). 
7. The Explanation renumbered as Explanation 2 thereof by Act 29 of 2006, s. 5 (w.e.f. 1-4-2006).  
8. Ins. by Act 14 of 2001, s. 23 (w.e.f. 1-4-2002). 
9. Ins. by Act 26 of 1997, s. 5 (w.e.f. 1-4-1998). 
10. Subs. by Act 14 of 2001, s. 23, for “engaged in the business of” (w.e.f. 1-4-2002). 
11. Subs. by Act 33 of 2009, s. 12, for “the business of manufacture or production of any drugs, pharmaceuticals, electronic 
equipments, computers, telecommunication equipments, chemicals or any other article or thing notified by the Board” 
(w.e.f. 1-4-2010). 

189 

                                                           
Eleventh Schedule]] incurs any expenditure on scientific research (not being expenditure in the nature of 
cost of any land or building) on in-house research and development facility as approved by the prescribed 
authority, then, there shall be allowed a deduction of  1[a sum equal to  2[one and one-half times] of the 
expenditure] so incurred. 

3[Provided that where such expenditure on scientific research (not being expenditure in the nature of 
cost of any land or building) on in-house research and development facility is incurred in a previous year 
relevant to the assessment year beginning on or after the 1st day of April, 2021, the deduction under this 
clause shall be equal to the expenditure so incurred.] 

4[Explanation.—For  the  purposes  of  this  clause,  “expenditure  on  scientific  research”,  in  relation  to 
drugs  and  pharmaceuticals,  shall  include  expenditure incurred  on  clinical  drug  trial, obtaining  approval 
from any regulatory authority under any Central, State or Provincial Act and filing an application for a 
patent under the Patents Act, 1970 (39 of 1970).] 

(2)  No  deduction  shall  be allowed  in  respect  of  the  expenditure  mentioned  in  clause  (1)  under  any 

other provision of this Act. 

(3)  No  company  shall  be  entitled  for  deduction  under  clause  (1)  unless  it  enters  into  an  agreement 
with the prescribed authority for co-operation in such research and development facility and 5[fulfils such 
conditions  with  regard  to  maintenance  of  accounts  and  audit  thereof  and  furnishing  of  reports  in  such 
manner as may be prescribed]. 

(4) The prescribed authority shall submit its report in relation to the approval of the said facility to 
the 6[Principal Chief Commissioner or Chief Commissioner or]  7[Principal Director General or Director 
General] in such form and within such time as may be prescribed.] 

8* 

* 

* 

* 

* 

9[(6) No deduction shall be allowed to a company approved under  sub-clause (C) of clause (iia) of  
sub-section (1) in respect of the expenditure referred to in clause (1) which is incurred after the 31st day 
of March, 2008.] 

10[(2B)  (a)  11[Where,  before the  1st  day  of March, 1984,  an assessee  has incurred any  expenditure] 
(not  being  in  the  nature  of  capital  expenditure  incurred  on  the  acquisition  of  any  land  or  building  or 
construction  of  any  building)  on  scientific  research  undertaken  under  a  programme  approved  in  this 

1. Subs. by Act 10 of 2000, s. 16, for “a sum equal to one and one-fourth times of the expenditure” (w.e.f. 1-4-2001). 

2. Subs. by Act 28 of 2016, s. 15 for “two times” (w.e.f. 1-4-2018). 

3. Ins. by s. 15, ibid. (w.e.f. 1-4-2018). 

4. Ins. by Act 14 of 2001, s. 23 (w.e.f. 1-4-2002). 

5. Subs. by Act 20 of 2015, s. 12, for “for audit of accounts maintained for that facility” (w.e.f. 1-4-2016). 

6. Ins. by s. 12, ibid. (w.e.f. 1-4-2016). 

7. Subs. by Act 25 of 2014, s. 4, for “Director General” (w.e.f. 1-6-2013). 

8. Clause (5) omitted by Act 28 of 2016, s. 15 (w.e.f. 1-4-2018). 

9. Ins. by Act 18 of 2008, s. 7 (w.e.f. 1-4-2009). 

10. Ins. by Act 44 of 1980, s. 7 (w.e.f. 1-9-1980). 

11. Subs. by Act 21 of 1984, s. 6, for “Where an assessee has incurred any expenditure” (w.e.f. 1-4-1984). 

190 

 
 
 
 
 
 
 
 
                                                           
behalf by the prescribed authority having regard to the social, economic and industrial needs of India, he 
shall,  subject  to  the  provisions  of  this  sub-section,  be  allowed  a  deduction  of  a  sum  equal  to  one  and  
one-fourth  times  the  amount  of  the  expenditure  certified  by  the  prescribed  authority  to  have  been  so 
incurred during the previous year. 

(b)  Where  a  deduction  has  been  allowed  under  clause  (a)  for  any  previous  year  in  respect  of  any 
expenditure,  no  deduction  in  respect  of  such  expenditure  shall  be  allowed  under  clause  (i)  of  
sub-section (1) or clause (ia) of sub-section (2) for the same or any other previous year. 

(c)  Where  a  deduction  is  allowed  for  any  previous  year  under  this  sub-section  in  respect  of 
expenditure represented wholly or partly by an asset, no deduction shall be allowed in respect of that asset 
under 1[clause (ii) of sub-section (1)] of section 32 for the same or any subsequent previous year. 

(d) Any deduction made under this sub-section in respect of any expenditure on scientific research in 
excess of the expenditure actually incurred shall be deemed to have been wrongly made for the purposes 
of this Act if the assessee fails to furnish within one year of the period allowed by the prescribed authority 
for  completion  of  the  programme,  a  certificate  of  its  completion  obtained  from  that  authority,  and  the 
provisions of sub-section (5B) of section 155 shall apply accordingly.] 

2[(3)  If  any  question  arises  under  this  section  as  to  whether,  and  if  so,  to  what  extent,  any  activity 
constitutes or constituted, or any asset is or was being used for, scientific research, the Board shall refer 
the question to— 

(a)  the Central Government, when such question relates to any activity under clauses (ii) and (iii) 

of sub-section (1), and its decision shall be final; 

(b)   the  prescribed  authority,  when  such  question  relates  to  any  activity  other  than  the  activity 

specified in clause (a), whose decision shall be final.] 

(4)  The  provisions  of  sub-section  (2)  of  section  32shall  apply  in  relation  to  deductions  allowable 
under  clause  (iv)  of  sub-section  (1)  as  they  apply  in  relation  to  deductions  allowable  in  respect  of 
depreciation. 

3[(5) Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfers to 
the  amalgamated  company  (being  an  Indian  company)  any  asset  representing  expenditure  of  a  capital 
nature on scientific research,— 

(i) the amalgamating company shall not be allowed the deduction under clause (ii) or clause (iii) 

of sub-section (2); and 

(ii) the provisions of this section shall, as far as may be, apply to the amalgamated company as 
they  would  have  applied  to  the  amalgamating  company  if  the  latter  had  not  so  sold  or  otherwise 
transferred the asset.] 

1.  Subs.  by  Act  46  of  1986,  s.  32,  for  “clauses  (i),  (ii),  (iia)  and  (iii)  of  sub-section  (1)  or  under  sub-section  (1A)”  

(w.e.f. 1-4-1988). 

2. Subs. by Act 27 of 1999, s. 15, for sub-section (3) (w.e.f. 1-4-2000). 
3. Ins. by Act 20 of 1967, s. 13 (w.e.f. 1-4-1967). 

191 

                                                           
1[35A.  Expenditure  on  acquisition  of  patent  rights  or  copyrights.— (1)  In  respect  of  any 
expenditure of a capital nature incurred after the 28th day of February, 1966  2[but before the 1st day of 
April,  1998],  on  the  acquisition  of  patent  rights  or  copyrights  (hereafter,  in  this  section,  referred  to  as 
rights) used for the purposes of the business, there shall, subject to and in accordance with the provisions 
of this section, be allowed for each of the relevant previous years, a deduction equal to the appropriate 
fraction of the amount of such expenditure. 

Explanation.—For the purposes of this section,— 

(i)  “relevant previous years” means the fourteen previous years beginning with the previous year 
in  which  such  expenditure  is  incurred  or,  where  such  expenditure  is  incurred  before  the 
commencement  of  the  business,  the  fourteen  previous  years  beginning  with  the  previous  year  in 
which the business commenced : 

Provided that where the rights commenced, that is to say, became effective, in any year prior to 
the previous year in which expenditure on the acquisition thereof was incurred by the assessee, this 
clause  shall  have  effect  with  the  substitution  for  the  reference  to  fourteen  years  of  a  reference  to 
fourteen years less the number of complete years which, when the rights are acquired by the assessee, 
have elapsed since the commencement thereof, and if fourteen years have elapsed as aforesaid, of a 
reference to one year; 

(ii)  “appropriate fraction” means the fraction the numerator of which is one and the denominator 

of which is the number of the relevant previous years. 

(2) Where the rights come to an end without being subsequently revived or where the whole or any 
part of the rights is sold and the proceeds of the sale (so far as they consist of capital sums) are not less 
than  the  cost  of  acquisition  thereof  remaining  unallowed,  no  deduction  under  sub-section  (1)  shall  be 
allowed in respect  of  the  previous  year  in  which the rights come  to an  end  or, as  the case  may  be,  the 
whole or any part of the rights is sold or in respect of any subsequent previous year. 

(3) Where  the  rights  either  come  to  an  end  without  being  subsequently  revived  or  are  sold  in their 
entirety  and  the  proceeds  of  the  sale  (so  far  as  they  consist  of  capital  sums)  are  less  than  the  cost  of 
acquisition thereof remaining unallowed, a deduction equal to such cost remaining unallowed or, as the 
case may be, such cost remaining unallowed as reduced by the proceeds of the sale, shall be allowed in 
respect of the previous year in which the rights come to an end, or, as the case may be, are sold.] 

(4)  Where  the  whole  or  any  part  of  the  rights  is  sold  and  the  proceeds  of  the  sale  (so  far  as  they 
consist  of  capital  sums)  exceed  the  amount  of  the  cost  of  acquisition  thereof  remaining  unallowed,  so 
much of the excess as does not exceed the difference between the cost of acquisition of the rights and the 
amount of such cost remaining unallowed shall be chargeable to income-tax as income of the business of 
the previous year in which the whole or any part of the rights is sold. 

Explanation.—Where  the  whole  or  any  part  of  the  rights  is  sold  in  a  previous  year  in  which  the 
business is no longer in existence, the provisions of this sub-section shall apply as if the business is in 
existence in that previous year. 

(5) Where a part of the rights is sold and sub-section (4) does not apply, the amount of the deduction 

to be allowed under sub-section (1) shall be arrived at by— 

(a)  subtracting the proceeds of the sale (so far as they consist of capital sums) from the amount 

of the cost of acquisition of the rights remaining unallowed; and 

(b)  dividing the remainder by the number of relevant previous years which have not expired at 

the beginning of the previous year during which the rights are sold.] 

1. Ins. by Act 13 of 1966, s. 10 (w.e.f. 1-4-1966). 
2. Ins. by Act 21 of 1998, s. 12 (w.e.f. 1-4-1999). 

192 

                                                           
1[(6)  Where, in  a  scheme  of  amalgamation,  the  amalgamating  company  sells  or otherwise  transfers 

the rights to the amalgamated company (being an Indian company),— 

 (i)   the  provisions  of  sub-sections  (3)  and  (4)  shall  not  apply  in  the  case  of  the  amalgamating 

company; and 

(ii) the provisions of this section shall, as far as may be, apply to the amalgamated company as 
they  would  have  applied  to  the  amalgamating  company  if  the  latter  had  not  so  sold  or  otherwise 
transferred the rights.] 

2[(7) Where in a scheme of demerger, the demerged company sells or otherwise transfers the rights to 

the resulting company (being an Indian company),— 

(i)   the  provisions  of  sub-sections  (3)  and  (4)  shall  not  apply  in  the  case  of  the  demerged 

company; and 

(ii) the provisions of this section shall, as far as may be, apply to the resulting company as they 
would have applied to the demerged company, if the latter had not sold or otherwise transferred the 
rights.] 

3[35AB.  Expenditure  on  know-how.—(1)  Subject  to  the  provisions  of  sub-section  (2),  where  the 

assessee  has  paid  4[in  any  previous  year  relevant  to  the  assessment  year  commencing  on  or  before  the             
1st day of April, 1998] any lump sum consideration for acquiring any know-how for use for the purposes 
of his business, one-sixth of the amount so paid shall be deducted in computing the profits and gains of 
the  business  for  that  previous  year,  and  the  balance  amount  shall  be  deducted  in  equal  instalments  for 
each of the five immediately succeeding previous years. 

(2)  Where  the  know-how  referred  to  in  sub-section  (1)  is  developed  in  a  laboratory,  university  or 
institution referred  to  in  sub-section (2B)  of  section  32A,  one-third  of  the  said lump  sum  consideration 
paid  in  the  previous  year  by  the  assessee  shall  be  deducted  in  computing  the  profits  and  gains  of  the 
business for that year, and the balance amount shall be deducted in equal instalments for each of the two 
immediately succeeding previous years. 

5[(3) Where there is a transfer of an undertaking under a scheme of amalgamation or demerger and 
the  amalgamating  or  the  demerged  company  is  entitled  to  a  deduction  under  this  section,  then,  the 
amalgamated company or the resulting company, as the case may be, shall be entitled to claim deduction 
under this section in respect of such undertaking to the same extent and in respect of the residual period as 
it would have been allowable to the amalgamating company or the demerged company, as the case may 
be, had such amalgamation or demerger not taken place.] 

Explanation.—For  the  purposes  of  this  section,  “know-how”  means  any  industrial  information  or 
technique likely to assist in the manufacture or processing of goods or in the working of a mine, oil well 
or other sources of mineral deposits (including the searching for, discovery or testing of deposits or the 
winning of access thereto).] 

6[35ABA. Expenditure for obtaining right to use spectrum for telecommunication services.—(1) 
In respect of any expenditure, being in the nature of capital expenditure, incurred for acquiring any right 
to  use  spectrum  for  telecommunication  services  either  before  the  commencement  of  the  business  or 
thereafter at any time during any previous year and for which payment has actually been made to obtain a 
right  to  use  spectrum,  there  shall,  subject  to  and  in  accordance  with  the  provisions  of  this  section,  be 

1. Ins. by Act 26 of 1967, s. 14 (w.e.f. 1-4-1967). 
2. Ins. by Act 27 of 1999, s. 16 (w.e.f. 1-4-2000). 
3. Ins. by Act 32 of 1985, s. 8 (w.e.f. 1-4-1986). 
4. Subs. by Act 21 of 1998, s. 12, for “in any previous year” (w.e.f. 1-4-1999). 
5. Ins. by Act 27 of 1999, s. 17 (w.e.f. 1-4-2000). 
6. Ins. by Act 28 of 2016, s. 16 (w.e.f. 1-4-2017). 

193 

                                                           
allowed  for  each  of  the  relevant  previous  years,  a  deduction  equal  to  the  appropriate  fraction  of  the 
amount of such expenditure. 

(2) The  provisions contained  in  sub-sections  (2)  to  (8)  of section  35  ABB,  shall  apply  as  if for the 

word “licence”, the word “spectrum” had been substituted. 

(3)  Where,  in  a  previous  year,  any  deduction  has  been  claimed  and  granted  to  the  assessee  under           

sub-section (1), and, subsequently, there is failure to comply with any of the provisions of this section, 
then,— 

(a) the deduction shall be deemed to have been wrongly allowed; 

(b)  the  Assessing  Officer  may,  notwithstanding  anything  contained  in  this  Act,  re-compute  the 

total income of the assessee for the said previous year and make the necessary rectification; 

(c)  the  provisions  of section  154 shall,  so  far  as  may  be,  apply  and  the  period  of  four  years 
specified in sub-section (7) of that section being reckoned from the end of the previous year in which 
the failure to comply with the provisions of this section takes place. 

Explanation.—For the purposes of this section,— 

(i) “relevant previous years” means,— 

(A) in a case where the spectrum fee is actually paid before the commencement of the business to 
operate  telecommunication  services,  the  previous  years  beginning  with  the  previous  year  in  which 
such business commenced; 

(B) in any other case, the previous years beginning with the previous year in which the spectrum 

fee is actually paid, 

and the subsequent previous year or years during which the spectrum, for which the fee is paid, 
shall be in force; 

(ii) “appropriate fraction” means the fraction, the numerator of which is one and the denominator of 

which is the total number of the relevant previous years; 

(iii) “payment has actually been made” means the actual payment of expenditure irrespective of the 
previous  year  in  which  the  liability  for  the  expenditure  was  incurred  according  to  the  method  of 
accounting regularly employed by the assessee or payable in such manner as may be prescribed.] 

1[35ABB.  Expenditure  for  obtaining  licence  to  operate  telecommunication  services.—(1)  In 
respect of any expenditure, being in the nature of capital expenditure, incurred 2[for acquiring any right to 
operate  telecommunication  services  either  before  the  commencement  of  the  business  to  operate 
telecommunication  services  or  thereafter  at  any  time  during  any  previous  year] and  for  which  payment 
has actually been made to obtain a licence, there shall, subject to and in accordance with the provisions of 
this  section,  be  allowed  for  each  of  the  relevant  previous  years,  a  deduction  equal  to  the  appropriate 
fraction of the amount of such expenditure. 

Explanation.—For the purposes of this section,— 

3[(i)  “relevant previous years” means,— 

(A)  in a case where the licence fee is actually paid before the commencement of the business 
to  operate  telecommunication  services,  the  previous  years  beginning  with  the  previous  year  in 
which such business commenced; 

(B)   in  any  other  case,  the  previous  years  beginning  with  the  previous  year  in  which  the 

licence fee is actually paid, 

1. Ins. by Act 26 of 1997, s. 6 (w.e.f. 1-4-1996). 
2. Subs. by Act 27 of 1999, s. 18, for “for acquiring any right to operate telecommunication services” (w.e.f. 1-4-1996).   
3. Subs. by s. 18, for clause (i) (w.e.f. 1-4-1996).   

194 

                                                           
and the subsequent previous year or years during which the licence, for which the fee is paid, shall be in 
force;] 

(ii)  “appropriate fraction” means the fraction the numerator of which is one and the denominator 

of which is the total number of the relevant previous years; 

(iii) “payment has actually been made” means the actual payment of expenditure irrespective of 
the previous year in which the liability for the expenditure was incurred according to the method of 
accounting regularly employed by the assessee. 

(2) Where the licence is transferred and the proceeds of the transfer (so far as they consist of capital 
sums) are less than the expenditure incurred remaining unallowed, a deduction equal to such expenditure 
remaining  unallowed,  as  reduced  by  the  proceeds  of  the  transfer,  shall  be  allowed  in  respect  of  the 
previous year in which the licence is transferred. 

(3) Where the whole or any part of the licence is transferred and the proceeds of the transfer (so far as 
they  consist  of  capital  sums)  exceed  the  amount  of  the  expenditure  incurred  remaining  unallowed,  so 
much  of  the  excess  as  does  not  exceed  the  difference  between  the  expenditure  incurred  to  obtain  the 
licence  and  the  amount  of  such  expenditure  remaining  unallowed  shall  be  chargeable  to  income-tax  as 
profits and gains of the business in the previous year in which the licence has been transferred. 

Explanation.—Where the licence is transferred in a previous year in which the business is no longer 
in existence, the provisions of this sub-section shall apply as if the business is in existence in that previous 
year. 

(4) Where the whole or any part of the licence is transferred and the proceeds of the transfer (so far as 
they consist of capital sums) are not less than the amount of expenditure incurred remaining unallowed, 
no deduction for such expenditure shall be allowed under sub-section (1) in respect of the previous year in 
which the licence is transferred or in respect of any subsequent previous year or years. 

(5) Where a part of the licence is transferred in a previous year and sub-section (3) does not apply, the 
deduction  to  be  allowed  under  sub-section  (1)  for  expenditure  incurred  remaining  unallowed  shall  be 
arrived at by— 

(a)   subtracting  the  proceeds  of  transfer  (so  far  as  they  consist  of  capital  sums)  from  the 

expenditure remaining unallowed; and 

(b)  dividing the remainder by the number of relevant previous years which have not expired at 

the beginning of the previous year during which the licence is transferred. 

(6) Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfers the 

licence to the amalgamated company (being an Indian company),— 

(i)  the provisions of sub-sections (2), (3) and (4) shall not apply in the case of the amalgamating 

company; and 

(ii)  the provisions of this section shall, as far as may be, apply to the amalgamated company as 

they would have applied to the amalgamating company if the latter had not transferred the licence.] 

1[(7) Where, in a scheme of demerger, the demerged company sells or otherwise transfers the licence 

to the resulting company (being an Indian company),— 

(i)   the  provisions  of  sub-sections  (2),  (3)  and  (4)  shall  not  apply  in  the  case  of  the  demerged 

company; and 

(ii)  the provisions of this section shall, as far as may be, apply to the resulting company as they 

would have applied to the demerged company if the latter had not transferred the licence.] 

1. Ins. by Act 27 of 1999, s. 18 (w.e.f. 1-4-2000). 

195 

                                                           
1[(8) Where a deduction for any previous year under sub-section (1) is claimed and allowed in respect 
of any expenditure referred to in that sub-section, no deduction shall be allowed under sub-section (1) of 
section 32 for the same previous year or any subsequent previous year.] 

2[35AC. Expenditure  on  eligible  projects  or  schemes.—  (1)  Where  an  assessee  incurs  any 
expenditure  by  way  of  payment  of  any  sum  to  a  public  sector  company  or  a  local  authority  or  to  an 
association  or  institution  approved by  the  National  Committee  for  carrying  out  any  eligible  project  or 
scheme, the assessee shall, subject to the provisions of this section, be allowed a deduction of the amount 
of such expenditure incurred during the previous year : 

Provided that  a  company  may,  for  claiming  the  deduction  under this  sub-section,  incur  expenditure 

either by way of payment of any sum as aforesaid or directly on the eligible project or scheme. 

(2) The deduction under sub-section (1) shall not be allowed unless the assessee furnishes along with 

his return of income a certificate— 

 (a)  where  the  payment  is  to  a  public  sector  company  or  a  local  authority  or  an  association  or 
institution referred to in sub-section (1), from such public sector company or local authority or, as the 
case may be, association or institution; 

 (b) in any other case, from an accountant, as defined in the Explanation below sub-section (2) of  

section 288, 

in such form, manner and containing such particulars (including particulars relating to the progress in 
the work relating to the eligible project or scheme during the previous year) as may be prescribed. 

3[Explanation.—The  deduction,  to  which  the  assessee  is  entitled  in  respect  of  any  sum  paid  to  a 
public sector company or a local authority or to an association or institution for carrying out the eligible 
project  or  scheme  referred  to  in  this  section  applies,  shall  not  be  denied  merely  on  the  ground  that 
subsequent to the payment of such sum by the assessee,— 

(a)  the approval granted to such association or institution has been withdrawn; or 

(b)   the  notification  notifying  the  eligible  project  or  scheme  carried  out  by  the  public  sector 

company or local authority or association or institution has been withdrawn.] 

(3) Where a deduction under this section is claimed and allowed for any assessment year in respect of 
any  expenditure  referred  to  in  sub-section  (1),  deduction  shall  not  be  allowed  in  respect  of  such 
expenditure under any other provision of this Act for the same or any other assessment year. 

4[(4)  Where  an  association  or  institution  is  approved  by  the  National  Committee  under                    

sub-section (1), and subsequently— 

(i)  that Committee is satisfied that the project or the scheme is not being carried on in accordance 

with all or any of the conditions subject to which approval was granted; or 

(ii)  such association or institution, to which approval has been granted, has not furnished to the 
National Committee, after the end of each financial year, a report in such form and setting forth such 
particulars and within such time as may be prescribed 

the National Committee may, at any time, after giving a reasonable opportunity of showing cause against 
the proposed withdrawal to the concerned association or institution, withdraw the approval: 

Provided that  a  copy  of  the  order  withdrawing  the  approval  shall  be  forwarded  by  the  National 

Committee to the Assessing Officer having jurisdiction over the concerned association or institution. 

1. Ins. by Act 27 of 1999, s. 18 (w.e.f. 1-4-1996). 
2. Ins. by Act 49 of 1991, s. 13 (w.e.f. 1-4-1992). 
3. Ins. by Act 29 of 2006, s. 6 (w.e.f. 1-4-2006). 
4. Subs by Act 23 of 2004, s. 10 for sub-section (4) (w.e.f. 1-10-2004).    

196 

                                                           
(5) Where any project or scheme has been notified as an eligible project or scheme under clause (b) of 

the Explanation, and subsequently— 

(i)  the National Committee is satisfied that the project or the scheme is not being carried on in 

accordance with all or any of the conditions subject to which such project or scheme was notified; or 

(ii)  a report in respect of such eligible project or scheme has not been furnished after the end of 
each financial year, in such form and setting forth such particulars and within such time as may be 
prescribed, 

such notification may be withdrawn in the same manner in which it was issued: 

Provided that  a  reasonable  opportunity  of  showing  cause  against  the  proposed  withdrawal  shall  be 
given by the National Committee to the concerned association, institution, public sector company or local 
authority, as the case may be: 

Provided  further that  a  copy  of  the  notification  by  which  the  notification  of  the  eligible  project  or 
scheme is withdrawn shall be forwarded to the Assessing Officer having jurisdiction over the concerned 
association,  institution,  public  sector  company  or  local  authority,  as  the  case  may  be,  carrying  on  such 
eligible project or scheme.] 

1[(6) Notwithstanding anything contained in any other provision of this Act, where— 

(i)  the approval of the National Committee, granted to an association or institution, is withdrawn 
under sub-section (4) or the notification in respect of eligible project or scheme is withdrawn in  the 
case  of  a  public  sector  company  or  local  authority  or  an  association  or  institution  under                   
sub-section (5); or 

(ii)   a  company  has  claimed  deduction  under  the  proviso  to  sub-section  (1)  in  respect  of  any 
expenditure incurred directly on the eligible project or scheme and the approval for such project or 
scheme is withdrawn by the National Committee under sub-section (5), 

the  total  amount  of  the  payment  received  by  the  public  sector  company  or  the  local  authority  or  the 
association  or  the  institution,  as  the  case  may  be,  in  respect  of  which  such  company  or  authority  or 
association  or  institution  has  furnished  a  certificate  referred  to  in  clause  (a)  of  sub-section  (2)  or  the 
deduction claimed by a company under the proviso to sub-section (1) shall be deemed to be the income of 
such company or authority or association or institution, as the case may be, for the previous year in which 
such  approval  or  notification  is  withdrawn  and  tax  shall  be  charged  on  such  income  at  the  maximum 
marginal rate in force for that year.] 

2[(7) No deduction under this section shall be allowed in respect of any assessment year commencing 

on or after the 1st day of April, 2018.] 

Explanation.—For the purposes of this section,— 

(a)   “National  Committee”  means  the  Committee  constituted  by  the  Central  Government,  from 

amongst persons of eminence in public life, in accordance with the rules made under this Act; 

(b)   “eligible  project  or  scheme”  means  such  project  or  scheme  for  promoting  the  social  and 
economic welfare of, or the uplift of, the public as the Central Government may, by notification in the 
Official Gazette, specify in this behalf on the recommendations of the National Committee.] 

3[35AD.  Deduction  in  respect  of  expenditure  on  specified  business.—  (1)  An  assessee  shall  be 
allowed  a  deduction  in  respect  of  the  whole  of  any  expenditure  of  capital  nature  incurred,  wholly  and 
exclusively,  for  the  purposes  of  any  specified  business  carried  on  by  him  during  the  previous  year  in 
which such expenditure is incurred by him: 

1. Ins. by Act 20 of 2002, s. 16 (w.e.f. 1-4-2003). 
2. Ins. by Act 28 of 2016, s. 17 (w.e.f. 1-4-2017).  
3. Ins. by Act 33 of 2009, s. 13 (w.e.f. 1-4-2010). 

197 

                                                           
Provided that  the  expenditure  incurred,  wholly  and  exclusively,  for  the  purposes  of  any  specified 
business, shall be allowed as deduction during the previous year in which he commences operations of his 
specified business, if— 

(a)  the expenditure is incurred prior to the commencement of its operations; and 

(b)  the  amount  is  capitalised  in  the  books  of  account  of  the  assessee  on  the  date  of 

commencement of its operations.] 

 1 *  

   * 

* 

* 

*  

(2)  This  section  applies  to  the  specified  business  which  fulfils  all  the  following  conditions,          

namely:— 

(i)  it is not set up by splitting up, or the reconstruction, of a business already in existence; 

(ii)  it is not set up by the transfer to the specified business of machinery or plant previously used 

for any purpose; 

(iii)  where  the  business  is  of  the  nature  referred  to  in  sub-clause  (iii)  of  clause  (c)  of                          

sub-section (8), such business,— 

 (a)   is  owned  by  a  company  formed  and  registered  in  India  under  the  Companies                        

Act, 1956 (1 of 1956) or by a consortium of such companies or by an authority or a board or a 
corporation established or constituted under any Central or State Act; 

 (b)   has  been  approved  by  the  Petroleum  and  Natural  Gas  Regulatory  Board  established 

under  sub-section  (1)  of  section  3  of  the  Petroleum  and  Natural  Gas  Regulatory  Board             
Act,  2006  (19  of  2006)  and  notified  by  the  Central  Government  in  the  Official  Gazette  in  this 
behalf; 

 (c)   has  made  not  less  than  2[such  proportion  of  its  total  pipeline  capacity  as  specified  by 
regulations  made  by  the  Petroleum  and  Natural  Gas  Regulatory  Board  established  under  sub-
section  (1)  of  section  3  of  the  Petroleum  and  Natural  Gas  Regulatory  Board  Act,  2006  (19  of 
2006)]  available  for  use  on  common  carrier  basis  by  any  person  other  than  the  assessee  or  an 
associated person; and 

(d)  fulfils any other condition as may be prescribed. 

3[(iv)  where  the  business  is  of  the  nature  referred  to  in  sub-clause  (xiv)  of  clause  (c)  of                    

sub-section (8), such business,— 

(A) is owned by a company registered in India or by a consortium of such companies or by an 
authority or a board or corporation or any other body established or constituted under any Central 
or State Act; 

(B)  entity  referred  to  in  sub-clause  (A)  has  entered  into  an  agreement  with  the  Central 
Government  or  a  State  Government  or  a  local  authority  or  any  other  statutory  body  for 
developing  or  operating  and  maintaining  or  developing,  operating  and  maintaining,  a  new 
infrastructure facility.] 

4[(3) Where a deduction under this section is claimed and allowed in respect of the specified business 
for  any  assessment  year,  no  deduction  shall  be  allowed  under  the  provisions  of   5[section  10AA and] 

1. Sub-section (1A) Omitted by Act 28 of 2016, s. 18 (w.e.f 1-4-2018). 
2. Subs. by Act 14 of 2010, s. 10, for the words “one-third of its total pipeline capacity” (w.e.f. 1-4-2010). 
3. Ins. by Act 28 of 2016, s. 18 (w.e.f. 1-4-2018). 
4. Subs. by Act 14 of 2010, s. 10, for sub-section (3) (w.e.f. 1-4-2011).  
5. Ins. by Act 25 of 2014, s. 12 (w.e.f. 1-4-2015). 

198 

 
 
 
 
 
 
 
                                                           
Chapter  VIA  under  the  heading”  C.—Deductions  in  respect  of  certain  incomes” in  relation  to  such 
specified business for the same or any other assessment year.] 

(4) No deduction in respect of the expenditure referred to in sub-section (1) shall be allowed to the 

assessee under any other section in any previous year or under this section in any other previous year. 

(5) The provisions of this section shall apply to the specified business referred to in sub-section (2) if 

it commences its operations,— 

(a)  on or after the 1st day of April, 2007, where the specified business is in the nature of laying 
and operating a cross-country natural gas pipeline network for distribution, including storage facilities 
being an integral part of such network; 1*** 

2[(aa)   on  or  after  the  1st  day  of  April,  2010,  where  the  specified  business  is  in  the  nature  of 
building  and  operating  a  new  hotel  of  two-star  or  above  category  as  classified  by  the  Central 
Government; 

(ab)  on  or  after  the  1st  day  of  April,  2010,  where  the  specified  business  is  in  the  nature  of 

building and operating a new hospital with at least one hundred beds for patients; 

(ac)  on  or  after  the  1st  day  of  April,  2010,  where  the  specified  business  is  in  the  nature  of 
developing and building a housing project under a scheme for slum redevelopment or rehabilitation 
framed by the Central Government or a State Government, as the case may be, and which is notified 
by the Board in this behalf in accordance with the guidelines as may be prescribed; 3***] 

4[(ad)  on  or  after  the  1st  day  of  April,  2011,  where  the  specified  business  is  in  the  nature  of 
developing  and  building  a  housing  project  under  a  scheme  for  affordable  housing  framed  by  the 
Central  Government  or  a  State  Government,  as  the  case  may  be,  and  notified  by  the  Board  in  this 
behalf in accordance with the guidelines as may be prescribed; 

(ae) on or after the 1st day of April, 2011, in a new plant or in a newly installed capacity in an 

existing plant for production of fertilizer; 5***] 

6(af) on or after the 1st day of April, 2012, where the specified business is in the nature of setting 
up and operating an inland container depot or a container freight station notified or approved under 
the Customs Act, 1962 (52 of 1962); 

(ag) on or after the 1st day of April, 2012, where the specified business is in the nature of bee-

keeping and production of honey and beeswax; 

(ah) on or after the 1st day of April, 2012, where the specified business is in the nature of setting 

up and operating a warehousing facility for storage of sugar; 7***] 

 8[(ai) on or after the 1st day of April, 2014, where the specified business is in the nature of laying 

and operating a slurry pipeline for the transportation of iron ore; 

(aj) on or after the 1st day of April, 2014, where the specified business is in the nature of setting 
up and operating a semi-conductor wafer fabrication manufacturing unit, and which is notified by the 
Board in accordance with such guidelines as may be prescribed; 9***] 

1. The word “and” omitted by Act 14 of 2010, s. 10 (w.e.f. 1-4-2011).   
2. Ins. by s. 10, ibid. (w.e.f. 1-4-2011). 
3. The word “and” omitted by Act 8 of 2011, s. 6 (w.e.f. 1-4-2012). 
4. Ins. by s. 6, ibid. (w.e.f. 1-4-2012). 
5. The word “and” omitted by Act 23 of 2012, s. 9 (w.e.f. 1-4-2013). 
6. Ins. by s. 9, ibid. (w.e.f. 1-4-2013). 
7. The word “and” omitted by Act 25 of 2014, s. 12 (w.e.f. 1-4-2015).  
8. Ins. by s. 12, ibid. (w.e.f. 1-4-2015). 
9. The word “and” omitted by Act 28 of 2016, s. 18 (w.e.f. 1-4-2018).  

199 

                                                           
1[(ak)  on  or  after  the  1st  day  of  April,  2017,  where  the  specified  business  is  in  the  nature  of 
developing or operating and maintaining or developing, operating and maintaining, any infrastructure 
facility; and] 

(b)  on or after the 1st day of April, 2009, in all other cases not falling under 2[any of the above 

clauses.] 

(6) The assessee carrying on the business of the nature referred to in clause (a) of sub-section (5) shall 
be  allowed,  in  addition  to  deduction  under  sub-section  (1),  a  further  deduction  in  the  previous  year 
relevant  to  the  assessment  year  beginning  on  the  1st  day  of  April,  2010,  of  an  amount  in  respect  of 
expenditure of capital nature incurred during any earlier previous year, if— 

(a)  the business referred to in clause (a) of sub-section (5) has commenced its operation at any 
time during the period beginning on or after the 1st day of April, 2007 and ending on the 31st day of 
March, 2009; and 

(b)  no deduction for such amount has been allowed or is allowable to the assessee in any earlier 

previous year. 

3[(6A)  Where  the  assessee builds  a  hotel  of  two-star  or  above  category  as  classified  by  the  Central 
Government  and  subsequently,  while  continuing  to  own  the  hotel,  transfers  the  operation  thereof  to 
another person, the assessee shall be deemed to be carrying on the specified business referred to in sub-
clause (iv) of clause (c) of sub-section (8).] 

(7) The provisions contained in sub-section (6) of section 80A and the provisions of sub-sections (7) 
and (10) of section 80-IA  shall, so far as may be, apply to this section in respect of goods or services or 
assets held for the purposes of the specified business. 

4[(7A) Any asset in respect of which a deduction is claimed and allowed under this section shall be 
used only for the specified business, for a period of eight years beginning with the previous year in which 
such asset is acquired or constructed. 

(7B) Where any asset, in respect of which a deduction is claimed and allowed under this section, is 
used  for  a  purpose  other  than  the  specified  business  during  the  period  specified  in  sub-section  (7A), 
otherwise than by way of a mode referred to in clause (vii) of section 28, the total amount of deduction so 
claimed and allowed in one or more previous years, as reduced by the amount of depreciation allowable 
in accordance with the provisions of section 32, as if no deduction under this section was allowed, shall 
be deemed to be the income of the assessee chargeable under the head “Profits and gains of business or 
profession” of the previous year in which the asset is so used. 

(7C)  Nothing  contained  in  sub-section  (7B)  shall  apply  to  a  company  which  has  become  a  sick 
industrial  company  under  sub-section  (1)  of  section  17  of  the  Sick  Industrial  Companies  (Special 
Provisions) Act, 1985 (1 of 1986), during the period specified in sub-section (7A).] 

(8) For the purposes of this section,— 

(a)  an“associated person”, in relation to the assessee, means a person,— 

 (i)   who  participates,  directly  or  indirectly,  or  through  one  or  more  intermediaries  in  the 

management or control or capital of the assessee; 

1. Ins. by Act 28 of 2016, s. 18 (w.e.f. 1-4-2018).   
2. Subs. by Act 23 of 2012, s. 9, for “clause (a), clause (aa), clause (ab) and clauses (ac)” (w.e.f. 1-4-2013).    
3. Ins. by s. 9, ibid. (w.e.f. 1-4-2011). 
4. Ins. by Act 25 of 2014, s. 12 (w.e.f. 1-4-2015). 

200 

                                                           
 
 (ii)  who holds, directly or indirectly, shares carrying not less than twenty-six per cent of the 

voting power in the capital of the assessee; 

(iii)  who  appoints  more  than  half  of  the  Board  of  directors  or  members  of  the  governing 
board,  or  one  or  more  executive  directors  or  executive  members  of  the  governing  board  of  the 
assessee; or 

(iv)  who guarantees not less than ten per cent of the total borrowings of the assessee; 

(b)  “cold chain facility” means a chain of facilities  for storage or transportation of agricultural 
and  forest  produce,  meat  and  meat  products,  poultry,  marine  and  dairy  products,  products  of 
horticulture,  floriculture  and  apiculture  and  processed  food  items  under  scientifically  controlled 
conditions including refrigeration and other facilities necessary for the preservation of such produce; 

1[(ba) “infrastructure facility” means— 

(i)  a road including toll road, a bridge or a rail system; 

(ii)   a  highway  project  including  housing  or  other  activities  being  an  integral  part  of  the 

highway project; 

 (iii)   a  water  supply  project,  water  treatment  system,  irrigation  project,  sanitation  and 

sewerage system or solid waste management system; 

(iv)  a port, airport, inland waterway, inland port or navigational channel in the sea;] 

(c)  “specified business” means any one or more of the following business, namely :— 

 (i)  setting up and operating a cold chain facility; 

 (ii)  setting up and operating a warehousing facility for storage of agricultural produce; 

(iii)  laying  and  operating  a  cross-country  natural  gas  or  crude  or  petroleum  oil  pipeline 

network for distribution, including storage facilities being an integral part of such network; 

2[(iv)  building and operating, anywhere in India, a  3[hotel] of two-star or above category as 

classified by the Central Government; 

(v)  building and operating, anywhere in India, a 4[hospital] with at least one hundred beds for 

patients; 

(vi)  developing  and  building  a  housing  project  under  a  scheme  for  slum  redevelopment  or 
rehabilitation framed by the Central Government or a State Government, as the case may be, and 
notified by the Board in this behalf in accordance with the guidelines as may be prescribed; 

1. Ins. by Act 28 of 2016, s. 18 (w.e.f. 1-4-2018). 
2. Ins. by Act 14 of 2010, s. 10 (w.e.f. 1-4-2011). 
3. Subs. by Act 8 of 2011, s. 6, for “new hotel” (w.e.f. 1-4-2011). 
4. Subs. by s. 6, ibid., for “new hospital” (w.e.f. 1-4-2011). 

201 

                                                           
1[(vii)  developing  and  building  a  housing  project  under  a  scheme  for  affordable  housing 
framed by the Central Government or a State Government, as the case may be, and notified by the 
Board in this behalf in accordance with the guidelines as may be prescribed; 

(viii) production of fertilizer in India;] 

2[(ix)  setting up and operating an inland container depot or a container freight station notified 

or approved under the Customs Act, 1962 (52 of 1962); 

 (x)  bee-keeping and production of honey and beeswax; 

(xi)  setting up and operating a warehousing facility for storage of sugar;] 

3[(xii) laying and operating a slurry pipeline for the transportation of iron ore; 

(xiii) setting up and operating a semi-conductor wafer fabrication manufacturing unit notified 

by the Board in accordance with such guidelines as may be prescribed;] 

4[(xiv)  developing  or  maintaining  and operating  or  developing,  maintaining  and operating a 

new infrastructure facility;] 

(d)  any machinery or plant which was used outside India by any person other than the assessee 

shall not be regarded as machinery or plant previously used for any purpose, if— 

 (i)  such machinery or plant was not, at any time prior to the date of the installation by the 

assessee, used in India; 

(ii)  such machinery or plant is imported into India from any country outside India; and 

(iii) no deduction on account of depreciation in respect of such machinery or plant has been 
allowed  or  is  allowable  under  the  provisions  of  this  Act  in  computing  the  total  income  of  any 
person for any period prior to the date of installation of the machinery or plant by the assessee; 

(e)   where  in  the  case  of  a  specified  business,  any  machinery  or  plant  or  any  part  thereof 
previously  used  for  any  purpose  is  transferred  to  the  specified  business  and  the  total  value  of  the 
machinery  or  plant  or  part  so  transferred  does  not  exceed  twenty  per  cent  of  the  total  value  of  the 
machinery or plant used in such business, then, for the purposes of clause (ii) of sub-section (2), the 
condition specified therein shall be deemed to have been complied with; 

(f)  any  expenditure  of  capital  nature  shall  not  include  5[any  expenditure in  respect  of  which  the 
payment  or  aggregate  of  payments  made  to  a  person  in  a  day,  otherwise  than  by  an  account  payee 
cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a 
bank account, exceeds ten thousand rupees or] any expenditure incurred on the acquisition of any land 
or goodwill or financial instrument.] 

1. Ins. by Act 8 of 2011, s. 6 (w.e.f. 1-4-2012). 
2. Ins. by Act 23 of 2012, s. 9 (w.e.f. 1-4-2013). 
3. Ins. by Act 25 of 2014, s. 12 (w.e.f. 1-4-2015). 
4. Ins. by Act 28 of 2016, s. 18 (w.e.f. 1-4-2018). 
5. Ins. by Act 7 of 2017, s. 13 (w.e.f. 1-4-2018). 

202 

                                                           
35B.  [Export  markets  development  allowance.]—Omitted  by  the  Direct  Tax  Laws  (Amendment) 
Act, 1987 (4 of 1988), s. 10 as amended by Act 3 of 1989, s. 95 (w.e.f.1-4-1989). Earlier inserted by Act 
19 of 1968, s. 5 (w.e.f. 1-4-1968). 

35C. [Agricultural development allowance.]—Omitted by s. 10, ibid. (w.e.f. 1-4-1988) as amended 

by s. 95, ibid. (w.e.f.1-4-1989). Earlier inserted s. 5, ibid. (w.e.f. 1-4-1968). 

35CC.  [Rural  development  allowance.]—Omitted  by  s.  10,  ibid.  (w.e.f.  1-4-1988)  as  amended  by    

s. 95, ibid. (w.e.f.1-4-1989). Earlier inserted s. 5, ibid. (w.e.f. 1-4-1968). 

1[35CCA.Expenditure by way of payment to associations and institutions for carrying out rural 
development programmes.—2[(1) Where an assessee incurs any expenditure by way of payment of any 
sum— 

(a)  to an association or institution, which has as its object the undertaking of any programme of 
rural development, to be used for carrying out any programme of rural development approved by the 
prescribed authority; or 

(b)   to  an  association  or  institution,  which  has  as  its  object  the  training  of  persons  for 

implementing programmes of rural development; 3[or] 

4[(c) to a rural development fund set up and notified by the Central Government in this  5[behalf; 

or] 

6[(d)  to  the  National  Urban  Poverty  Eradication  Fund  set  up  and  notified  by  the  Central 

Government in this behalf,] 

the assessee shall, subject to the provisions of sub-section (2), be allowed a deduction of the amount of 
such expenditure incurred during the previous year.] 

7[(2) The deduction under clause (a) of sub-section (1) shall not be allowed in respect of expenditure 
by way of payment of any sum to any association or institution referred to in the said clause unless the 
assessee furnishes a certificate from such association or institution to the effect that— 

(a)  the programme of rural development had been approved by the prescribed authority before 

the 1st day of March, 1983; and 

(b)  where such payment is made after the 28th day of February, 1983, such programme involves 
work  by  way  of  construction  of  any  building  or  other  structure  (whether  for  use  as  a  dispensary, 
school, training or welfare centre, workshop or for any other purpose) or the laying of any road or the 
construction or boring of a well or tube-well or the installation of any plant or machinery, and such 
work has commenced before the 1st day of March, 1983.] 

(2A) The deduction under clause (b) of sub-section (1) shall not be allowed in respect of expenditure 
by way of payment of any sum to any association or institution unless the assessee furnishes a certificate 
from such association or institution to the effect that— 

(a)   the  prescribed  authority  had  approved  the  association  or  institution  before  the  1st  day  of 

March, 1983; and 

1.  Restored  by  Act  3  of  1989,  s.  95  (w.e.f.  1-4-1989).  Earlier omitted  by  Act  4  of  1988,  s.  10  (w.e.f  1-4-1988).  Original       

s. 35CCA ins. by Act 19 of 1978, s. 7 (w.e.f. 1-6-1978). 

2. Subs. by Act 21 of 1979, s. 5, for sub-section (1) (w.e.f. 1-6-1979). 
3. Ins. by Act 11 of 1983, s. 16 (w.e.f. 1-4-1983). 
4. Ins. by s. 16, ibid. (w.e.f. 1-4-1983).  
5. Subs. by Act 22 of 1995, s. 9, for “behalf” (w.e.f. 1-4-1996). 
6. Ins. by s. 9, ibid. (w.e.f. 1-4-1996). 
7. Subs. by Act 11 of 1983, s. 16 for sub-section (2), (2A) and (2B) (w.e.f. 1-4-1983). 

203 

                                                           
(b) the  training  of  persons  for  implementing  any  programme  of  rural  development  had  been 

started by the association or institution before the 1st day of March, 1983.] 

1[Explanation.—The deduction, to which the assessee is entitled in respect of any sum paid to an 
association  or  institution  for  carrying  out  the  programme  of  rural  development  referred  to  in  sub-
section (1), shall not be denied merely on the ground that subsequent to the payment of such sum by 
the assessee, the approval granted to such programme of rural development, or as the case may be, to 
the association or institution has been withdrawn.] 

(2B) No certificate of the nature referred to in sub-section (2) or sub-section (2A) shall be issued by 
any  association  or  institution  unless  such  association  or  institution  has  obtained  from  the  prescribed 
authority authorisation in writing to issue certificates of such nature.] 

Explanation.—For  the  purposes  of  this  section,  “programme  of  rural  development”  shall  have  the 

meaning assigned to it in the Explanation to sub-section (1) of section 35CC. 

(3) Where a deduction under this section is claimed and allowed for any assessment year in respect of 
any  expenditure  referred  to  in  sub-section  (1),  deduction  shall  not  be  allowed  in  respect  of  such 
expenditure under section 35C or section 35CC or section 80G or any other provision of this Act for the 
same or any other assessment year.] 

2[35CCB. Expenditure  by  way  of  payment  to  associations  and  institutions  for  carrying  out 
programmes of conservation of natural resources.—3[(1) 4[Where an assessee incurs any expenditure 
on or before the 31st day of March, 2002] by way of payment of any sum— 

(a)  to an association or institution, which has as its object the undertaking of any programme of 
conservation of natural resources or of afforestation, to be used for carrying out any programme of 
conservation of natural resources or afforestation approved by the prescribed authority; or 

(b)  to such fund for afforestation as may be notified by the Central Government, 

the assessee shall, subject to the provisions of sub-section (2), be allowed a deduction of the amount of 
such expenditure incurred during the previous year.] 

(2)  The  deduction  under  5[clause  (a)  of]  sub-section  (1)  shall  not  be  allowed  with  respect  to 
expenditure by way of payment of any sum to any association or institution, unless such association or 
institution is for the time being approved in this behalf by the prescribed authority: 

Provided that  the  prescribed  authority  shall  not  grant  such  approval  for  more  than  three  years  at  a 

time. 

(3) Where a deduction under this section is claimed and allowed for any assessment year in respect of 
any  expenditure  referred  to  in  sub-section  (1),  deduction  shall  not  be  allowed  in  respect  of  such 
expenditure under any other provision of this Act for the same or any other assessment year.] 

6[35CCC.   Expenditure  on  agricultural  extension  project.—  (1)  Where  an  assessee  incurs  any 
expenditure  on  agricultural  extension  project  notified  by  the  Board  in  this  behalf  in  accordance  with 
theguidelines as may be prescribed, then, there shall be allowed a deduction of a sum equal to one and 
one-half times of such expenditure. 

1. Ins. by Act 29 of 2006, s. 7 (w.e.f. 1-4-2006). 
2. Restored by Act 3 of 1989, s. 95 earlier omitted by Act 4 of 1988, s.10 (w.e.f. 1-4-1989). Original s. 35CCB was inserted 

by Act 14 of 1982, s. 9 (w.e.f. 1-6-1982). 

3. Subs. by Act 12 of 1990, s. 12, for sub-section (1) (w.e.f. 1-4-1991). 
4. Subs. by Act 20 of 2002, s. 17, for “Where an assessee incurs any expenditure” (w.e.f. 1-4-2003). 
5. Ins. by Act 12 of 1990, s. 12 (w.e.f. 1-4-1991). 
6. Ins. by Act 23 of 2012, s. 10 (w.e.f. 1-4-2013). 

204 

                                                           
1[Provided that for the assessment year beginning on or after the 1st day of April, 2021, the provisions 
of this sub-section shall have effect as if for the words “a sum equal to one and one-half times of”, the 
words “a sum equal to” had been substituted.] 

(2) Where a deduction under this section is claimed and allowed for any assessment year in respect of 
any  expenditure  referred  to  in  sub-section  (1),  deduction  shall  not  be  allowed  in  respect  of  such 
expenditure under any other provisions of this Act for the same or any other assessment year.] 

2[35CCD.  Expenditure  on  skill  development  project.— (1)  Where  a  company  incurs  any 
expenditure (not being expenditure in the nature of cost of any land or building) on any skill development 
project notified by the Board in this behalf in accordance with the guidelines as may be prescribed, then, 
there shall be allowed a deduction of a sum equal to one and one-half times of such expenditure.] 

3[Provided that for the assessment year beginning on or after the 1st day of April, 2021, the provisions 
of this sub-section shall have effect, as if for the words “an amount equal to one and one-half times of”, 
the words “a sum equal to” had been substituted.] 

(2) Where a deduction under this section is claimed and allowed for any assessment year in respect of 
any  expenditure  referred  to  in  sub-section  (1),  deduction  shall  not  be  allowed  in  respect  of  such 
expenditure under any other provisions of this Act for the same or any other assessment year.] 

4[35D. Amortisation  of  certain  preliminary  expenses.—  (1)  Where  an  assessee,  being  an  Indian 
company or a person (other than a company) who is resident in India, incurs, after the 31st day of March, 
1970, any expenditure specified in sub-section (2),— 

(i) before the commencement of his business, or 

(ii)  after  the  commencement  of  his  business,  in  connection  with  the  extension  of  his 

5[undertaking] or in connection with his setting up a new 6[unit], 

the  assessee  shall,  in  accordance  with  and  subject  to  the  provisions  of  this  section,  be  allowed  a 
deduction of  an amount  equal  to  one-tenth  of  such  expenditure  for  each  of  the  ten  successive  previous 
years  beginning  with  the  previous  year  in  which  the  business  commences  or,  as  the  case  may  be,  the 
previous  year  in  which  the  extension  of the  5[undertaking]  is  completed  or  the new  6[unit]  commences 
production or operation: 

7[Provided that where an assessee incurs after the 31st day of March, 1998, any expenditure specified 
in sub-section (2), the provisions of this sub-section shall have effect as if for the words “an amount equal 
to  one-tenth  of  such  expenditure  for  each  of the  ten successive  previous  years”,  the  words  “an  amount 
equal  to  one-fifth  of  such  expenditure  for  each  of  the  five  successive  previous  years”  had  been 
substituted.] 

(2)  The  expenditure  referred  to  in  sub-section  (1)  shall  be  the  expenditure  specified  in  any  one  or 

more of the following clauses, namely :— 

(a)  expenditure in connection with— 

 (i)  preparation of feasibility report; 

(ii)  preparation of project report; 

1. Ins. by Act 28 of 2016, s. 19 (w.e.f. 1-4-2017).  
2. Ins. by Act 23 of 2012, s. 10 (w.e.f. 1-4-2013). 
3. Ins. by Act 28 of 2016, s. 20 (w.e.f. 1-4-2017). 
4. Ins. by Act 42 of 1970, s. 8 (w.e.f. 1-4-1971). 
5. Subs. by Act 18 of 2008, s. 8, for “industrial undertaking” (w.e.f. 1-4-2009). 
6. Subs. by s. 8, ibid., for “industrial unit” (w.e.f. 1-4-2009). 
7. Ins. by Act 21 of 1998, s. 14 (w.e.f. 1-4-1999). 

205 

                                                           
(iii)  conducting market survey or any other survey necessary for the business of the assessee; 

(iv)  engineering services relating to the business of the assessee: 

Provided that  the  work  in  connection  with  the  preparation  of  the  feasibility  report  or  the 
project  report  or  the  conducting  of  market  survey  or  of  any  other  survey  or  the  engineering 
services referred to in this clause is carried out by the assessee himself or by a concern which is 
for the time being approved in this behalf by the Board; 

(b)  legal charges for drafting any agreement between the assessee and any other person for any 

purpose relating to the setting up or conduct of the business of the assessee; 

(c)  where the assessee is a company, also expenditure— 

 (i)  by way of legal charges for drafting the Memorandum and Articles of Association of the 

company; 

(ii)  on printing of the Memorandum and Articles of Association; 

(iii)   by  way  of  fees  for  registering  the  company  under  the  provisions  of  the  Companies     

Act, 1956 (1 of 1956); 

(iv)   in  connection  with  the  issue,  for  public  subscription,  of  shares in  or  debentures  of  the 
company,  being  underwriting  commission,  brokerage  and  charges  for  drafting,  typing,  printing 
and advertisement of the prospectus; 

(d)   such  other  items  of  expenditure  (not  being  expenditure  eligible  for  any  allowance  or 

deduction under any other provision of this Act) as may be prescribed. 

(3) Where the aggregate amount of the expenditure referred to in sub-section (2) exceeds an amount 

calculated at two and one-half per cent— 

(a)  of the cost of the project, or 

(b)   where  the  assessee  is  an  Indian  company,  at  the  option  of  the  company,  of  the  capital 

employed in the business of the company, 

the excess shall be ignored for the purpose of computing the deduction allowable under sub-section (1): 

1[Provided that  where  the  aggregate  amount  of  expenditure  referred  to  in  sub-section  (2)  is 
incurred after the 31st day of March, 1998, the provisions of this sub-section shall have effect as if for 
the words “two and one-half per cent”, the words “five per cent” had been substituted.] 

Explanation.—In this sub-section— 

(a)  “cost of the project” means— 

 (i)  in a case referred to in clause (i) of sub-section (1), the actual cost of the fixed assets, 
being  land,  buildings,  leaseholds,  plant,  machinery,  furniture,  fittings  and  railway  sidings 
(including expenditure on development of land and buildings), which are shown in the books of 
the  assessee  as  on  the  last  day  of  the  previous  year  in  which  the  business  of  the  assessee 
commences; 

(ii)  in a case referred to in clause (ii) of sub-section (1), the actual cost of the fixed assets, 
being  land,  buildings,  leaseholds,  plant,  machinery,  furniture,  fittings  and  railway  sidings 
(including expenditure on development of land and buildings), which are shown in the books of 
the assessee as on the last day of the previous year in which the extension of the 2[undertaking] is 

1. Ins. by Act 21 of 1998, s. 14 (w.e.f. 1-4-1999). 
2. Subs. by Act 18 of 2008, s. 8, for “industrial undertaking" (w.e.f. 1-4-2009). 

206 

                                                           
completed or, as the case may be, the new 1[unit] commences production or operation, in so far as 
such  fixed  assets  have  been  acquired  or  developed  in  connection  with  the  extension  of  the 
2[undertaking] or the setting up of the new 1[unit] of the assessee; 

(b)  “capital employed in the business of the company” means— 

 (i)   in  a  case  referred  to  in  clause  (i)  of  sub-section  (1),  the  aggregate  of  the  issued  share 
capital, debentures and long-term borrowings as on the last day of the previous year in which the 
business of the company commences; 

(ii)   in  a  case  referred  to  in  clause  (ii)  of  sub-section  (1),  the  aggregate  of  the issued  share 
capital, debentures and long-term borrowings as on the last day of the previous year in which the 
extension of the  2[undertaking] is completed or, as the case may be, the new  1[unit] commences 
production or operation, in so far as such capital, debentures and long-term borrowings have been 
issued or obtained in connection with the extension of the  2[undertaking] or the setting up of the 
new 2[unit] of the company; 

(c)  “long-term borrowings” means— 

 (i)   any  moneys  borrowed  by  the  company  from  Government  or  the  Industrial  Finance 
Corporation  of  India  or  the  Industrial  Credit  and  Investment  Corporation  of  India  or  any  other 
financial  institution3[which  is  eligible  for  deduction  under  clause  (viii)  of  sub-section  (1)  of        
section 36] or any banking institution (not being a financial institution referred to above), or 

(ii)   any  moneys  borrowed  or  debt  incurred  by  it  in  a  foreign  country  in  respect  of  the 
purchase outside India of capital plant and machinery, where the terms under which such moneys 
are borrowed or the debt is incurred provide for the repayment thereof during a period of not less 
than seven years. 

(4) Where the assessee is a person other than a company or a co-operative society, no deduction shall 
be admissible under sub-section (1) unless the accounts of the assessee for the year or years in which the 
expenditure  specified  in  sub-section  (2)  is  incurred  have  been  audited  by  an  accountant  as  defined  in 
the Explanation below sub-section (2) of section 288, and the assessee furnishes, along with his return of 
income for the first year in which the deduction under this section is claimed, the report of such audit in 
the prescribed form duly signed and verified by such accountant and setting forth such particulars as may 
be prescribed. 

(5)  Where  the  undertaking  of  an  Indian  company  which  is  entitled  to  the  deduction  under                     

sub-section (1) is transferred, before the expiry of the period of ten years specified in sub-section (1), to 
another Indian company in a scheme of amalgamation,— 

 (i)   no  deduction  shall  be  admissible  under  sub-section  (1)  in  the  case  of  the  amalgamating 

company for the previous year in which the amalgamation takes place; and 

(ii) the provisions of this section shall, as far as may be, apply to the amalgamated company as 

they would have applied to the amalgamating company if the amalgamation had not taken place. 

4[(5A)  Where  the  undertaking  of  an  Indian  company  which  is  entitled  to  the  deduction  under  sub-
section (1) is transferred, before the expiry of the period specified in sub-section (1), to another company 
in a scheme of demerger,— 

 (i)  no deduction shall be admissible under sub-section (1) in the case of the demerged company 

for the previous year in which the demerger takes place; and 

1. Subs. by Act of 18 of 2008, s. 8, for “industrial unit" (w.e.f. 1-4-2009). 
2. Subs. by s. 8, ibid., for “industrial undertaking” (w.e.f. 1-4-2009). 
3. Subs. by Act 10 of 2000, s. 17, for “which is for the time being approved by the Central Government for the purposes of 

clause (viii) of sub-section (1) of section 36” (w.e.f. 1-4-2000). 

4. Ins. by Act 27 of 1999, s. 19 (w.e.f. 1-4-2000). 

207 

                                                           
(ii) the provisions of this section shall, as far as may be, apply to the resulting company, as they 

would have applied to the demerged company, if the demerger had not taken place.] 

(6) Where a deduction under this section is claimed and allowed for any assessment year in respect of 
any expenditure specified in sub-section (2), the expenditure in respect of which deduction is so allowed 
shall not qualify for deduction under any other provision of this Act for the same or any other assessment 
year. 

1[35DD.  Amortisation  of  expenditure  in  case  of  amalgamation  or  demerger.—(1)  Where  an 
assessee, being an Indian company, incurs any expenditure, on or after the 1st day of April, 1999, wholly 
and exclusively for the purposes of amalgamation or demerger of an undertaking, the assessee shall be 
allowed a deduction of an amount equal to one-fifth of such expenditure for each of the five successive 
previous years beginning with the previous year in which the amalgamation or demerger takes place. 

(2) No deduction shall be allowed in respect of the expenditure mentioned in sub-section (1) under 

any other provision of this Act.] 

2[35DDA.  Amortisation  of  expenditure  incurred  under  voluntary  retirement  scheme.—(1) 
Where  an  assessee  incurs  any  expenditure  in  any  previous  year  by  way  of  payment  of  any  sum  to  an 
employee  3[in connection with his voluntary retirement], in accordance with any scheme or schemes of 
voluntary retirement, one-fifth of the amount so paid shall be deducted in computing the profits and gains 
of the business for that previous year, and the balance shall be deducted in equal instalments for each of 
the four immediately succeeding previous years.] 

4[(2) Where the assessee, being an Indian company, is entitled to the deduction under sub-section (1) 
and the undertaking of such Indian company entitled to the deduction under sub-section (1) is transferred, 
before the expiry of the period specified in that sub-section, to another Indian company in a scheme of 
amalgamation, the provisions of this section shall, as far as may be, apply to the amalgamated company 
as they would have applied to the amalgamating company if the amalgamation had not taken place. 

(3)  Where the  undertaking  of  an  Indian  company  entitled  to  the  deduction  under  sub-section  (1)  is 
transferred, before the expiry of the period specified in that sub-section, to another company in a scheme 
of demerger, the provisions of this section shall, as far as may be, apply to the resulting company, as they 
would have applied to the demerged company, if the demerger had not taken place. 

(4)  Where  there  has  been  reorganisation  of  business,  whereby  a  firm  is  succeeded  by  a  company 
fulfilling the conditions laid down in clause (xiii) of section 47 or a proprietary concern is succeeded by a 
company  fulfilling  the conditions  laid  down  in  clause  (xiv)  of  section  47,  the  provisions  of  this  section 
shall, as far as may be, apply to the successor company, as they would have applied to the firm or the 
proprietary concern, if reorganisation of business had not taken place. 

5[(4A) Where there has been reorganisation ofbusiness, whereby a private company or unlisted public 
company is succeeded by a limited liability partnership fulfilling the conditions laid down in the proviso 
to clause (xiiib) of section 47, the provisions of this section shall, as far as may be, apply to the successor 
limited liability partnership, as they would have applied to the said company, if reorganisation of business 
had not taken place. 

(5) No deduction shall be allowed in respect of the expenditure mentioned in sub-section (1) in the 
case  of  the  amalgamating  company  referred  to  in  sub-section  (2),  in  the  case  of  demerged  company 
referred to in 6[sub-section (3), in the case of a firm or proprietary concern referred to in sub-section (4) 

1. Ins. by Act 27 of 1999, s. 20 (w.e.f. 1-4-2000). 
2. Ins. by Act 14 of 2001, s. 24 (w.e.f. 1-4-2001). 
3. Subs. by Act 18 of 2005, s. 11, for “at the time of his voluntary retirement” (w.e.f. 1-4-2004). 
4. Subs. by Act 20 of 2002, s. 18, for sub-section (2) (w.e.f. 1-4-2001). 
5. Ins. by Act 14 of 2010, s. 11 (w.e.f. 1-4-2011).  
6. Subs. by s. 11, ibid., for “sub-section (3) and in the case of a firm or proprietary concern referred to in sub-section (4)” 

(w.e.f. 1-4-2011). 

208 

                                                           
and  in  the  case  of  a  company  referred  to  in  sub-section  (4A)]  of  this  section,  for  the  previous  year  in 
which amalgamation, demerger or succession, as the case may be, takes place. 

(6) No deduction shall be allowed in respect of the expenditure mentioned in sub-section (1) under 

any other provision of this Act.] 

35E. Deduction  for  expenditure  on  prospecting,  etc.,  for  certain  minerals.—(1)  Where  an 
assessee,  being  an  Indian  company  or  a  person  (other  than  a  company)  who  is  resident  in  India,  is 
engaged  in  any  operations  relating  to  prospecting  for,  or  extraction  or  production  of,  any  mineral  and 
incurs, after the 31st day of March, 1970, any expenditure specified in sub-section (2), the assessee shall, 
in accordance with and subject to the provisions of this section, be allowed for each one of the relevant 
previous years a deduction of an amount equal to one-tenth of the amount of such expenditure. 

(2)  The  expenditure  referred  to  in  sub-section  (1)  is  that  incurred  by  the  assessee  after  the  date 
specified in that sub-section at any time during the year of commercial production and any one or more of 
the  four  years  immediately  preceding  that  year,  wholly  and  exclusively  on  any  operations  relating  to 
prospecting for any mineral or group of associated minerals specified in Part A or Part B, respectively, of 
the  Seventh  Schedule  or  on  the  development  of a  mine  or  other  natural  deposit  of any such mineral or 
group of associated minerals : 

Provided that there shall be excluded from such expenditure any portion thereof which is met directly 
or indirectly by any other person or authority and any sale, salvage, compensation or insurance moneys 
realised  by  the  assessee  in  respect  of  any  property  or  rights  brought  into  existence  as  a  result  of  the 
expenditure. 

(3) Any expenditure— 

(i) on  the  acquisition  of  the  site  of  the  source  of  any  mineral  or  group  of  associated  minerals 

referred to in sub-section (2) or of any rights in or over such site; 

(ii) on the acquisition of the deposits of such mineral or group of associated minerals or of any 

rights in or over such deposits; or 

(iii)  of  a  capital  nature  in  respect  of  any  building,  machinery,  plant  or  furniture  for  which 

allowance by way of depreciation is admissible under section 32, 

shall  not  be  deemed  to  be  expenditure  incurred  by  the  assessee  for  any  of  the  purposes  specified  in       
sub-section (2). 

(4) The deduction to be allowed under sub-section (1) for any relevant previous year shall be— 

(a)  an amount equal to one-tenth of the expenditure specified in sub-section (2) (such one-tenth 

being hereafter in this sub-section referred to as the instalment); or 

(b)  such  amount  as  is  sufficient  to  reduce  to nil the  income  (as  computed  before  making  the 
deduction under this section) of that previous year arising from the commercial exploitation [whether 
or not such commercial exploitation is as a result of the operations or development referred to in sub-
section (2)] of any mine or other natural deposit of the mineral or any one or more of the minerals in a 
group of associated minerals as aforesaid in respect of which the expenditure was incurred, 

209 

whichever amount is less: 

Provided that  the  amount  of  the  instalment  relating  to  any  relevant  previous  year,  to  the  extent  to 
which it remains unallowed, shall be carried forward and added to the instalment relating to the previous 
year next following and deemed to be part of that instalment, and so on, for succeeding previous years, 
so,  however,  that  no  part  of  any  instalment  shall  be  carried  forward  beyond  the  tenth  previous  year  as 
reckoned from the year of commercial production. 

(5) For the purposes of this section,— 

(a) “operation  relating  to  prospecting”  means  any  operation  undertaken  for  the  purposes  of 
exploring, locating or proving deposits of any mineral, and includes any such operation which proves 
to be infructuous or abortive; 

(b)  “year  of  commercial  production”  means  the  previous  year  in  which  as  a  result  of  any 
operation relating  to  prospecting,  commercial  production  of  any  mineral or any  one or  more  of  the 
minerals in a group of associated minerals specified in Part A or Part B, respectively, of the Seventh 
Schedule, commences; 

(c) “relevant previous years” means the ten previous years beginning with the year of commercial 

production. 

(6) Where the assessee is a person other than a company or a co-operative society, no deduction shall 
be admissible under sub-section (1) unless the accounts of the assessee for the year or years in which the 
expenditure  specified  in  sub-section  (2)  is  incurred  have  been  audited  by  an  accountant  as  defined  in 
the Explanation below sub-section (2) of section 288, and the assessee furnishes, along with his return of 
income for the first year in which the deduction under this section is claimed, the report of such audit in 
the prescribed form duly signed and verified by such accountant and setting forth such particulars as may 
be prescribed. 

(7)  Where  the  undertaking  of  an  Indian  company  which  is  entitled  to  the  deduction  under                

sub-section (1) is transferred, before the expiry of the period of ten years specified in sub-section (1), to 
another Indian company in a scheme of amalgamation— 

(i)  no  deduction  shall  be  admissible  under  sub-section  (1)  in  the  case  of  the  amalgamating 

company for the previous year in which the amalgamation takes place; and 

(ii) the provisions of this section shall, as far as may be, apply to the amalgamated company as 

they would have applied to the amalgamating company if the amalgamation had not taken place. 

 1[(7A)  Where  the  undertaking  of  an  Indian  company  which  is  entitled  to  the  deduction  under             

sub-section (1) is transferred, before the expiry of the period of ten years specified in sub-section (1), to 
another Indian company in a scheme of demerger,— 

(i) no deduction shall be admissible under sub-section (1) in the case of the demerged company 

for the previous year in which the demerger takes place; and 

(ii) the provisions of this section shall, as far as may be, apply to the resulting company as they 

would have applied to the demerged company, if the demerger had not taken place.] 

(8) Where a deduction under this section is claimed and allowed for any assessment year in respect of 
any expenditure specified in sub-section (2), the expenditure in respect of which deduction is so allowed 
shall not qualify for deduction under any other provision of this Act for the same or any other assessment 
year.] 

1. Ins. by 27 of 1999, s. 21 (w.e.f. 1-4-2000). 

210 

                                                           
36. Other deductions.—(1) The deductions provided for in the following clauses shall be allowed in 

respect of the matters dealt with therein, in computing the income referred to in section 28— 

(i) the amount of any premium paid in respect of insurance against risk of damage or destruction 

of stocks or stores used for the purposes of the business or profession; 

1[(ia) the amount of any premium paid by a federal milk co-operative society to effect or to keep 
in force an insurance on the life of the cattle owned by a member of a co-operative society, being a 
primary society engaged in supplying milk raised by its  members to such federal milk co-operative 
society;] 

2[(ib) the amount of any premium paid by any mode of payment other than cash by the assessee 
as  an  employer  to  effect  or  to  keep  in  force  an  insurance  on  the  health  of  his  employees  under  a 
scheme framed in this behalf by— 

(A) the  General  Insurance  Corporation  of  India  formed  under  section  9  of  the  General 
Insurance  Business  (Nationalisation)  Act,  1972  (57  of  1972)  and  approved  by  the  Central 
Government; or 

(B) any other insurer and approved by the Insurance Regulatory and Development Authority 
established  under  sub-section  (1)  of  section  3  of  the  Insurance  Regulatory  and  Development 
Authority Act, 1999 (41 of 1999);] 

(ii)  any sum paid to an employee as bonus or commission for services rendered, where such sum 
would  not  have  been  payable  to  him  as  profits  or  dividend  if  it  had  not  been  paid  as  bonus  or 
commission; 

3* 

4* 

* 

* 

* 

* 

* 

* 

* 

* 

(iii) the amount of the interest paid in respect of capital borrowed for the purposes of the business 

or profession: 

5[Provided that any amount of the interest paid, in respect of capital borrowed for acquisition of 
an asset 6*** (whether capitalised in the books of account or not); for any period beginning from the 
date on which the capital was borrowed for acquisition of the asset till the date on which such asset 
was first put to use, shall not be allowed as deduction. 

Explanation.—Recurring  subscriptions  paid  periodically  by  shareholders,  or  subscribers  in 
Mutual Benefit Societies which fulfill such conditions as may be prescribed, shall be deemed to be 
capital borrowed within the meaning of this clause; 

7[(iiia) the pro rata amount of discount on a zero coupon bond having regard to the period of life 

of such bond calculated in the manner as may be prescribed. 

1. Ins. by Act 21 of 1979, s. 6 (w.e.f. 1-4-1980). 
2. Subs. by Act 21 of 2006, s. 9, for clause (ib) (w.e.f. 1-4-2007). 
3. The provisos omitted by Act 4 of 1988, s. 11 (w.e.f. 1-4-1989). 
4. Clause (iia) omitted by Act 27 of 1999, s. 22 (w.e.f. 1-4-2000). 
5. Ins. by Act 32 of 2003, s. 18 (w.e.f. 1-4-2004). 
6. The words “for extension of existing business or profession” omitted by Act 20 of 2015, s. 13 (w.e.f. 1-4-2016). 
7. Ins. by Act 18 of 2005, s. 12 (w.e.f. 1-4-2006). 

211 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
Explanation.—For the purposes of this clause, the expressions— 

(i) “discount”  means  the  difference  between  the  amount  received  or  receivable  by  the 
infrastructure  capital  company  or  infrastructure  capital  fund  or  public  sector  company  1[or 
scheduled  bank]  issuing  the  bond  and  the  amount  payable  by  such  company  or  fund  or  public 
sector company 1[or scheduled bank] on maturity or redemption of such bond; 

(ii) “period of life of the bond” means the period commencing from the date of issue  of the 

bond and ending on the date of the maturity or redemption of such bond; 

2* 

* 

* 

* 

*] 

(iv) any sum paid by the assessee as an employer by way of contribution towards a recognised 
provident fund or an approved superannuation fund, subject to such limits as may be prescribed for 
the purpose of recognising the provident fund or approving the superannuation fund, as the case may 
be;  and  subject  to  such  conditions  as  the  Board  may  think  fit  to  specify  in  cases  where  the 
contributions are not in the nature of annual contributions of fixed amounts or annual contributions 
fixed on some definite basis by reference to the income chargeable under the head “Salaries” or to the 
contributions or to the number of members of the fund; 

3[(iva)  any  sum  paid  by the  assessee as  an  employer  by  way  of  contribution  towards  a  pension 
scheme, as referred to in section 80CCD, on account of an employee to the extent it does not exceed 
ten per cent of the salary of the employee in the previous year. 

Explanation.—For the purposes of this clause, “salary” includes dearness allowance, if the terms 

of employment so provide, but excludes all other allowances and perquisites;] 

(v)  any  sum  paid  by  the  assessee  as  an  employer  by  way  of  contribution  towards  an  approved 

gratuity fund created by him for the exclusive benefit of his employees under an irrevocable trust; 

4[(va)  any  sum  received  by  the  assessee  from  any  of  his  employees  to  which  the  provisions  of 
sub-clause  (x)  of  clause  (24)  of section  2 apply,  if  such  sum  is  credited  by  the  assessee  to  the 
employee’s account in the relevant fund or funds on or before the due date. 

Explanation.—For the purposes of this clause, “due date” means the date by which the assessee is 
required as an employer to credit an employee's contribution to the employee's account in the relevant 
fund under any Act, rule, order or notification issued thereunder or under any standing order, award, 
contract of service or otherwise;] 

(vi)  in  respect  of  animals  which  have  been  used  for  the  purposes  of  the  business  or  profession 
otherwise than as stock-in-trade and have died or become permanently useless for such purposes, the 
difference between the actual cost to the assessee of the animals and the amount, if any, realised in 
respect of the carcasses or animals; 

(vii)  subject  to  the  provisions  of  sub-section  (2),  the  amount  of  5[any  bad  debt  or  part  thereof 

which is written off as irrecoverable in the accounts of the assessee for the previous year:] 

1. Ins. by Act 33 of 2009, s. 14 (w.e.f. 1-4-2009). 
2. Clause (iii) omitted by Act 21 of 2006, s. 9 (w.e.f. 1-4-2007). 
3. Ins. by Act 8 of 2011, s. 5 (w.e.f. 1-4-2012). 
4. Ins. by Act 11 of 1987, s. 9 (w.e.f. 1-4-1988). 
5.  Subs.  by  Act  4  of  1988,  s.  11,  for  “any  debt,  or  part  thereof,  which  is  established  to  have  become  a  bad  debt  in  the 

previous year” (w.e.f. 1-4-1989). 

212 

 
 
 
 
 
 
 
                                                           
1[Provided that in the case of 2[an assesse] to which clause (viia) applies, the amount of the deduction 
relating to any such debt or part thereof shall be limited to the amount by which such debt or part thereof 
exceeds the credit balance in the provision for bad and doubtful debts account made under that clause:] 

3[Provided further that where the amount of such debt or part thereof has been taken into account in 
computing  the  income  of  the  assessee  of  the  previous  year  in  which  the  amount  of  such  debt  or  part 
thereof  becomes  irrecoverable  or  of  an  earlier  previous  year  on  the  basis  of  income  computation  and 
disclosure  standards  notified  under  sub-section  (2)  of section  145 without  recording  the  same  in  the 
accounts, then, such debt or part thereof shall be allowed in the previous year in which such debt or part 
thereof becomes irrecoverable and it shall be deemed that such debt or part thereof has been written off as 
irrecoverable in the accounts for the purposes of this clause.] 

4[5[Explanation1].—For  the  purposes  of  this  clause,  any  bad  debt  or  part  thereof  written  off  as 
irrecoverable in the accounts of the assessee shall not include any provision for bad and doubtful debts 
made in the accounts of the assessee;] 

6[Explanation 2.—For the removal of doubts, it is hereby clarified that for the purposes of the proviso 
to clause (vii) of this sub-section and clause (v) of sub-section (2), the account referred to therein shall be 
only one account in respect of provision for bad and doubtful debts under clause (viia) and such account 
shall relate to all types of advances, including advances made by rural branches;] 

7[(viia) 8[in respect of any provision for bad and doubtful debts made by— 

(a)   a  scheduled  bank  [not  being  9***  a  bank  incorporated  by  or  under  the  laws  of  a  country 
outside  India]  or  a  non-scheduled  bank  10[or  a  co-operative  bank  other  than  a  primary  agricultural 
credit society or a primary co-operative agricultural and rural development bank], an amount  11[not 
exceeding  12[eight  and  one-half  per  cent.]]  of  the  total  income  (computed  before  making  any 
deduction under this clause and Chapter VIA) and an amount not exceeding  13[ten per cent.] of the 
aggregate  average  advances  made  by  the  rural  branches  of  such  bank  computed  in  the  prescribed 
manner: 

14[Provided that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at 
its option, be allowed in any of the relevant assessment years, deduction in respect of any provision 
made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in 
accordance with the guidelines issued by it in this behalf, for an amount not exceeding five per cent 
of the amount of such assets shown in the books of account of the bank on the last day of the previous 
year:] 

1. Ins. by Act 32 of 1985, s. 10 (w.e.f. 1-4- 1985). 
2. Subs. by Act 26 of 1997, s. 7, for “a bank” (w.e.f. 1-4-1992). 
3. Ins. by Act 20 of 2015, s. 13 (w.e.f. 1-4-2016). 
4. Ins. by Act 14 of 2001, s. 25 (w.e.f. 1-4-1989). 
5. Explanation renumbered as Explanation 1 thereof by Act 17 of 2013, s. 7 (w.e.f. 1-4-2014). 
6. Ins. by s. 7, ibid. (w.e.f. 1-4-2014). 
7. Ins. by Act 21 of 1979, s. 6 (w.e.f. 1-4-1980). 
8. Subs. by Act 26 of 1986, s. 2, for certain words (w.e.f. 1-4-1987). 
9. The words “a bank approved by the Central Government for the purpose of clause (viiia) or” omitted by Act 32 of 1994, 

s. 14  (w.e.f. 1-4-1995). 

10. Ins. by Act 22 of 2007, s. 13 (w.e.f. 1-4-2007). 
11. Subs. by Act 20 of 2002, s. 19, for “not exceeding five per cent.” (w.e.f. 1-4-2003). 
12. Subs. by Act 7 of 2017, s. 14 for “seven and one-half per cent.” (w.e.f. 1-4-2018). 
13. Subs. by Act 32 of 1994, s. 14, for “four per cent.” (w.e.f. 1-4-1995). 
14. Ins. by Act 27 of 1999, s. 22 (w.e.f. 1-4-2000). 

213 

                                                           
1[Provided further that for the relevant assessment years commencing on or after the 1st day of 
April, 2003 and ending before the 1st day of April, 2005, the provisions of the first proviso shall have 
effect as if for the words “five per cent”, the words “ten per cent.” had been substituted:] 

2[Provided also that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, 
at  its  option,  be  allowed  a  further  deduction  in  excess  of  the  limits  specified  in  the  foregoing 
provisions,  for  an  amount  not  exceeding  the  income  derived  from  redemption  of  securities  in 
accordance with a scheme framed by the Central Government: 

Provided also that no deduction shall be allowed under the third proviso unless such income has 

been disclosed in the return of income under the head “Profits and gains of business or profession.] 

Explanation.—For  the  purposes  of  this  sub-clause,  “relevant  assessment  years”  means  the  five 
consecutive assessment years commencing on or after the 1st day of April, 2000 and ending before 
the 1st day of April, 2005;] 

(b)  a bank, being a bank incorporated by or under the laws of a country outside India, an amount 
not  exceeding  five  per  cent  of  the  total income  (computed  before  making  any  deduction  under this 
clause and Chapter VI-A);] 

3[(c)  a public financial institution or a State financial corporation or a State industrial investment 
corporation, an amount not exceeding five per cent of the total income (computed before making any 
deduction under this clause and Chapter VI-A):] 

1[Provided that a public financial institution or a State financial corporation or a State industrial 
investment corporation referred to in this sub-clause shall, at its option, be allowed in any of the two 
consecutive assessment years commencing on or after the 1st day of April, 2003 and ending before 
the 1st day of April, 2005, deduction in respect of any provision made by it for any assets classified 
by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued 
by it in this behalf, of an amount not exceeding ten per cent of the amount of such assets shown in the 
books of account of such institution or corporation, as the case may be, on the last day of the previous 
year.] 

4[(d)  a  non-banking  financial  company,  an  amount  not  exceeding  five  per  cent.  of  the  total 

income (computed before making any deduction under this clause and Chapter VI-A).] 

Explanation.—For the purposes of this clause,— 

5[(i)  “non-scheduled bank” means a banking company as defined in clause (c) of section 5 of 

the Banking Regulation Act, 1949 (10 of 1949), which is not a scheduled bank; 

6[(ia)]“rural branch” means a branch of a scheduled bank 7[or a non-scheduled bank] situated 
in a place which has a population of not more than ten thousand according to the last preceding 
census of which the relevant figures have been published before the first day of the previous year; 

1. Ins. by Act 20 of 2002, s. 19 (w.e.f 1-4-2003). 
2. Ins. by Act 32 of 2003, s. 18 (w.e.f. 1-4-2004). 
3. Ins. by Act 49 of 1991, s. 14 (w.e.f. 1-4-1992). 
4. Ins. by Act 28 of 2016, s. 21 (w.e.f. 1-4-2017). 
5. Ins. by Act 14 of 1982, s. 10 (w.e.f. 1-4-983). 
6. Clause (i) renumbered as clause (ia) thereof by Act 14 of 1982, s. 10 (w.e.f. 1-4-1983). 
7. Ins. by s. 10, ibid. (w.e.f. 1-4-1983). 

214 

                                                           
1[(ii)   “scheduled  bank”  means  the  State  Bank  of  India  constituted  under  the  State  Bank  of 
India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary 
Banks)  Act,  1959  (38  of  1959),  a  corresponding  new  bank  constituted  under  section  3                      
of  the  Banking  Companies  (Acquisition  and  Transfer  of  Undertakings)  Act,  1970  (5  of  1970),                
or  under  section  3  of  the  Banking  Companies  (Acquisition  and  Transfer  of  Undertakings)                    
Act, 1980 (40 of 1980), or any other bank being a bank included in the Second Schedule to the 
Reserve Bank of India Act, 1934 (2 of 1934) 2***;] 

3[(iii) “public financial institution” shall have the meaning assigned to it in section 4A of the 

Companies Act, 1956 (1 of 1956); 

(iv) “State financial corporation” means a financial corporation established under section 3 or 

section  3A  or  an  institution  notified  under  section  46  of  the  State  Financial  Corporations               
Act, 1951 (63 of 1951); 

(v)  “State  industrial  investment  corporation”  means  a  Government  company  within  the 
meaning  of  section  617  of  the  Companies  Act,  1956  (1  of  1956),  engaged  in  the  business  of 
providing long-term finance for industrial projects and 4[eligible for deduction under clause (viii) 
of this sub-section];] 

5[(vi)  “co-operative  bank”,  “primary  agricultural  credit  society”  and  “primary  co-operative 
agricultural and rural development bank” shall have the meanings respectively assigned to them 
in the Explanation to sub-section (4) of section 80P;] 

6[(vii) “non-banking financial company” shall have the meaning assigned to it in clause (f) of 

section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934);] 

7[(viii)  in  respect  of  any  special  reserve  created  and  maintained  by  a  specified  entity,  an 
amount  not  exceeding  twenty  per  cent  of  the  profits  derived  from  eligible  business  computed 
under the head “Profits and gains of business or profession” (before making any deduction under 
this clause) carried to such reserve account: 

Provided that where the aggregate of the amounts carried to such reserve account from time 
to time exceeds twice the amount of the paid up share capital and of the general reserves of the 
specified entity, no allowance under this clause shall be made in respect of such excess. 

Explanation.—In this clause,— 

(a)  “specified entity” means,— 

 (i)   a 

financial  corporation  specified 

in  section  4A  of 

the  Companies                                     

Act, 1956 (1 of 1956); 

(ii)  a financial corporation which is a public sector company; 

1. Subs. by Act 4 of 1988, s. 10, for clause (ii) (w.e.f. 1-4-1989). 
2. The words “but does not include a co-operative bank” omitted by Act 22 of 2007, s. 11 (w.e.f. 1-4-2007). 
3. Ins. by Act 49 of 1991, s. 12 (w.e.f. 1-4-1992). 
4. Subs. by Act 10 of 2000, s. 18, for “a sum equal to one and one-fourth times of the expenditure” (w.e.f. 1-4-2000). 
5. Ins. by Act 22 of 2007, s. 13 (w.e.f. 1-4-2007). 
6. Ins. by Act 28 of 2016, s. 21 (w.e.f. 1-4-2017). 
7. Subs. by Act 22 of 2007, s. 13, for clause (viii) (w.e.f. 1-4-2008). 

215 

                                                           
(iii) a banking company; 

(iv) a co-operative bank other than a primary agricultural credit society or a primary             

co-operative agricultural and rural development bank; 

(v)  a housing finance company; and 

(vi) any other financial corporation including a public company; 

(b)  “eligible business” means,— 

1[(i) in respect of the specified entity referred to in sub-clause (i) or sub-clause (ii) or 
sub-clause  (iii)  or  sub-clause  (iv)  of  clause  (a),  the  business  of  providing  long-term 
finance for— 

(A) industrial or agricultural development; 

(B) development of infrastructure facility in India; or 

(C) development of housing in India;] 

(ii)  in respect of the specified entity referred to in sub-clause (v) of clause (a), the 
business  of  providing  long-term  finance  for  the  construction  or  purchase  of  houses  in 
India for residential purposes; and 

(iii) in respect of the specified entity referred to in sub-clause (vi) of clause (a), the 
business  of  providing  long-term  finance  for  development  of  infrastructure  facility  in 
India; 

(c)  “banking  company”  means  a  company 

to  which 

the  Banking  Regulation                 

Act,  1949  (10  of  1949)  applies  and  includes  any  bank  or  banking  institution  referred  to  in 
section 51 of that Act; 

(d) “co-operative bank”, “primary agricultural credit society” and “primary co-operative 
agricultural  and  rural  development  bank”  shall  have  the  meanings  respectively  assigned  to 
them in the Explanation to sub-section (4) of section 80P; 

(e)  “housing  finance  company”  means  a  public  company  formed  or  registered  in  India 
with  the  main  object  of  carrying  on  the  business  of  providing  long-term  finance  for 
construction or purchase of houses in India for residential purposes; 

(f) “public company” shall have the meaning assigned to it in section 3 of the Companies   

Act, 1956 (1 of 1956); 

(g) “infrastructure facility” means— 

(i)   an  infrastructure  facility  as  defined  in  the Explanation to  clause  (i)  of                     

sub-section (4) of section 80-IA, or any other public facility of a similar nature as may be 
notified  by  the  Board  in  this  behalf  in  the  Official  Gazette  and  which  fulfils  the 
conditions as may be prescribed; 

(ii)  an undertaking referred to in clause (ii) or clause (iii) or clause (iv) or clause (vi) 

of sub-section (4) of section 80-IA; and 

1. Subs. by Act 33 of 2009, s. 14, for clause (i) (w.e.f. 1-4-2010). 

216 

                                                           
(iii) an undertaking referred to in sub-section (10) of section 80-IB; 

(h)  “long-term finance” means any loan or advance where the terms under which moneys 
are loaned or advanced provide for repayment along with interest thereof during a period of 
not less than five years;] 

1* 

* 

* 

* 

* 

2[(ix) any expenditure bona fide incurred by a company for the purpose of promoting family 

planning amongst its employees : 

Provided that where such expenditure or any part thereof is of a capital nature, one-fifth of 
such expenditure shall be deducted for the previous year in which it was incurred; and the balance 
thereof  shall  be  deducted  in  equal  instalments  for  each  of  the  four  immediately  succeeding 
previous years: 

Provided  further that  the  provisions  of  sub-section  (2)  of section  32 and  of  sub-section  (2) 
of section  72 shall  apply  in  relation  to  deductions  allowable  under  this  clause  as  they  apply  in 
relation to deductions allowable in respect of depreciation : 

Provided further that the provisions of clauses (ii), (iii), (iv) and (v) of  3[sub-section (2) and 
sub-section (5) of section 35], of sub-section (3) of section 41 and of Explanation 1 to clause (1) 
of section 43 shall, so far as may be, apply in relation to an asset representing expenditure of a 
capital nature for the purposes of promoting family planning as they apply in relation to an asset 
representing expenditure of a capital nature on scientific research;] 

4* 

* 

* 

* 

* 

5[(xi)  any  expenditure  incurred  by  the  assessee,  on  or  after  the  1st  day  of  April,  1999  but 
before  the  1st  day  of  April,  2000,  wholly  and  exclusively  in  respect  of  a  non-Y2K  compliant 
computer system, owned by the assessee and used for the purposes of his business or profession, 
so as to make such computer system Y2K compliant computer system: 

Provided that  no  such  deduction  shall  be  allowed  in  respect  of  such  expenditure  under  any 

other provisions of this Act: 

Provided further that no such deduction shall be admissible unless the assessee furnishes in 
the prescribed form, along with the return of income, the report of an accountant, as defined in 
the Explanation below  sub-section  (2)  of section  288,  certifying  that  the  deduction  has  been 
correctly claimed in accordance with the provisions of this clause. 

1. Clause (viiia) omitted by Act 32 of 1994, s. 14 (w.e.f. 1-4-1995). 

2. Ins. by Act 10 of 1965, s. 11 (w.e.f. 1-4-1965). 

3. Subs. by Act 20 of 1967, s. 15, for “sub-section (2) of section 35” (w.e.f. 1-4-1967). 

4. Clause (x) omitted by Act 22 of 2007, s. 13 (w.e.f. 1-4-2008). 

5. Ins. by Act 27 of 1999, s. 22 (w.e.f. 1-4-2000). 

217 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
Explanation.—For the purposes of this clause,— 

(a)   “computer  system”  means  a  device  or  collection  of  devices  including  input  and 
output support devices and excluding calculators which are not programmable and capable of 
being  used  in  conjunction  with  external  files,  or  more  of  which  contain  computer 
programmes,  electronic  instructions,  input  data  and  output  data,  that  performs  functions 
including, but not limited to, logic, arithmetic, data storage and retrieval, communication and 
control; 

(b)   “Y2K  compliant  computer  system”  means  a  computer  system  capable  of  correctly 
processing, providing or receiving data relating to date within and between the twentieth and 
twenty-first century;] 

1[(xii)  any  expenditure  (not  being  in  the  nature  of  capital  expenditure)  incurred  by  a 

corporation or a body corporate, by whatever name called, if,— 

(a) it is constituted or established by gjma Central, State or Provincial Act; 

(b) such corporation or body corporate, having regard to the objects and purposes of the 
Act  referred  to  in  sub-clause  (a),  is  notified  by  the  Central  Government  in  the  Official 
Gazette for the purposes of this clause; and 

(c) the expenditure is incurred for the objects and purposes authorised by the Act under 

which it is constituted or established;] 

2[(xiii) any amount of banking cash transaction tax paid by the assessee during the previous 

year on the taxable banking transactions entered into by him. 

Explanation.—For the purposes of this clause, the expressions “banking cash transaction tax” 
and  “taxable  banking  transaction”  shall  have  the  same  meanings  respectively  assigned  to  them 
under Chapter VII of the Finance Act, 2005;] 

3[(xiv)  any  sum  paid  by  a  public  financial  institution  by  way  of  contribution  to  such  credit 
guarantee fund  trust for  small  industries  as  the  Central  Government  may,  by  notification  in  the 
Official Gazette, specify in this behalf. 

Explanation.—For  the  purposes  of  this  clause,  “public  financial  institution”  shall  have  the 

meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956);] 

4[(xv) an amount equal to the securities transaction tax paid by the assessee in respect of the 
taxable securities transactions entered into in the course of his business during the previous year, 
if the income arising from such taxable securities transactions is included in the income computed 
under the head “Profits and gains of business or profession”. 

1. Subs. by Act 22 of 2007, s. 13, for clause (xii) (w.e.f. 1-4-2008). 

2. Ins. by Act 18 of 2005, s. 12 (w.e.f. 1-4-2006). 

3. Ins. by Act 22 of 2007, s. 13 (w.e.f. 1-4-2008). 

4. Ins. by Act 18 of 2008, s. 9 (w.e.f. 1-4-2009). 

218 

                                                           
Explanation.—For  the  purposes  of  this  clause,  the  expressions  “securities  transaction  tax” 
and “taxable securities transaction” shall have the meanings respectively assigned to them under 
Chapter VII of the Finance (No. 2) Act, 2004 (23 of 2004); 

1[(xvi) an amount equal to the commodities transaction tax paid by the assessee in respect of 
the  taxable  commodities  transactions  entered  into  in  the  course  of  his  business  during  the 
previous year, if the income arising from such taxable commodities transactions is included in the 
income computed under the head “Profits and gains of business or profession”. 

Explanation.—For the purposes of this clause, the expressions “commodities transaction tax” 
and  “taxable  commodities  transaction”  shall  have  the  meanings  respectively  assigned  to  them 
under Chapter VII of the Finance Act, 2013;]] 

2[(xvii) the amount of expenditure incurred by a co-operative society engaged in the business 
of  manufacture of  sugar for  purchase  of  sugarcane  at  a  price  which  is equal to or less than  the 
price fixed or approved by the Government.] 

3[(xviii)  marked  to  market  loss  or  other  expected  loss  as  computed  in  accordance  with  the 

income computation and disclosure standards notified under sub-section (2) of section 145.] 

(2) In making any deduction for a bad debt or part thereof, the following provisions shall apply— 

4[(i)  no  such  deduction  shall  be  allowed  unless  such  debt  or  part  thereof  has  been  taken  into 
account in computing the income of the assessee of the previous year in which the amount of such 
debt  or  part  thereof  is  written  off  or  of  an  earlier  previous  year,  or  represents  money  lent  in  the 
ordinary course of the business of banking or money-lending which is carried on by the assessee;] 

(ii)  if the amount ultimately recovered on any such debt or part of debt is less than the difference 
between  the  debt  or  part  and  the  amount  so  deducted,  the  deficiency  shall  be  deductible  in  the 
previous year in which the ultimate recovery is made; 

(iii)  any  such  debt  or  part  of  debt  may  be  deducted  if  it  has  already  been  written  off  as 
irrecoverable  in  the  accounts  of  an  earlier  previous  year  5[(being  a  previous  year  relevant  to  the 
assessment year commencing on the 1st day of April, 1988, or any earlier assessment year)], but the 
6[Assessing Officer] had not allowed it to be deducted on the ground that it had not been established 
to have become a bad debt in that year; 

(iv)  where  any  such  debt  or  part  of  debt  is  written  off  as  irrecoverable  in  the  accounts  of  the 
previous year 5[(being a previous year relevant to the assessment year commencing on the 1st day of 
April, 1988, or any earlier assessment year)] and the 6[Assessing Officer] is satisfied that such debt or 
part became a bad debt in any earlier previous year not falling beyond a period of four previous years 
immediately preceding the previous year in which such debt or part is written off, the provisions of 
sub-section (6) of section 155 shall apply; 

7[(v)  where  such  debt  or  part  of  debt  relates  to  advances  made  by  an  assessee  to  which                 

clause  (viia)  of  sub-section  (1)  applies,  no  such  deduction  shall  be  allowed  unless  the  assessee  has 
debited  the  amount  of  such  debt  or  part  of  debt  in  that  previous  year  to  the  provision  for  bad  and 
doubtful debts account made under that clause.] 

1. Ins. by Act 17 of 2013, s. 7 (w.e.f. 1-4-2014). 
2. Ins. by Act 20 of 2015, s. 13 (w.e.f. 1-4-2016). 
3. Ins. by Act 13 of 2018, s. 10 (w.r.e.f. 1-4-2017). 
4. Subs. by Act 4 of 1988, s. 11, for clause (i) (w.e.f. 1-4-1989). 
5. Ins. by s. 11, ibid. (w.e.f. 1-4-1989). 
6. Subs. by s. 11, ibid., for “Income-tax Officer” (w.e.f. 1-4-1988).  
7. Subs. by Act 26 of 1997, s. 7, for clause (v) (w.e.f. 1-4-1992). 

219 

                                                           
37.  General.—(1)  Any  expenditure  (not  being  expenditure  of 

the  nature  described 

in                  

sections  30 to  36  1***  and  not  being  in  the  nature  of  capital  expenditure  or  personal  expenses  of  the 
assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall 
be  allowed  in  computing  the  income  chargeable  under  the  head  “Profits  and  gains  of  business  or 
profession”. 

2[  3[Explanation 1.]—For the removal of doubts, it is hereby declared that any expenditure incurred 
by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to 
have been incurred for the purpose of business or profession and no deduction or allowance shall be made 
in respect of such expenditure.] 

 4[Explanation  2.—For  the  removal  of  doubts,  it  is  hereby  declared  that  for  the  purposes  of  sub-
section  (1),  any  expenditure  incurred  by  an  assessee  on  the  activities  relating  to  corporate  social 
responsibility referred to in section 135 of the Companies Act, 2013 (18 of 2013) shall not be deemed to 
be an expenditure incurred by the assessee for the purposes of the business or profession.] 

5* 

* 

* 

    * 

* 

6[(2B) Notwithstanding anything contained in sub-section (1), no allowance shall be made in respect 
of expenditure incurred by an assessee on advertisement in any souvenir, brochure, tract, pamphlet or the 
like published by a political party.] 

7* 

8* 

9* 

* 

* 

* 

* 

* 

* 

     * 

     * 

     * 

  * 

  * 

  * 

38. Building, etc., partly used for business, etc., or not exclusively so used.— (1) Where a part of 

any premises is used as dwelling house by the assessee,— 

(a) the deduction under sub-clause (i) of clause (a) of section 30, in the case of rent, shall be such 
amount as the 10[Assessing Officer] may determine having regard to the proportionate annual value of 
the part used for the purpose of the business or profession, and in the case of any sum paid for repairs, 
such  sum  as  is  proportionate  to  the  part  of  the  premises  used  for  the  purpose  of  the  business  or 
profession; 

(b) the deduction under clause (b) of section 30 shall be such sum as the 8[Assessing Officer] may 

determine having regard to the part so used. 

(2) Where any building, machinery, plant or furniture is not exclusively used for the purposes of the 
business  or  profession,  the  deductions  under  sub-clause  (ii)  of  clause  (a)  and  clause  (c)  of  section  30, 

1. The words “and section 80VV” omitted by Act 32 of 1985, s. 11 (w.e.f. 1-4-1986). 

2. Ins. by Act 21 of 1998, s. 15 (w.e.f. 1-4-1962). 

3. Explanation numbered as Explanation 1 thereof by Act 25 of 2014, s. 13 (w.e.f. 1-4-2015). 

4. Ins. by s. 13, ibid. (w.e.f. 1-4-2015).  

5. Sub-section (2) omitted by Act 26 of 1997, s. 8 (w.e.f. 1-4-1998). 

6. Ins. by Act 29 of 1978, s. 2 (w.e.f. 1-4-1979). 

7. Sub-section (3) omitted by Act 26 of 1997, s. 8 (w.e.f. 1-4-1998). 

8. Sub-sections (3A), (3B), (3C) and (3D) omitted by Act 32 of 1985, s. 11 (w.e.f. 1-4-1986).  
9.  Sub-sections (4) and (5) omitted by Act 26 of 1997, s. 8 (w.e.f. 1-4-1998). 

10. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer”, (w.e.f. 1-4-1988). 

220 

 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
  
 
 
 
               
 
 
 
 
 
               
                                                           
clauses (i) and (ii) of section 31 and  1[clause (ii) of sub-section (1)] of section 32 shall be restricted to a 
fair proportionate part thereof which the 2[Assessing Officer] may determine, having regard to the user of 
such building, machinery, plant or furniture for the purposes of the business or profession. 

39. Managing  agency  commission.—Omitted  by 

the  Direct  Tax  Laws 

(Amendment)                       

Act, 1987 (4 of 1988), s. 12, (w.e.f. 1-4-1989). 

40. Amounts  not  deductible.—Notwithstanding  anything  to  the  contrary  in 3[section  30 to 38],  the 
following amounts shall not be deducted in computing the income chargeable under the head “Profits and 
gains of business or profession”,— 

(a) in the case of any assessee— 

4[(i) any interest (not being interest on a loan issued for public subscription before the 1st day 
of April, 1938), royalty, fees for technical services or other sum chargeable under this Act, which 
is payable,— 

(A) outside India; or 

(B) in India to a non-resident, not being a company or to a foreign company, 

on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted 
or, after deduction, has not been paid 5[on or before the due date specified in sub-section (1) of 
section 139]: 

6[Provided that where in respect of any such sum, tax has been deducted in any subsequent 
year,  or  has  been  deducted  during  the  previous  year  but  paid  after  the  due  date  specified  in        
sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income 
of the previous year in which such tax has been paid.] 

Explanation.—For the purposes of this sub-clause,— 

(A) “royalty”  shall  have  the  same  meaning  as  in Explanation 2 to  clause  (vi)  of                 

sub-section (1) of section 9; 

(B) “fees  for  technical  services”  shall  have  the  same  meaning  as  in Explanation 2 to        

clause (vii) of sub-section (1) of section 9; 

(ia)  7[thirty per cent of any sum payable to a resident], on which tax is deductible at source 
under Chapter XVII-B and such tax has not been deducted or, after deduction, 8[has not been paid 
on or before the due date specified in sub-section (1) of section 139:] 

9[Provided that where in respect of any such sum, tax has been deducted in any subsequent 

year,  or  has  been  deducted  during  the  previous  year  but  paid  after  the  due  date  specified  in              
sub-section (1) of section 139, 10[thirty per cent of] such sum shall be allowed as a deduction in 
computing the income of the previous year in which such tax has been paid:] 

1.  Subs.  by  Act  46  of  1986,  s.  32,  for  “clause  (i),  (ii), (iia)  and  (iii)  of  sub-section (1)  and  sub-section  (1A)”  (w.e.f.  1-4-

1988).  

2. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
3. Subs. by s. 13, ibid., for “section 30 to 39” (w.e.f. 1-4-1989). 
4. Subs. by Act 23 of 2004, s. 11, for sub-clause (i) (w.e.f. 1-4-2005). 
5. Subs. by Act 25 of 2014, s. 14, for certain words, brackets and figures (w.e.f. 1-4-2015).   
6. Subs. by s. 14, ibid., for the proviso (w.e.f. 1-4-2015). 
7. Subs. by s. 14, ibid., for certain words and brackets (w.e.f. 1-4-2015). 
8.  Subs. by Act 14 of 2010, s. 12, for certain words, brackets and figures (w.e.f. 1-4-2010).  
9. Subs. by s. 12, ibid., for proviso (w.e.f. 1-4-2010).  
10. Ins. by Act 25 of 2014, s. 14 (w.e.f. 1-4-2015).  

221 

                                                           
1[Provided further that where an assessee fails to deduct the whole or any part of the tax in 
accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an 
assessee in default under the first proviso to sub-section (1) of section 201, then, for the purpose 
of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum 
on the date of furnishing of return of income by the resident payee referred to in the said proviso.] 

Explanation.—For the purposes of this sub-clause,— 

 (i) “commission  or  brokerage”  shall  have  the  same  meaning  as  in  clause  (i)  of 

the Explanation to section 194H; 

 (ii)   “fees  for  technical  services”  shall  have  the  same  meaning  as  in Explanation 2 to        

clause (vii) of sub-section (1) of section 9; 

(iii)   “professional  services”  shall  have  the  same  meaning  as  in  clause  (a)  of 

the Explanation to section 194J; 

(iv)  “work” shall have the same meaning as in Explanation III to section 194C; 

2[(v) “rent”  shall  have  the  same  meaning  as  in  clause  (i)  to  the Explanation to         

 section 194-I; 

(vi)  “royalty”  shall  have  the  same  meaning  as  in Explanation  2 to  clause  (vi)  of            

sub-section (1) of section 9;] 

3[(ib)  any  consideration  paid  or  payable  to  a  non-resident  for  a  specified  service  on  which 
equalisation levy is deductible under the provisions of Chapter VIII of the Finance Act, 2016, and 
such levy has not been deducted or after deduction, has not been paid on or before the due date 
specified in sub-section (1) of section 139: 

Provided that  where  in  respect  of  any  such  consideration,  the  equalisation  levy  has  been 
deducted in any subsequent year or has been deducted during the previous year but paid after the 
due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in 
computing the income of the previous year in which such levy has been paid;]] 

4[(ic) any sum paid on account of fringe benefit tax under Chapter XIIH;] 

(ii) any sum paid on account of any rate or tax levied on the profits or gains of any business 
or  profession  or  assessed  at  a  proportion  of,  or  otherwise  on  the  basis  of,  any  such  profits  or 
gains. 

5[Explanation  1.—For  the  removal  of  doubts,  it is  hereby  declared  that  for  the  purposes  of 
this sub-clause, any sum paid on account of any rate or tax levied includes and shall be deemed 
always to have included any sum eligible for relief of tax under section 90 or, as the case may be, 
deduction from the Indian income-tax payable under section 91.] 

1. Ins. by Act 23 of 2012, s. 11 (w.e.f. 1-4-2013). 
2. Ins. by Act 29 of 2006, s. 8 (w.e.f. 1-4-2006). 
3. Ins. by Act 28 of 2016, s. 22 (w.e.f. 1-6-2016). 
4. Ins. by Act 18 of 2005, s. 13 (w.e.f. 1-4-2006). 
5. Ins. by Act 21 of 2006, s. 10 (w.e.f. 1-4-2006).  

222 

                                                           
1[Explanation  2.—For  the  removal  of  doubts,  it is  hereby  declared  that  for  the  purposes  of 
this sub-clause, any sum paid on account of any rate or tax levied includes any sum eligible for 
relief of tax under section 90A;] 

2[(iia) any sum paid on account of wealth-tax. 

Explanation.—For the purposes of this sub-clause, “wealth-tax” means wealth-tax chargeable 
under the Wealth-tax Act, 1957 (27 of 1957), or any tax of a similar character chargeable under 
any law in force in any country outside India or any tax chargeable under such law with reference 
to the value of the assets of, or the capital employed in, a business or profession carried on by the 
assessee,  whether  or  not  the  debts  of  the  business  or  profession  are  allowed  as  a  deduction  in 
computing the amount with reference to which such tax is charged, but does not include any tax 
chargeable with reference to the value of any particular asset of the business or profession;] 

3[(iib) any amount— 

(A) paid by way of royalty, licence fee, service fee, privilege fee, service charge or any 

other fee or charge, by whatever name called, which is levied exclusively on; or 

(B) which  is  appropriated,  directly  or  indirectly,  from,  a  State  Government  undertaking 

by the State Government. 

Explanation.—For  the  purposes  of  this  sub-clause,  a  State  Government  undertaking 

includes— 

 (i) a corporation established by or under any Act of the State Government; 

 (ii) a  company  in  which  more  than  fifty  per  cent  of  the  paid-up  equity  share  capital is 

held by the State Government; 

(iii) a company in which more than fifty per cent of the paid-up equity share capital is 

held by the entity referred to in clause (i) or clause (ii) (whether singly or taken together); 

(iv) a company or corporation in which the State Government has the right to appoint the 
majority  of  the  directors  or  to  control  the  management  or  policy  decisions,  directly  or 
indirectly,  including  by  virtue  of  its  shareholding  or  management  rights  or  shareholders 
agreements or voting agreements or in any other manner; 

(v) an authority, a board or an institution or a body established or constituted by or under 

any Act of the State Government or owned or controlled by the State Government;] 

4[(iii) any payment which is chargeable under the head “Salaries”, if it is payable— 

(A) outside India; or 

(B) to a non-resident, 

and if the tax has not been paid thereon nor deducted therefrom under Chapter XVII-B;] 

1. Ins. by Act 21 of 2006, s. 10 (w.e.f. 1-6-2006). 
2. Ins. by Act 41 of 1972, s. 2 (w.e.f. 1-4-1962). 
3. Ins. by Act 17 of 2013, s. 8 (w.e.f. 1-4-2014). 
4. Subs. by Act 32 of 2003, s. 19, for sub-clause (iii) (w.e.f. 1-4-2004).  

223 

                                                           
(iv) any payment to a provident or other fund established for the benefit of employees of the 
assessee, unless the assessee has made effective arrangements to secure that tax shall be deducted 
at  source  from  any  payments  made  from  the  fund  which  are  chargeable  to  tax  under  the  head 
“Salaries”; 

1[(v) any tax actually paid by an employer referred to in clause (10CC) of section 10;] 

2[(b) in the case of any firm assessable as such,— 

 (i) any  payment  of  salary,  bonus,  commission  or  remuneration,  by  whatever  name  called 

(hereinafter referred to as “remuneration”) to any partner who is not a working partner; or 

(ii) any  payment  of  remuneration to  any  partner  who  is  a  working  partner,  or  of  interest  to 
any partner, which, in either case, is not authorised by, or is not in accordance with, the terms of 
the partnership deed; or 

(iii) any payment of remuneration to any partner who is a working partner, or of interest to 
any partner, which, in either case, is authorised by, and is in accordance with, the terms of the 
partnership  deed,  but  which  relates  to  any  period  (falling  prior  to  the  date  of  such  partnership 
deed)  for  which  such  payment  was  not  authorised  by,  or  is  not  in  accordance with,  any  earlier 
partnership  deed,  so, however,  that  the  period  of authorisation for such  payment  by  any  earlier 
partnership deed does not cover any period prior to the date of such earlier partnership deed; or 

(iv) any payment of interest to any partner which is authorised by, and is in accordance with, 
the  terms  of  the  partnership  deed  and  relates  to  any  period  falling  after  the  date  of  such 
partnership deed in so far as such amount exceeds the amount calculated at the rate of  3[twelve 
per cent.]  simple interest per annum; or 

(v) any payment of remuneration to any partner who is a working partner, which is authorised 
by, and is in accordance with, the terms of the partnership deed and relates to any period falling 
after the date of such partnership deed in so far as the amount of such payment to all the partners 
during the previous year exceeds the aggregate amount computed as hereunder:— 

                  4[(a) on the first Rs. 3,00,000 of the                     Rs. 1,50,000 or at the  rate of 90 per cent. 

                   book-profit or in case of a loss                   of the book-profit, whichever is more; 

                    (b) on the balance of the book-profit                at the rate of 60 per cent:] 

Provided that in relation to any payment under this clause to the partner during the previous 
year relevant to the assessment year commencing on the 1st day of April, 1993, the terms of the 
partnership deed may, at any time during the said previous year, provide for such payment. 

Explanation  1.—Where an individual is a partner in a firm on behalf, or for the benefit, of 
any other person (such partner and the other person being hereinafter referred to as “partner in a 
representative capacity” and “person so represented”, respectively),— 

(i) interest  paid  by  the  firm  to  such  individual  otherwise  than  as  partner  in  a 

representative capacity, shall not be taken into account for the purposes of this clause; 

1. Ins. by Act 20 of 2002, s. 20 (w.e.f. 1-4-2003). 
2.  Subs.  by  Act  18  of  1992,  s.  16,  for  clause  (b)  (w.e.f.  1-4-1993).  Earlier  amended  by  Act  67  of  1984,  s.  10                   

(w.e.f. 1-4-1985), Act 4 of 1988, s. 13 and 3 of 1989, s. 95 (w.e.f. 1-4-1989). 

3. Subs. by Act 20 of 2002, s. 20, for “eighteen per cent.” (w.e.f. 1-6-2002).  
4. Subs. by Act 33 of 2009, s. 15, for Items (1) and (2) (w.e.f. 1-4-2010).  

224 

 
                                                           
(ii) interest paid by the firm to such individual as partner in a representative capacity and 
interest  paid  by  the  firm  to  the  person  so  represented  shall  be  taken  into  account  for  the 
purposes of this clause. 

Explanation  2.—Where  an  individual  is  a  partner  in  a  firm  otherwise  than  as  partner  in  a 
representative capacity, interest paid by the firm to such individual shall not be taken into account 
for the purposes of this clause, if such interest is received by him on behalf, or for the benefit, of 
any other person. 

Explanation 3.—For the purposes of this clause, “book-profit” means the net profit, as shown 
in the profit and loss account for the relevant previous year, computed in the manner laid down in 
Chapter IV-D as increased by the aggregate amount of the remuneration paid or payable to all the 
partners of the firm if such amount has been deducted while computing the net profit. 

Explanation 4.—For the purposes of this clause, “working partner” means an individual who 
is actively engaged in conducting the affairs of the business or profession of the firm of which he 
is a partner;] 

1[(ba) in the case of an association of persons or body of individuals [other than a company or a        

co-operative society or a society registered under the Societies Registration Act, 1860 (21 of 1860), 
or  under  any  law  corresponding  to that  Act in  force in  any  part  of  India],  any payment  of interest, 
salary,  bonus,  commission  or remuneration,  by  whatever  name  called,  made  by  such  association  or 
body to a member of such association or body. 

Explanation 1.—Where interest is paid by an association or body to any member thereof who has 
also paid interest to the association or body, the amount of interest to be disallowed under this clause 
shall  be  limited  to  the  amount  by  which  the  payment  of  interest  by  the  association  or  body  to  the 
member exceeds the payment of interest by the member to the association or body. 

Explanation 2.—Where an individual is a member of an association or body on behalf, or for the 
benefit,  of  any  other  person  (such  member  and  the  other  person  being  hereinafter  referred  to  as 
“member in a representative capacity” and “person so represented”, respectively),— 

(i) interest  paid  by  the  association  or  body  to  such  individual  or  by  such  individual  to  the 
association or body otherwise than as member in a representative capacity, shall not be taken into 
account for the purposes of this clause; 

(ii) interest  paid  by  the  association  or  body  to  such  individual  or  by  such  individual  to  the 
association or body as member in a representative capacity and interest paid by the association or 
body to the person so represented or by the person so represented to the association or body, shall 
be taken into account for the purposes of this clause. 

Explanation  3.—Where  an  individual  is  a  member  of  an  association  or  body  otherwise  than  as 
member in a representative capacity, interest paid by the association or body to such individual shall 
not be taken into account for the purposes of this clause, if such interest is received by him on behalf, 
or for the benefit, of any other person.] 

2* 

3* 

* 

* 

* 

* 

* 

* 

* 

* 

1. Ins. by Act 3 of 1989, s. 9 (w.e.f. 1-4-1989). 
2. Clause (c) omitted by Act 4 of 1988, s. 13 (w.e.f. 1-4-1989). 
3. Clause (d) omitted by Act 26 of 1988, s. 11 (w.e.f. 1-4-1989). 

225 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
1[40A. Expenses or payments not deductible in certain circumstances.—(1) The provisions of this 
section shall have effect notwithstanding anything to the contrary contained in any other provision of this 
Act relating to the computation of income under the head “Profits and gains of business or profession”. 

(2) (a) Where the assessee incurs any expenditure in respect of which payment has been or is to be 
made to any person referred to in clause (b) of this sub-section, and the 2[Assessing Officer] is of opinion 
that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, 
services or facilities for which the payment is made or the legitimate needs of the business or profession 
of the assessee or the benefit derived by or accruing to him therefrom, so much of the expenditure as is so 
considered by him to be excessive or unreasonable shall not be allowed as a deduction: 

3[Provided that  4[for  an  assessment  year  commencing  on  or  before  the  1st  day  of  April,  2016]  no 
disallowance,  on  account  of  any  expenditure  being  excessive  or  unreasonable  having  regard  to  the  fair 
market value, shall be made in respect of a specified domestic transaction referred to in section 92BA, if 
such transaction is at arm's length price as defined in clause (ii) of section 92F.] 

(b) The persons referred to in clause (a) are the following, namely:— 

(i) where the assessee is an individual 

any relative of the assessee;  

(ii) where the assessee is a company, 

any director of the company, partner of the firm, 

      firm, association  of persons or 

or member of the association or family, or any 

       Hindu un-divided family  

relative of such director, partner or member; 

(iii) any individual who has a substantial interest in the business or profession of the assessee, or 

any relative of such individual; 

(iv)  a  company,  firm,  association  of  persons  or  Hindu  undivided  family  having  a  substantial 
interest  in  the  business  or  profession  of  the  assessee  or  any  director,  partner  or  member  of  such 
company,  firm,  association  or  family,  or  any  relative  of  such  director,  partner  or  member  5[or  any 
other  company  carrying  on  business  or  profession  in  which  the  first  mentioned  company  has 
substantial interest;] 

(v)  a  company,  firm,  association  of  persons  or  Hindu  undivided  family  of  which  a  director, 
partner or member, as the case may be, has a substantial interest in the business or profession of the 
assessee;  or  any  director,  partner  or  member  of  such  company,  firm,  association  or  family  or  any 
relative of such director, partner or member; 

 (vi) any person who carries on a business or profession,— 

(A) where the assessee being an individual, or any relative of such assessee, has a substantial 

interest in the business or profession of that person; or 

1. Ins. by Act 19 of 1968, s. 7 (w.e.f 1-4-1968). 
2. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
3. Ins. by Act 23 of 2012, s. 12 (w.e.f. 1-4-2013).   
4. Ins. by Act 7 of 2017, s. 15 (w.e.f. 1-4-2017).  
5. Ins. by Act 23 of 2012, s. 12 (w.e.f. 1-4-2013).   

226 

                                                           
(B) where  the  assessee  being  a  company,  firm,  association  of  persons  or  Hindu  undivided 
family,  or  any  director  of  such  company,  partner  of such  firm  or  member  of  the  association  or 
family,  or  any  relative  of  such  director,  partner  or  member,  has  a  substantial  interest  in  the 
business or profession of that person. 

Explanation.—For the purposes of this sub-section, a person shall be deemed to have a substantial 

interest in a business or profession, if,— 

(a) in a case where the business or profession is carried on by a company, such person is, at 
any time during the previous year, the beneficial owner of shares (not being shares entitled to a 
fixed rate of dividend whether with or without a right to participate in profits) carrying not less 
than twenty per cent of the voting power; and 

(b) in  any  other  case,  such  person  is,  at  any  time  during  the  previous  year,  beneficially 

entitled to not less than twenty per cent of the profits of such business or profession. 

1[(3)  Where  the  assessee  incurs  any  expenditure  in  respect  of  which  a  payment  or  aggregate  of 
payments  made  to  a  person  in  a  day,  otherwise  than  by  an  account  payee  cheque  drawn  on  a  bank  or 
account payee bank draft,  2[or  use  of  electronic  clearing  system  through  a  bank  account,  exceeds  ten  thousand 
rupees], no deduction shall be allowed in respect of such expenditure. 

(3A)  Where  an  allowance  has  been  made  in  the  assessment  for  any  year  in  respect  of  any  liability 
incurred  by  the  assessee  for  any  expenditure  and  subsequently  during  any  previous  year  (hereinafter 
referred  to  as  subsequent  year)  the  assessee  makes  payment  in  respect  thereof,  otherwise  than  by  an 
account payee cheque drawn on a bank or account payee bank draft 3[or use of electronic clearing system 
through a bank account], the payment so made shall be deemed to be the profits and gains of business or 
profession and accordingly chargeable to income-tax as income of the subsequent year if the payment or 
aggregate of payments made to a person in a day, exceeds 4[ten thousand rupees]: 

Provided that no disallowance shall be made and no payment shall be deemed to be the profits and 
gains of business or profession under sub-section (3) and this sub-section where a payment or aggregate 
of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or 
account payee bank draft,  2[or  use  of  electronic  clearing  system  through  a  bank  account,  exceeds  ten  thousand 
rupees], in such cases and under such circumstances as may be prescribed, having regard to the nature and 
extent of banking facilities available, considerations of business expediency and other relevant factors:] 

5[Provided further that in the case of payment made for plying, hiring or leasing goods carriages, the 
provisions  of  sub-sections  (3)  and  (3A)  shall  have  effect  as  if  for  the  words  4[ten  thousand  rupees],  the 
words “thirty-five thousand rupees” had been substituted.] 

6[(4)  Notwithstanding  anything  contained  in  any  other  law  for  the  time  being  in  force  or  in  any 
contract, where any payment in respect of any expenditure has to be made by  7[an account payee cheque 
drawn  on  a  bank  or  account  payee  bank  draft]  3[or  use  of  electronic  clearing  system  through  a  bank 
account] in order that such expenditure may not be disallowed as a deduction under sub-section (3), then 
the  payment  may  be  made  by  such  cheque  or  draft;  8[or  electronic  clearing  system]  and  where  the 

1.  Subs. by Act 18 of 2008, s. 11, for sub-section (3) (w.e.f. 1-4-2009). 
2. Subs. by Act 7 of 2017, s. 15, for “exceeds twenty thousand rupees” (w.e.f. 1-4-2018).  
3. Ins. by s. 15, ibid. (w.e.f. 1-4-2018). 
4. Subs. by s. 15, ibid., for “twenty thousand rupees” (w.e.f. 1-4-2018). 
5. Ins. by Act 33 of 2009, s. 16 (w.e.f. 1-10-2009).  
6. Ins. by Act 14 of 1969, s. 5 (w.e.f. 1-4-1969). 
7.  Subs.  by  Act  29  of  2006,  s.  9,  for  the  words  “a  crossed  cheque  drawn  on  a  bank  or  by  a  crossed  bank  draft”                           

(w.e.f. 13-7-2006).  

8. Ins. by Act 7 of 2017, s. 15 (w.e.f 1-4-2018). 

227 

                                                           
payment is so made or tendered, no person shall be allowed to raise, in any suit or other proceeding, a 
plea based on the ground that the payment was not made or tendered in cash or in any other manner.] 

1* 

* 

* 

* 

* 

2[(7)  (a)  Subject  to  the  provisions  of  clause  (b),  no  deduction  shall  be  allowed  in  respect  of  any 
provision (whether called as such or by any other name) made by the assessee for the payment of gratuity 
to his employees on their retirement or on termination of their employment for any reason. 

(b) Nothing in clause (a) shall apply in relation to any provision made by the assessee for the purpose 
of payment of a sum by way of any contribution towards an approved gratuity fund, or for the purpose of 
payment of any gratuity, that has become payable during the previous year. 

Explanation.—For the removal of doubts, it is hereby declared that where any provision made by the 
assessee  for  the  payment  of  gratuity  to  his  employees  on  their  retirement  or  termination  of  their 
employment for any reason has been allowed as a deduction in computing the income of the assessee for 
any  assessment  year,  any  sum  paid  out  of  such  provision  by  way  of  contribution  towards  an  approved 
gratuity fund or by way of gratuity to any employee shall not be allowed as a deduction in computing the 
income of the assessee of the previous year in which the sum is so paid.] 

3* 

* 

* 

* 

* 

4[(9)  No  deduction  shall  be  allowed  in  respect  of  any  sum  paid  by  the  assessee  as  an  employer 
towards  the  setting  up  or  formation  of,  or  as  contribution  to,  any  fund,  trust,  company,  association  of 
persons, body of individuals, society registered under the Societies Registration Act, 1860 (21 of 1860), 
or other institution for any purpose, except where such sum is so paid, for the purposes and to the extent 
provided  by  or  under  clause  (iv)  5[or  clause  (iva)]  or  clause  (v)  of  sub-section  (1)  of  section  36,  or  as 
required by or under any other law for the time being in force. 

(10)  Notwithstanding  anything  contained  in  sub-section  (9),  where  the  6[Assessing  Officer]  is 
satisfied  that  the  fund,  trust,  company,  association  of  persons,  body  of  individuals,  society  or  other 
institution  referred  to  in  that  sub-section  has,  before  the  1st  day  of  March,  1984, bona  fide laid  out  or 
expended any expenditure (not being in the nature of capital expenditure) wholly and exclusively for the 
welfare of the employees of the assessee referred to in sub-section (9) out of the sum referred to in that 
sub-section, the amount of such expenditure shall, in case no deduction has been allowed to the assessee 
in  respect  of  such  sum  and  subject  to  the  other  provisions  of  this  Act,  be  deducted  in  computing  the 
income referred to in section 28 of the assessee of the previous year in which such expenditure is so laid 
out or expended, as if such expenditure had been laid out or expended by the assessee. 

(11)  Where  the  assessee  has,  before  the  1st  day  of  March,  1984,  paid  any  sum  to  any  fund,  trust, 

company,  association  of  persons,  body  of  individuals,  society  or  other  institution  referred  to  in             
sub-section (9), then, notwithstanding anything contained in any other law or in any instrument, he shall 
be entitled— 

(i)  to claim that so much of the amount paid by him as has not been laid out or expended by such 
fund,  trust,  company,  association  of  persons,  body  of  individuals,  society  or  other  institution  (such 
amount being hereinafter referred to as the unutilised amount) be repaid to him, and where any claim 
is so made, the unutilised amount shall be repaid, as soon as may be, to him; 

1. Sub-sections (5) and (6) omitted by Act 4 of 1988, s. 14 (w.e.f. 1-4-1989). 
2. Subs. by Act 27 of 1999, s. 23, for sub-section (7) (w.e.f. 1-4-2000).  
3. Sub-section (8) omitted by Act 32 of 1985, s. 12 (w.e.f. 1-4-1986). 
4. Ins. by Act 21 of 1984, s. 10 (w.e.f. 1-4-1980). 
5. Ins. by Act 8 of 2011, s. 8 (w.e.f. 1-4-2012). 
6. Subs. by Act 4 of 1988, s. 2 for “income-tax officer”(w.e.f. 1-4-1988).  

228 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
(ii) to  claim  that  any  asset,  being  land,  building,  machinery,  plant  or  furniture  acquired  or 
constructed by the fund, trust, company, association of persons, body of individuals, society or other 
institution out of the sum paid by the assessee, be transferred to him, and where any claim is so made, 
such asset shall be transferred, as soon as may be, to him.] 

1* 

* 

* 

* 

* 

2[(13) No deduction or allowance shall be allowed in respect of any marked to market loss or other 

expected loss, except as allowable under clause (xviii) of sub-section (1) of section 36.] 

41.  Profits  chargeable  to  tax.— 3[(1)  Where  an  allowance  or  deduction  has  been  made  in  the 
assessment  for  any  year  in  respect  of  loss,  expenditure  or  trading  liability  incurred  by  the  assessee 
(hereinafter referred to as the first-mentioned person) and subsequently during any previous year,— 

(a) the first-mentioned person has obtained, whether in cash or in any other manner whatsoever, 
any amount in respect of such loss or expenditure or some benefit in respect of such trading liability 
by way of remission or cessation thereof, the amount obtained by such person or the value of benefit 
accruing  to  him  shall  be  deemed  to  be  profits  and  gains  of  business  or  profession  and  accordingly 
chargeable to income-tax as the income of that previous year, whether the business or profession in 
respect of which the allowance or deduction has been made is in existence in that year or not; or 

(b) the successor in business has obtained, whether in cash or in any other manner whatsoever, 
any  amount  in  respect  of  which  loss  or  expenditure  was  incurred  by  the  first-mentioned  person  or 
some  benefit  in  respect  of  the  trading  liability  referred  to  in  clause  (a)  by  way  of  remission  or 
cessation thereof, the amount obtained by the successor in business or the value of benefit accruing to 
the successor in business shall be deemed to be profits and gains of the business or profession, and 
accordingly chargeable to income-tax as the income of that previous year. 

4[Explanation 1.—For the purposes of this sub-section, the expression “loss or expenditure or some 
benefit in respect of any such trading liability by way of remission or cessation thereof” shall include the 
remission or cessation of any liability by a unilateral act by the first mentioned person under clause (a) or 
the successor in business under clause (b) of that sub-section by way of writing off such liability in his 
accounts.] 

Explanation 5[2]—For the purposes of this sub-section, “successor in business” means,— 

 (i)   where  there  has  been  an  amalgamation  of  a  company  with  another  company,  the 

amalgamated company; 

(ii)   where  the  first-mentioned  person  is  succeeded  by  any  other  person  in  that  business  or 

profession, the other person; 

(iii)  where  a  firm  carrying  on  a  business  or  profession  is  succeeded  by  another  firm,  the  other 

firm;] 

6[(iv) where there has been a demerger, the resulting company.] 

7[(2) Where any building, machinery, plant or furniture,— 

(a) which is owned by the assessee; 

1. Sub-section (12) omitted by Act 18 of 1992, s. 17 (w.e.f. 1-4-1993.) 
2. Ins. by Act 13 of 2018, s. 11 (w.r.e.f. 1-4-2017). 
3. Subs. by Act 18 of 1992, s. 18, for sub-section (1) (w.e.f. 1-4-1993).  
4. Ins. by Act 33 of 1996, s. 16 (w.e.f. 1-4-1997).  
5. Explanation renumbered as Explanation2 thereof by s. 16, ibid. (w.e.f. 1-4-1997). 
6. Ins. by Act 27 of 1999, s. 24 (w.e.f. 1-4-2000). 
7. Ins. by Act 21 of 1998, s. 16 (w.e.f. 1-4-1998). 

229 

 
 
 
 
 
 
 
 
                                                           
(b) in respect of which depreciation is claimed under clause (i) of sub-section (1) of section 32; 

and 

(c) which was or has been used for the purposes of business, 

is  sold,  discarded,  demolished  or  destroyed  and  the  moneys  payable  in  respect  of  such  building, 
machinery, plant or furniture, as the case may be, together with the amount of scrap value, if any, exceeds 
the written down value, so much of the excess as does not exceed the difference between the actual cost 
and the written down value shall be chargeable to income-tax as income of the business of the previous 
year in which the moneys payable for the building, machinery, plant or furniture became due. 

Explanation.—Where  the  moneys  payable  in  respect  of  the  building,  machinery,  plant  or  furniture 
referred  to  in  this  sub-section  become  due  in  a  previous  year  in  which  the  business  for  the  purpose  of 
which the building, machinery, plant or furniture was being used is no longer in existence, the provision 
of this sub-section shall apply as if the business is in existence in that previous year.] 

1* 

* 

* 

* 

* 

(3)  Where  an  asset  representing  expenditure  of  a  capital  nature  on  scientific  research  within  the 
meaning  of  2[clause  (iv)  of  sub-section  (1),  or  clause  (c)  of  sub-section  (2B),  of  section  35],  read  with 
clause (4) of section 43, is sold, without having been used for other purposes, and the proceeds of the sale 
together  with  the  total  amount  of  the  deductions  made  under  clause  (i)  3[or,  as  the  case  may  be,  the 
amount of the deduction under clause (ia) of sub-section (2), or clause (c) of sub-section (2B), of section 
35] exceed the amount of the capital expenditure, the excess or the amount of the deductions so made, 
whichever is the less, shall be chargeable to income-tax as income of the business or profession of the 
previous year in which the sale took place. 

Explanation.—Where  the  moneys  payable  in  respect  of  any  asset  referred  to  in  this  sub-section 
become  due  in  a  previous  year  in  which  the  business  is  no  longer  in  existence,  the  provisions  of  this     
sub-section shall apply as if the business is in existence in that previous year. 

(4) Where a deduction has been allowed in respect of a bad debt or part of debt under the provisions 
of clause (vii) of sub-section (1) of section 36, then, if the amount subsequently recovered on any such 
debt or part is greater than the difference between the debt or part of debt and the amount so allowed, the 
excess shall be deemed to be profits and gains of business or profession, and accordingly chargeable to 
income-tax as the income of the previous year in which it is recovered, whether the business or profession 
in respect of which the deduction has been allowed is in existence in that year or not. 

4[Explanation.—For the purposes of sub-section (3),— 

(1) “moneys payable” in respect of any building, machinery, plant or furniture includes— 

(a) any insurance, salvage or compensation moneys payable in respect thereof; 

(b) where the building, machinery, plant or furniture is sold, the price for which it is sold, 

so, however, that where the actual cost of a motor car is, in accordance with the proviso to clause (1) of 
section 43, taken to be twenty-five thousand rupees, the moneys payable in respect of such motor car shall 
be taken to be a sum which bears to the amount for which the motor car is sold or, as the case may be, the 
amount  of  any  insurance,  salvage  or  compensation  moneys  payable  in  respect  thereof  (including  the 
amount of scrap value, if any) the same proportion as the amount of twenty-five thousand rupees bears to 

1. Sub-section (2A) omitted by Act 46 of 1986, s. 7 (w.e.f. 1-4-1988). 
2.  Subs.  by  Act  44  of  1980,  s.  11,  for  the  words,  brackets  and  figures  “clause  (iv)  of  subsection  (1)  of  section  35”                     

(w.e.f. 1-4-1981). 

3. Subs. by s. 11, ibid.,for “clause (ia) of sub-section (2) of section 35” (w.e.f. 1-4-1981). Earlier Quoted portion “or, as the 
case  may be, the amount of the deduction under clause (ia)” inserted by  Act 20 of 1967, s. 33 and the Third Schedule 
(w.e.f 1-4-1968).   

4. Subs. by Act 46 of 1986, s. 7, for the Explanation (w.e.f. 1-4-1988).  

230 

 
 
 
 
 
 
 
 
                                                           
the actual cost of the motor car to the assessee as it would have been computed before applying the said 
proviso; 

(2) “sold” includes a transfer by way of exchange or a compulsory acquisition under any law for 
the time being in force but does not include a transfer, in a scheme of amalgamation, of any asset by 
the  amalgamating  company  to  the  amalgamated  company  where  the  amalgamated  company  is  an 
Indian company.] 

1[(4A) Where a deduction has been allowed in respect of any special reserve created and maintained 
under clause (viii) of sub-section (1) of section 36, any amount subsequently withdrawn from such special 
reserve  shall  be  deemed  to  be  the  profits  and  gains  of  business  or  profession  and  accordingly  be 
chargeable to income-tax as the income of the previous year in which such amount is withdrawn. 

Explanation.—Where any amount is withdrawn from the special reserve in a previous year in which 
the business is no longer in existence, the provisions of this sub-section shall apply as if the business is in 
existence in that previous year.] 

(5)  Where  the  business  or  profession  referred  to  in  this  section  is  no  longer  in  existence  and                    

there  is  income  chargeable  to  tax  under  sub-section  (1),  2***  sub-section  (3)  ,  3[sub-section  (4)  or                 
sub-section  (4A)]  in  respect  of  that  business  or  profession,  any  loss,  not  being  a  loss  sustained  in 
speculation 4*** business, which arose in that business or profession during the previous year in which it 
ceased to exist and which could not be set off against any other income of that previous year shall, so far 
as may be, be set off against the income chargeable to tax under the sub-sections aforesaid. 

5[(6)  References  in  sub-section  (3)  to  any  other  provision  of  this  Act  which  has  been  amended  or 
omitted  by  the  Direct  Tax  Laws  (Amendment)  Act,  1987  shall,  notwithstanding  such  amendment  or 
omission, be construed, for the purposes of that sub-section, as if such amendment or omission had not 
been made.] 

42.  Special  provision  for  deductions  in  the  case  of  business  for  prospecting,  etc.,  for  mineral 
oil.—6[(1)]  For  the  purpose  of  computing  the  profits  or  gains  of  any  business  consisting  of  the 
prospecting for or extraction or production of mineral oils in relation to which the Central Government 
has  entered  into  an  agreement  with  any  person  for  the  7[association  or  participation  of  the  Central 
Government or any person authorised by it in such business] (which agreement has been laid on the Table 
of each House of Parliament), there shall be made in lieu of, or in addition to, the allowances admissible 
under this Act, such allowances as are specified in the agreement in relation— 

(a) to expenditure by way of infructuous or abortive exploration expenses in respect of any area 

surrendered prior to the beginning of commercial production by the assessee; 

(b)  after  the  beginning  of  commercial  production,  to  expenditure  incurred  by  the  assessee, 
whether before or after such commercial production, in respect of drilling or exploration activities or 
services or in respect of physical assets used in that connection, except assets on which allowance for 
depreciation is admissible under section 32: 8*** 

9[Provided that in relation to any agreement entered into after the 31st day of March, 1981, this 
clause shall have effect subject to the modification that the words and figures “except assets on which 
allowance for depreciation is admissible under section 32” had been omitted; and] 

1. Ins. by Act 26 of 1997, s. 9 (w.e.f. 1-4-1998). 
2. The words, brackets and figures “sub-section (2), sub-section (2A)”omitted by Act 46 of 1986, s. 7 (w.e.f. 1-4-1988). 
3. Subs. by Act 26 of 1997, s. 9, for “or sub-section (4)” (w.e.f. 1-4-1998). 
4. The words “or under the head Capital gains” omitted by Act 11 of 1987, s. 74 (w.e.f. 1-4-1988). 
5. Ins. by Act 4 of 1988, s. 126(w.e.f. 1-4-1989). 
6. Section 42 renumbered as sub-section (1) thereof by Act 21 of 1998, s. 17 (w.e.f. 1-4-1999). 
7.  Subs.  by  Act  16  of  1981,  s.  8,  for  “the  association  or  participation  in  such  business  of  the  Central  Government”         

(w.e.f. 1-4-1981). 

8. The word “and” omitted bys. 8, ibid.(w.e.f. 1-4-1981). 
9. Ins. by s. 8, ibid. (w.e.f. 1-4-1981) 

231 

                                                           
(c) to the depletion of mineral oil in the mining area in respect of the assessment year relevant to 
the previous year in which commercial production is begun and for such succeeding year or years as 
may be specified in the agreement; 

and  such  allowances  shall  be  computed  and  made  in  the  manner  specified  in  the  agreement,  the  other 
provisions of this Act being deemed for this purpose to have been modified to the extent necessary to give 
effect to the terms of the agreement. 

1[(2) Where the business of the assessee consisting of the prospecting for or extraction or production 
of petroleum and natural gas is transferred wholly or partly or any interest in such business is transferred 
in  accordance  with  the  agreement  referred  to  in  sub-section  (1),  subject  to  the  provisions  of  the  said 
agreement and where the proceeds of the transfer (so far as they consist of capital sums)— 

(a)  are  less  than  the  expenditure  incurred  remaining  unallowed,  a  deduction  equal  to  such 
expenditure remaining unallowed, as reduced by the proceeds of transfer, shall be allowed in respect 
of the previous year in which such business or interest, as the case may be, is transferred; 

(b) exceed the amount of the expenditure incurred remaining unallowed, so much of the excess as 
does not exceed the difference between the expenditure incurred in connection with the business or to 
obtain interest therein and the amount of such expenditure remaining unallowed, shall be chargeable 
to  income-tax  as  profits  and  gains  of  the  business  in  the  previous  year  in  which  the  business  or 
interest therein, whether wholly or partly, had been transferred: 

Provided that in a case where the provisions of this clause do not apply, the deduction to be allowed 
for expenditure incurred remaining unallowed shall be arrived at by subtracting the proceeds of transfer 
(so far as they consist of capital sums) from the expenditure remaining unallowed. 

Explanation.—Where  the  business  or  interest  in  such  business  is  transferred  in  a  previous  year  in 
which such business carried on by the assessee is no longer in existence, the provisions of this clause shall 
apply as if the business is in existence in that previous year; 

(c) are not less than the amount of the expenditure incurred remaining unallowed, no deduction 
for such expenditure shall be allowed in respect of the previous year in which the business or interest 
in such business is transferred or in respect of any subsequent year or years: 

2[Provided that  where  in  a  scheme  of  amalgamation  or  demerger,  the  amalgamating  or  the 
demerged  company  sells  or  otherwise  transfers  the  business  to  the  amalgamated  or  the  resulting 
company (being an Indian company), the provisions of this sub-section— 

 (i)  shall not apply in the case of the amalgamating or the demerged company; and 

(ii) shall, as far as may be, apply to the amalgamated or the resulting company as they would 
have applied to the amalgamating or the demerged company if the latter had not transferred the 
business or interest in the business.]] 

3[Explanation.—For  the  purposes  of  this  section,  “mineral  oil”  includes  petroleum  and  natural 

gas.] 

1. Ins. by Act 21 of 1998, s. 17 (w.e.f. 1-4-1999). 
2. Subs. by Act 27 of 1999, s. 25, for “the proviso” (w.e.f. 1-4-2000). 
3. Ins. by Act 16 of 1981, s. 8 (w.e.f. 1-4-1981). 

232 

                                                           
43. Definitions  of  certain  terms  relevant  to  income  from  profits  and  gains  of  business  or 

profession.—In section 28 to 41 and in this section, unless the context otherwise requires— 

(1) “actual cost” means the actual cost of the assets to the assessee, reduced by that portion of the 

cost thereof, if any, as has been met directly or indirectly by any other person or authority: 

1[Provided that  where  the  actual  cost  of  an  asset,  being  a  motor  car  which  is  acquired  by  the 
assessee  after  the  31st  day  of  March,  1967  2[,  but  before  the  1st  day  of  March, 1975,]  and is  used 
otherwise than in a business of running it on hire for tourists, exceeds twenty-five thousand rupees, 
the excess of the actual cost over such amount shall be ignored, and the actual cost thereof shall be 
taken to be twenty-five thousand rupees:] 

3[Provided further that where the assessee incurs any expenditure for acquisition of any asset or 
part  thereof  in  respect  of  which  a  payment  or  aggregate  of  payments  made  to  a  person  in  a  day, 
otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or use of 
electronic  clearing  system  through  a  bank  account,  exceeds  ten  thousand  rupees,  such  expenditure 
shall be ignored for the purposes of determination of actual cost.] 

Explanation  1.—Where  an  asset  is  used  in  the  business  after  it  ceases  to  be  used  for  scientific 
research  related  to  that  business  and  a  deduction  has  to  be  made  under  4[clause  (ii)  of  sub-section  (1)] 
of section 32 in respect of that asset, the actual cost of the asset to the assessee shall be the actual cost to 
the  assessee  as  reduced  by  the  amount  of  any  deduction  allowed  under  clause  (iv)  of  sub-section  (1) 
of section 35 or under any corresponding provision of the Indian Income-tax Act, 1922 (11 of 1922). 

5[Explanation  1A.—Where  a  capital  asset  referred  to  in  clause  (via)  of  section  28  is  used  for  the 
purposes of business or profession, the actual cost of such asset to the assessee shall be the fair market 
value which has been taken into account for the purposes of the said clause.] 

6[Explanation 2.—Where an asset is acquired by the assessee by way of gift or inheritance, the actual 

cost of the asset to the assessee shall be the actual cost to the previous owner, as reduced by— 

(a) the amount of depreciation actually allowed under this Act and the corresponding provisions 
of  the  Indian  Income-tax  Act,  1922  (11  of  1922),  in  respect  of  any  previous  year  relevant  to  the 
assessment year commencing before the 1st day of April, 1988; and 

(b) the amount of depreciation that would have been allowable to the assessee for any assessment 
year  commencing  on  or  after  the  1st  day  of  April,  1988,  as  if  the  asset  was  the  only  asset  in  the 
relevant block of assets.] 

Explanation  3.—Where,  before  the  date  of  acquisition  by  the  assessee, the  assets  were at  any  time 
used by any other person for the purposes of his business or profession and the  7[Assessing Officer] is 
satisfied that the main purpose of the transfer of such assets, directly or indirectly to the assessee, was the 
reduction of a liability to income-tax (by claiming depreciation with reference to an enhanced cost), the 
actual  cost  to  the  assessee  shall  be  such  an  amount  as  the  7[Assessing  Officer]  may,  with  the  previous 
approval of the 8[Joint Commissioner], determine having regard to all the circumstances of the case. 

1. Ins. by Act 20 of 1967, s. 33 and the Third Schedule (w.e.f. 1-4-1968). 
2. Ins. by Act 25 of 1975, s. 7 (w.e.f. 1-4-1975). 
3. Ins. by Act 7 of 2017, s. 16 (w.e.f. 1-4-2018). 
4. Subs. by Act 46 of 1986, s. 8, for “clause (i), clause (ii) or clause (iii) or sub-section (1) or sub-section (1A)” (w.e.f. 1-4-

1988). 

5. Ins. by Act 13 of 2018, s. 12 (w.e.f. 1-4-2019). 
6. Subs. by Act 46 of 1986, s. 8, for Explanation 2 (w.e.f. 1-4-1988). 
7. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988).  
8. Subs. by Act 21 of 1998, s. 3, for “Deputy Commissioner” (w.e.f. 1-10-1998). 

233 

                                                           
1[Explanation 4.—Where any asset which had once belonged to the assessee and had been used by 
him for the purposes of his business or profession and thereafter ceased to be his property by reason of 
transfer or otherwise, is re-acquired by him, the actual cost to the assessee shall be— 

 (i)  the actual cost to him when he first acquired the asset as reduced by— 

(a)  the  amount  of  depreciation  actually  allowed  to  him  under  this  Act  or  under  the 
corresponding  provisions  of  the  Indian  Income-tax  Act,  1922  (11  of  1922),  in  respect  of  any 
previous year relevant to the assessment year commencing before the 1st day of April, 1988; and 

(b)  the  amount  of  depreciation  that  would  have  been  allowable  to  the  assessee  for  any 
assessment year commencing on or after the 1st day of April, 1988, as if the asset was the only 
asset in the relevant block of assets; or 

(ii) the actual price for which the asset is re-acquired by him, 

whichever is less.] 

2[Explanation 4A.—Where before the  date of acquisition by the assessee (hereinafter referred to as 
the first mentioned person), the assets were at any time used by any other person (hereinafter referred to 
as  the  second  mentioned  person)  for  the  purposes  of  his  business  or  profession  and  depreciation 
allowance has been claimed in respect of such assets in the case of the second mentioned person and such 
person acquires on lease, hire or otherwise assets from the first mentioned person, then, notwithstanding 
anything  contained  in Explanation  3, the  actual  cost  of  the  transferred  assets,  in  the  case  of  first 
mentioned person, shall be the same as the written down value of the said assets at the time of transfer 
thereof by the second mentioned person.] 

Explanation 5.—Where a building previously the property of the assessee is brought into use for the 
purpose of the business or profession after the 28th day of February, 1946, the actual cost to the assessee 
shall be the actual cost of the building to the assessee, as reduced by an amount equal to the depreciation 
calculated at the rate in force on that date that would have been allowable had the building been used for 
the aforesaid purposes since the date of its acquisition by the assessee. 

3[Explanation  6.—When  any  capital  asset  is  transferred  by  a  holding  company  to  its  subsidiary 
company or by a subsidiary company to its holding company, then, if the conditions of clause (iv) or, as 
the case may be, of clause (v) of section 47 are satisfied, the actual cost of the transferred capital asset to 
the transferee-company shall be taken to be the same as it would have been if the transferor-company had 
continued to hold the capital asset for the purposes of its business.] 

4[Explanation  7.—Where,  in  a  scheme  of  amalgamation,  any  capital  asset  is  transferred  by  the 
amalgamating  company  to  the  amalgamated  company  and  the  amalgamated  company  is  an  Indian 
company, the actual cost of the transferred capital asset to the amalgamated company shall be taken to be 
the same as it would have been if the amalgamating company had continued to hold the capital asset for 
the purposes of its own business.] 

1. Subs. by Act 46 of 1986, s. 8, for Explanation 8 (w.e.f. 1-4-1988). 
2. Ins. by Act 33 of 1996, s. 17 (w.e.f. 1-10-1996). 
3. Ins. by Act 10 of 1965, s. 14 (w.e.f. 1-4-1965). 
4. Ins. by Act 20 of 1967, s. 16 (w.e.f. 1-4-1967). 

234 

                                                           
1[Explanation 7A.—Where, in a demerger, any capital asset is transferred by the demerged company 
to  the  resulting  company  and  the  resulting  company  is  an  Indian  company,  the  actual  cost  of  the 
transferred capital asset to the resulting company shall be taken to be the same as it would have been if 
the demerged company had continued to hold the capital asset for the purpose of its own business: 

Provided that  such  actual  cost  shall  not  exceed  the  written  down  value  of  such  capital  asset  in  the 

hands of the demerged company.] 

2[Explanation 8.—For the removal of doubts, it is hereby declared that where any amount is paid or is 
payable as interest in connection with the acquisition of an asset, so much of such amount as is relatable 
to any period after such asset is first put to use shall not be included, and shall be deemed never to have 
been included, in the actual cost of such asset.] 

3[Explanation 9.—For the removal of doubts, it is hereby declared that where an asset is or has been 
acquired on or after the 1st day of March, 1994 by an assessee, the actual cost of asset shall be reduced by 
the amount of duty of excise or the additional duty leviable under section 3 of the Customs Tariff Act, 
1975  (51  of  1975)  in  respect  of  which  a  claim  of  credit  has  been  made  and  allowed  under  the  Central 
Excise Rules, 1944.] 

4[Explanation  10.—Where  a  portion  of  the  cost  of  an  asset  acquired  by  the  assessee  has  been  met 
directly or indirectly by the Central Government or a State Government or any authority established under 
any law or by any other person, in the form of a subsidy or grant or reimbursement (by whatever name 
called), then, so much of the cost as is relatable to such subsidy or grant or reimbursement shall not be 
included in the actual cost of the asset to the assessee: 

Provided that  where  such  subsidy  or  grant  or  reimbursement  is  of  such  nature  that  it  cannot  be 
directly  relatable  to  the  asset  acquired,  so  much  of  the  amount  which  bears  to  the  total  subsidy  or 
reimbursement  or  grant  the  same  proportion  as  such  asset  bears  to  all  the  assets  in  respect  of  or  with 
reference  to  which  the  subsidy  or  grant  or  reimbursement  is  so  received,  shall  not  be  included  in  the 
actual cost of the asset to the assessee.] 

1[Explanation  11.—Where  an  asset  which  was  acquired  outside  India  by  an  assessee,  being  a  non-
resident, is brought by him to India and used for the purposes of his business or profession, the actual cost 
of the asset to the assessee shall be the actual cost to the assessee, as reduced by an amount equal to the 
amount of depreciation calculated at the rate in force that would have been allowable had the asset been 
used in India for the said purposes since the date of its acquisition by the assessee.] 

5[Explanation  12.—Where  any  capital  asset  is  acquired  by  the  assessee  under  a  scheme  for 
corporatisation of a recognised stock exchange in India, approved by the Securities and Exchange Board 
of  India  established  under  section  3  of  the  Securities  and  Exchange  Board  of  India  Act,  1992  (15  of 
1992), the actual cost of the asset shall be deemed to be the amount which would have been regarded as 
actual cost had there been no such corporatization.] 

1. Ins. by Act 27of 1999, s. 26 (w.e.f. 1-4-2000). 

2. Ins. by Act 23 of 1986, s. 9 (w.e.f. 1-4-1974). 

3. Ins. by Act 21 of 1998, s. 18 (w.e.f. 1-4-1994). 

4. Ins. by s. 18, ibid. (w.e.f. 1-4-1999). 

5. Ins. by Act 14 of 2001, s. 26 (w.e.f. 1-4-2002). 

235 

                                                           
1[Explanation 13.—The  actual  cost of  any  capital asset  on  which  deduction  has  been  allowed  or is 

allowable to the assessee under section 35AD, shall be treated as 'nil',— 

(a) in the case of such assessee; and 

(b) in any other case if the capital asset is acquired or received,— 

 (i)  by way of gift or will or an irrevocable trust; 

(ii)  on any distribution on liquidation of the company; and 

(iii) by such mode of transfer as is referred to in clauses (i), (iv), (v), (vi), (vib), 2[(xiii), (xiiib) 

and (xiv)] of section 47:] 

3[Provided  that  where  any  capital  asset  in  respect  of  which  deduction  or  part  of  deduction  allowed 
under section 35AD is deemed to be the income of the assessee in accordance with the provisions of sub-
section (7B) of the said section, the actual cost of the asset to the assessee shall be the actual cost to the 
assessee, as reduced by an amount equal to the amount of depreciation calculated at the rate in force that 
would  have  been  allowable  had  the  asset  been  used  for  the  purpose  of  business  since  the  date  of  its 
acquisition.] 

(2) “paid” means actually paid or incurred according to the method of accounting upon the basis of 

which the profits or gains are computed under the head “Profits and gains of business or profession”; 

(3) “plant” includes ships, vehicles, books, scientific apparatus and surgical equipment used for the 
purposes  of  the  business  or  profession  4[but  does  not  include  tea  bushes  or  livestock]5[or  buildings  or 
furniture and fittings]; 

(4) (i) “scientific research” means any activities for the extension of knowledge in the fields of natural 

or applied science including agriculture, animal husbandry or fisheries; 

(ii) references to expenditure incurred on scientific research include all expenditure incurred for the 
prosecution, or the provision of facilities for the prosecution, of scientific research, but do not include any 
expenditure incurred in the acquisition of rights in, or arising out of, scientific research; 

(iii) references to scientific research related to a business or class of business include— 

(a) any scientific research which may lead to or facilitate an extension of that business or, as the 

case may be, all businesses of that class; 

(b)  any  scientific  research  of  a  medical  nature  which  has  a  special  relation  to  the  welfare  of 

workers employed in that business or, as the case may be, all businesses of that class; 

(5) “speculative transaction” means a transaction in which a contract for the purchase or sale of any 
commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual 
delivery or transfer of the commodity or scrips: 

Provided that for the purposes of this clause— 

(a) a contract in respect of raw materials or merchandise entered into by a person in the course of 
his manufacturing or merchanting business to guard against loss through future price fluctuations in 
respect  of  his  contracts  for  actual  delivery  of  goods  manufactured  by  him  or  merchandise  sold  by 
him; or 

1. Ins. by Act 33 of 2009, s. 17 (w.e.f. 1-4-2010). 
2. Subs. by Act 14 of 2010, s. 13, for “(xiii) and (xiv)” (w.e.f. 1-4-2011). 
3. The proviso ins by Act 7 of 2017, s. 16 (w.e.f. 1-4-2018). 
4. Ins. by Act 22 of 1995, s. 12 (w.e.f. 1-4-1962). 
5. Ins. by Act 32 of 2003, s. 20 (w.e.f. 1-4-2004). 

236 

                                                           
(b) a contract in respect of stocks and shares entered into by a dealer or investor therein to guard 

against loss in his holdings of stocks and shares through price fluctuations; or 

(c) a contract entered into by a member of a forward market or a stock exchange in the course of 
any  transaction  in  the  nature  of  jobbing  or  arbitrage  to  guard  against  loss  which  may  arise  in  the 
ordinary course of his business as such member; 1[or] 

1[(d)  an  eligible  transaction  in  respect  of  trading  in  derivatives  referred  to  in  clause  2[(ac)]  of 
section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) carried out in a recognised 
stock exchange; 3[or]] 

3[(e)  an  eligible  transaction  in  respect  of  trading  in  commodity  derivatives  carried  out  in  a 
recognised  association 4[,  which is  chargeable to  commodities transaction tax  under  Chapter VII  of 
the Finance Act, 2013 (17 of 2013),] 

shall not be deemed to be a speculative transaction. 

5[Provided  further  that  for  the  purposes  of  clause  (e)  of  the  first  proviso,  in  respect  of  trading  in 
agricultural commodity derivatives, the requirement of chargeability of commodity transaction tax under 
Chapter VII of the Finance Act, 2013 shall not apply.] 

1 [6[Explanation 1].—For the purposes of 7[clause (d)], the expressions— 

 (i)  “eligible transaction” means any transaction,— 

(A) carried out electronically on screen-based systems through a stock broker or sub-broker or 
such  other  intermediary  registered  under  section  12  of  the  Securities  and  Exchange  Board  of 
India  Act,  1992  (15  of  1992)  in  accordance  with  the  provisions  of  the  Securities  Contracts 
(Regulation) Act, 1956 (42 of 1956) or the Securities and Exchange Board of India Act, 1992 (15 
of 1992) or the Depositories Act, 1996 (22 of 1996) and the rules, regulations or bye-laws made 
or  directions  issued  under  those  Acts  or  by  banks  or  mutual  funds  on  a  recognised  stock 
exchange; and 

(B)  which  is  supported  by  a  time  stamped  contract  note  issued  by  such  stock  broker  or        

sub-broker  or  such  other intermediary  to every  client  indicating  in  the  contract note the  unique 
client identity number allotted under any Act referred to in sub-clause (A) and permanent account 
number allotted under this Act; 

(ii) “recognised stock exchange” means a recognised stock exchange as referred to in clause (f) of 
section  2  of  the  Securities  Contracts  (Regulation)  Act,  1956  (42  of  1956)  and  which  fulfils  such 
conditions as may be prescribed and notified by the Central Government for this purpose.] 

8[Explanation 2.—For the purposes of clause (e), the expressions— 

 (i)   “commodity  derivative”  shall  have  the  meaning  as  assigned  to  it  in  Chapter  VII  of  the 

Finance Act, 2013; 

1. Ins. by Act 18 of 2005, s. 14 (w.e.f. 1-4-2006). 
2. Subs. by Act 21 of 2006, s. 11, for “(aa)” (w.e.f. 1-4-2006). 
3. Ins. by Act 17 of 2013, s. 9 (w.e.f. 1-4-2014). 
4. Subs. by Act 25 of 2014, s. 15, for “recognised association” (w.e.f. 1-4-2014). 
5. Ins. by Act 13 of 2018, s. 12 (w.e.f. 1-4-2019). 
6. The Explanation renumbered as Explanation 1 by Act 17 of 2013, s. 9 (w.e.f. 1-4-2014). 
7. Subs. by s. 9, ibid., “this clause” (w.e.f. 1-4-2013). 
8. Ins. by s. 9, ibid. (w.e.f. 1-4-2014). 

237 

                                                           
(ii)  “eligible transaction” means any transaction,— 

(A)  carried  out  electronically  on  screen-based  systems  through  member  or  an  intermediary, 
registered under the bye-laws, rules and regulations of the recognised association for trading in 
commodity  derivative  in  accordance  with  the  provisions  of  the  Forward  Contracts (Regulation) 
Act, 1952 (74 of 1952) and the rules, regulations or bye-laws made or directions issued under that 
Act on a recognised association; and 

(B)  which  is  supported  by  a  time  stamped  contract  note  issued  by  such  member  or 
intermediary  to  every  client  indicating  in  the  contract  note,  the  unique  client  identity  number 
allotted under the Act, rules, regulations or bye-laws referred to in sub-clause (A), unique trade 
number and permanent account number allotted under this Act; 

(iii)  “recognised  association”  means  a  recognised  association  as  referred  to  in  clause  (j)  of                     

section  2  of  the  Forward  Contracts  (Regulation)  Act,  1952  (74  of  1952)  and  which  fulfils  such 
conditions as may be prescribed and is notified by the Central Government for this purpose;] 

(6) “written down value” means— 

(a)  in the case of assets acquired in the previous year, the actual cost to the assessee; 

(b)  in the case of assets acquired before the previous year, the actual cost to the assessee less all 
depreciation actually allowed to him under this Act, or under the Indian Income-tax Act, 1922 (11 of 
1922), or any Act repealed by that Act, or under any executive orders issued when the Indian Income-
tax Act, 1886 (2 of 1886), was in force: 

1[Provided that in determining the written down value in respect of buildings, machinery or plant 
for the purposes of clause (ii) of sub-section (1) of section 32, “depreciation actually allowed” shall 
not include depreciation allowed under sub-clauses (a), (b) and (c) of clause (vi) of sub-section (2) of 
section  10  of  the  Indian  Income-tax  Act,  1922  (11  of  1922),  where  such  depreciation  was  not 
deductible in determining the written down value for the purposes of the said clause (vi);] 

2[(c) in the case of any block of assets,— 

(i)  in respect of any previous year relevant to the assessment year commencing on the 1st day 
of April, 1988, the aggregate of the written down values of all the assets falling within that block 
of assets at the beginning of the previous year and adjusted,— 

(A)  by  the  increase  by  the  actual  cost  of  any  asset  falling  within  that  block,  acquired 

during the previous year; 

(B)  by  the  reduction  of  the  moneys  payable  in  respect  of  any  asset  falling  within  that 
block,  which  is  sold  or  discarded  or  demolished  or  destroyed  during  that  previous  year 
together  with  the  amount  of  the  scrap  value,  if  any,  so,  however,  that  the  amount  of  such 
reduction does not exceed the written down value as so increased; and 

3[(C) in the case of a slump sale, decrease by the actual cost of the asset falling within 

that block as reduced— 

(a) by the amount of depreciation actually allowed to him under this Act or under the 
corresponding provisions of the Indian Income-tax Act, 1922 (11 of 1922) in respect of 
any  previous  year  relevant  to  the  assessment  year  commencing  before  the  1st  day  of 
April, 1988; and 

1. Ins. by Act 15 of 1965, s. 6 (w.e.f. 1-4-1962). 
2. Ins. by Act 46 of 1986, s. 8 (w.e.f. 1-4-1988). 
3. Ins. by Act 27 of 1999, s. 26 (w.e.f. 1-4-2000). 

238 

                                                           
 
(b) by the amount of depreciation that would have been allowable to the assessee for 
any assessment year commencing on or after the 1st day of April, 1988 as if the asset was 
the  only  asset  in  the  relevant  block  of  assets,  so,  however,  that  the  amount  of  such 
decrease does not exceed the written down value;] 

(ii) in respect of any previous year relevant to the assessment year commencing on or after 
the  1st  day  of  April,  1989,  the  written  down  value  of  that  block  of  assets  in  the  immediately 
preceding previous year as reduced by the depreciation actually allowed in respect of that block 
of assets in relation to the said preceding previous year and as further adjusted by the increase or 
the reduction referred to in item (i).] 

Explanation 1.—When in a case of succession in business or profession, an assessment is made on 
the successor under sub-section (2) of section 170 the written down  1[value of any asset or any block of 
assets] shall be the amount which would have been taken as its written down value if the assessment had 
been made directly on the person succeeded to. 

2[Explanation 2.—Where in any previous year, any block of assets is transferred,— 

(a) by a holding company  to its subsidiary company  or by a subsidiary company to its holding 
company  and  the  conditions  of  clause  (iv)  or,  as  the  case  may  be,  of  clause  (v)  of section  47 are 
satisfied; or 

(b) by the amalgamating company to the amalgamated company in a scheme of amalgamation, 

and the amalgamated company is an Indian company, 

then, notwithstanding anything contained in clause (1), the actual cost of the block of assets in the case of 
the transferee-company or the amalgamated company, as the case may be, shall be the written down value 
of  the  block  of  assets  as  in  the  case  of  the  transferor-company  or  the  amalgamating  company  for  the 
immediately  preceding  previous  year  as  reduced  by  the  amount  of  depreciation  actually  allowed  in 
relation to the said preceding previous year.] 

3[Explanation  2A.—Where  in  any  previous  year,  any  asset  forming  part  of  a  block  of  assets  is 
transferred by a demerged company to the resulting company, then, notwithstanding anything contained 
in clause (1), the written down value of the block of assets of the demerged company for the immediately 
preceding  previous  year  shall  be  reduced  by  the  4[written  down  value  of  the  assets]  transferred  to  the 
resulting company pursuant to the demerger. 

Explanation 2B.—Where in a previous year, any asset forming part of a block of assets is transferred 
by a demerged company to the resulting company, then, notwithstanding anything contained in clause (1), 
the written down value of the block of assets in the case of the resulting company shall be the  5[written 
down value of the transferred assets 6***] of the demerged company immediately before the demerger. 

1. Subs. by Act 46 of 1986, s. 8, for “any asset” (w.e.f. 1-4-1988). 
2. Subs. by s. 8, ibid., for Explanation 2 and Explanation 2A (w.e.f. 1-4-1988). 
3. Ins. by Act 27 of 1999, s. 26 (w.e.f. 1-4-2000). 
4. Subs. by Act 10 of 2000, s. 19, for “book value of the assets” (w.e.f. 1-4-2000). 
5. Subs. by s. 19, ibid., for “value of the assets as appearing in the books of account” (w.e.f. 1-4-2000). 
6. The words “as appearing in the books of account” omitted by Act 32 of 2003, s. 20 (w.e.f. 1-4-2004). 

239 

                                                           
1[Explanation  2C.—Where  in  any  previous  year,  any  block  of  assets  is  transferred  by  a  private 
company or unlisted public company to a limited liability partnership and the conditions specified in the 
proviso  to  clause  (xiiib)  of   section  47 are  satisfied,  then,  notwithstanding  anything  contained  in                
clause (1), the actual cost of the block of assets in the case of the limited liability partnership shall be the 
written down value of the block of assets as in the case of the said company on the date of conversion of 
the company into the limited liability partnership.] 

2* 

* 

* 

* 

* 

Explanation 3.—Any allowance in respect of any depreciation carried forward under sub-section (2) 

of section 32 shall be deemed to be depreciation “actually allowed”. 

3[Explanation 4.—For the purposes of this clause, the expressions “moneys payable” and “sold” shall 

have the same meanings as in the Explanation below sub-section (4) of section 41.] 

4[Explanation 5.—Where in a previous year, any asset forming part of a block of assets is transferred 
by a recognised stock exchange in India to a company under a scheme for corporatisation approved by the 
Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board 
of India Act, 1992 (15 of 1992), the written down value of the block of assets in the case of such company 
shall be the written down value of the transferred assets immediately before such transfer.] 

5[Explanation 6.—Where an assessee was not required to compute his total income for the purposes 
of  this  Act  for  any  previous  year  or  years  preceding  the  previous  year  relevant  to  the  assessment  year 
under consideration,— 

(a) the actual cost of an asset shall be adjusted by the amount attributable to the revaluation of 

such asset, if any, in the books of account; 

(b)  the  total  amount  of  depreciation  on  such  asset,  provided  in  the  books  of  account  of  the 
assessee  in  respect  of  such  previous  year  or  years  preceding  the  previous  year  relevant  to  the 
assessment  year under  consideration  shall  be  deemed  to  be the depreciation  actually  allowed  under 
this Act for the purposes of this clause; and 

(c)  the  depreciation  actually  allowed  under  clause  (b)  shall  be  adjusted  by  the  amount  of 

depreciation attributable to such revaluation of the asset.] 

6[Explanation 7.—For the purposes of this clause, where the income of an assessee is derived, in part 
from agriculture and in part from business chargeable to income-tax under the head “Profits and gains of 
business or profession”, for computing the written down value of assets acquired before the previous year, 
the total amount of depreciation shall be computed as if the entire income is derived from the business of 
the  assessee  under  the  head  “Profits  and  gains  of  business  or  profession”  and  the  depreciation  so 
computed shall be deemed to be the depreciation actually allowed under this Act.] 

1. Ins. by Act 14 of 2010, s. 13 (w.e.f. 1-4-2011). 
2. The proviso omitted by Act 10 of 2000, s. 19 (w.e.f. 1-4-2000). 
3. Ins. by Act 46 of 1986, s. 8 (w.e.f 1-4-1988). 
4. Ins. by Act 14 of 2001, s. 26 (w.e.f. 1-4-2002). 
5. Ins. by Act 18 of 2008, s. 12 (w.e.f. 1-4-2003). 
6.  Ins. by Act 33 of 2009, s. 17 (w.e.f. 1-4-2010). 

240 

 
 
 
 
 
 
 
                                                           
1[43A. Special  provisions  consequential  to  changes  in  rate  of  exchange  ofcurrency.—
Notwithstanding anything  contained in any other provision of this Act,  where an assessee has acquired 
any asset in any previous year from a country outside India for the purposes of his business or profession 
and, in consequence of a change in the rate of exchange during any previous year after the acquisition of 
such asset, there is an increase or reduction in the liability of the assessee as expressed in Indian currency 
(as  compared  to  the  liability  existing  at  the  time  of  acquisition  of  the  asset)  at  the  time  of  making 
payment— 

(a)  towards the whole or a part of the cost of the asset; or 

(b)  towards repayment of the whole or a part of the moneys borrowed by him from any person, 
directly or indirectly, in any foreign currency specifically for the purpose of acquiring the asset along 
with interest, if any, 

the amount by which the liability as aforesaid is so increased or reduced during such previous year and 
which is taken into account at the time of making the payment, irrespective of the method of accounting 
adopted by the assessee, shall be added to, or, as the case may be, deducted from— 

 (i)  the actual cost of the asset as defined in clause (1) of section 43; or 

(ii)  the amount of expenditure of a capital nature referred to in clause (iv) of sub-section (1) of 

section 35; or 

(iii) the amount of expenditure of a capital nature referred to in section 35A; or 

(iv) the amount of expenditure of a capital nature referred to in clause (ix) of sub-section (1) of 

section 36; or 

(v)  the cost of acquisition of a capital asset (not being a capital asset referred to in section 50) for 

the purposes of section 48, 

and the amount arrived at after such addition or deduction shall be taken to be the actual cost of the asset 
or  the  amount  of  expenditure  of  a  capital  nature  or,  as  the  case  may  be,  the  cost  of  acquisition  of  the 
capital asset as aforesaid: 

Provided that  where  an  addition  to  or  deduction  from  the  actual  cost  or  expenditure  or  cost  of 
acquisition  has  been  made  under  this  section,  as  it  stood  immediately  before  its  substitution  by  the 
Finance Act, 2002, on account of an increase or reduction in the liability as aforesaid, the amount to be 
added to, or, as the case may be, deducted under this section from, the actual cost or expenditure or cost 
of acquisition at the time of making the payment shall be so adjusted that the total amount added to, or, as 
the  case  may  be,  deducted  from,  the  actual  cost  or  expenditure  or  cost  of  acquisition,  is  equal  to  the 
increase or reduction in the aforesaid liability taken into account at the time of making payment. 

Explanation 1.—In this section, unless the context otherwise requires,— 

(a)  “rate  of  exchange”  means  the  rate  of  exchange  determined  or  recognised  by  the  Central 
Government  for  the  conversion  of  Indian  currency  into  foreign  currency  or  foreign  currency  into 
Indian currency; 

(b) “foreign currency” and “Indian currency” have the meanings respectively assigned to them in 

section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999). 

Explanation  2.—Where the  whole  or  any  part  of the  liability  aforesaid  is  met,  not  by  the  assessee, 
but,  directly  or  indirectly,  by  any  other  person  or  authority,  the  liability  so  met  shall  not  be  taken  into 
account for the purposes of this section. 

1. Subs. by Act 20 of 2002, s. 21, for section 43A (w.e.f. 1-4-2003). 

241 

                                                           
Explanation 3.—Where the assessee has entered into a contract with an authorised dealer as defined 
in  section  2  of  the  Foreign  Exchange  Management  Act,  1999  (42  of  1999),  for  providing  him  with  a 
specified sum in a foreign currency on or after a stipulated future date at the rate of exchange specified in 
the contract to enable him to meet the whole or any part of the liability aforesaid, the amount, if any, to be 
added to, or deducted from, the actual cost of the asset or the amount of expenditure of a capital nature or, 
as the  case  may  be,  the cost  of acquisition  of  the  capital asset  under this section  shall, in respect  of  so 
much  of  the  sum  specified  in  the  contract  as  is  available  for  discharging  the  liability  aforesaid,  be 
computed with reference to the rate of exchange specified therein.] 

1[43AA. Taxation of foreign exchange fluctuation.—(1) Subject to the provisions of section 43A, 
any gain or loss arising on account of any change in foreign exchange rates shall be treated as income or 
loss,  as  the  case  may  be,  and  such  gain  or  loss  shall  be  computed  in  accordance  with  the  income 
computation and disclosure standards notified under sub-section (2) of section 145. 

(2)  For  the  purposes  of  sub-section  (1),  gain  or  loss  arising  on  account  of  the  effects  of  change  in 
foreign  exchange  rates  shall  be  in  respect  of  all  foreign  currency  transactions,  including  those  relating 
to— 

(i) monetary items and non-monetary items; 

(ii) translation of financial statements of foreign operations; 

(iii) forward exchange contracts; 

(iv) foreign currency translation reserves.] 

2[43B. Certain deductions to be only on actual payment.—Notwithstanding anything contained in 

any other provision of this Act, a deduction otherwise allowable under this Act in respect of— 

3[(a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, 

under any law for the time being in force, or] 

(b) any sum payable by the assessee as an employer by way of contribution to any provident fund 

or superannuation fund or gratuity fund or any other fund for the welfare of employees, 4[or] 

4[(c) any sum referred to in clause (ii) of sub-section (1) of section 36,] 5[or] 
5[(d)  any  sum  payable  by  the  assessee  as  interest  on  any  loan  or  borrowing  from  any  public 
financial institution 6[or a State financial corporation or a State industrial investment corporation], in 
accordance with the terms and conditions of the agreement 7[governing such loan or borrowing; or] 

8[(e)  any  sum  payable  by  the  assessee  as  interest  on  any  9[loan  or  advances]  from  a  scheduled 

bank  10[or  a  co-operative  bank  other  than  a  primary  agricultural  credit  society  or  a  primary               
co-operative agricultural and rural development bank] in accordance with the terms and conditions of 
the agreement governing 11[such loan or advances], 12[or] 

12[(f)  any  sum  payable  by  the  assessee  as  an  employer  in  lieu  of  any  leave  at  the  credit  of  his 

13[employee, or]] 

14[(g) any sum payable by the assessee to the Indian Railways for the use of railway assets,] 

1. Ins. by Act 13 of 2018, s. 13 (w.r.e.f. 1-4-2017). 
2. Ins. by Act 11 of 1983, s. 18 (we.f. 1-4-1984). 
3. Subs. by Act 26 of 1988, s. 12, for clause (a) (w.e.f. 1-4-1989). 
4. Ins. by Act 4 of 1988, s. 15 (w.e.f. 1-4-1989). 
5. Ins. by Act 26 of 1988, s. 12 (w.e.f. 1-4-1989). 
6. Ins. by Act 12 of 1990, s. 13 (w.e.f. 1-4-1991). 
7. Subs. by Act 33 of 1996, s. 18, for “governing such loan or borrowing” (w.e.f. 1-4-1997). 
8. Ins. by s. 18, ibid. (w.e.f. 1-4-1997). 
9. Subs. by Act 32 of 2003, s. 21, for “term loan” (w.e.f. 1-4-2004). 
10. Ins. by Act 7 of 2017, s. 17 (w.e.f. 1-4-2018). 
11. Subs. by Act 32 of 2003, s. 21, for “such loan” (w.e.f. 1-4-2004). 
12. Ins. by Act 14 of 2001, s. 27 (w.e.f. 1-4-2002). 
13. Subs. by Act 28 of 2016, s.  23, for “employee” ( w.e.f. 1-4-2017). 
14. Ins. by s. 23, ibid. (w.e.f. 1-4-2017). 

242 

                                                           
shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by 
the assessee according  to  the  method of accounting  regularly  employed  by  him)  only  in  computing  the 
income referred to in section 28 of that previous year in which such sum is actually paid by him: 

1[Provided that  nothing  contained  in  this  section  shall  apply  in  relation  to  any  sum  2***  which  is 
actually paid by the assessee on or before the due date applicable in his case for furnishing the return of 
income under sub-section (1) of section 139 in respect of the previous year in whichthe liability to pay 
such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along 
with such return. 

3* 

* 

* 

* 

*] 

Explanation 4[1].—For the removal of doubts, it is hereby declared that where a deduction in respect 
of  any  sum  referred  to  in  clause  (a)  or  clause  (b)  of  this  section  is  allowed  in  computing  the  income 
referred  to  in  section  28 of  the  previous  year  (being  a  previous  year  relevant  to  the  assessment  year 
commencing on the 1st day of April, 1983, or any earlier assessment year) in which the liability to pay 
such  sum  was  incurred  by  the  assessee,  the  assessee  shall  not  be  entitled  to  any  deduction  under  this 
section in respect of such sum in computing the income of the previous year in which the sum is actually 
paid by him:] 

5[Explanation 2.—For the purposes of clause (a), as in force at all material times, “any sum payable” 
means a sum for which the assessee incurred liability in the previous year even though such sum might 
not have been payable within that year under the relevant law.] 

6[Explanation7[3].—For the removal of doubts it is hereby declared that where a deduction in respect 
of  any  sum  referred  to  in  clause  (c)8[or  clause  (d)]  of  this  section  is  allowed  in  computing  the  income 
referred  to  in  section  28 of  the  previous  year  (being  a  previous  year  relevant  to  the  assessment  year 
commencing on the 1st day of April, 1988, or any earlier assessment year) in which the liability to pay 
such  sum  was  incurred  by  the  assessee,  the  assessee  shall  not  be  entitled  to  any  deduction  under  this 
section in respect of such sum in computing the income of the previous year in which the sum is actually 
paid by him.] 

9[Explanation 3A.—For the removal of doubts, it is hereby declared that where a deduction in respect 
of  any  sum  referred  to  in  clause  (e)  of  this  section  is  allowed  in  computing  the  income  referred  to  in 
section 28 of the previous year (being a previous year relevant to the assessment year commencing on the 
1st day of April, 1996, or any earlier assessment year) in which the liability to pay such sum was incurred 
by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such 
sum in computing the income of the previous year in which the sum is actually paid by him.] 

10[Explanation  3B.—For  the  removal  of  doubts,  it  is  hereby  declared  that  where  a  deduction  in 
respect of any sum referred to in clause (f) of this section is allowed in computing the income, referred to 
in section 28, of the previous year (being a previous year relevant to the assessment year commencing on 
the  1st  day  of  April,  2001,  or  any  earlier  assessment  year)  in  which  the  liability  to  pay  such  sum  was 
incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of 
such sum in computing the income of the previous year in which the sum is actually paid by him.] 

1. Ins. by Act 11 of 1987, s. 10 (w.e.f. 1-4-1988). 
2.  The  words  “referred  to  in  clause  (a)  or  clauses  (c)  or  clause  (d)  or  clause  (f)”  omitted  by  Act  32  of  2003,                            

s. 21 (w.e.f. 1-4-2004). 

3. The second proviso omitted by s. 21, ibid. (w.e.f. 1-4-2004). 
4. The Explanation numbered as Explanation 1 thereof by Act 4 of 1988, s. 15 (w.e.f. 1-4-1989). 
5. Ins. by Act 13 of 1989, s. 9 (w.e.f. 1-4-1984). 
6. Ins. by Act 4 of 1988, s. 15 (w.e.f 1-4-1989). 
7. Explanation 2 renumbered as Explanation 3 thereof by Act 13 of 1989, s. 9 (w.e.f. 1-4-1984). 
8. Ins. by Act 26 of 1988, s. 12 (w.e.f. 1-4-1989). 
9. Ins. by Act 33 of 1996, s. 18 (w.e.f. 1-4-1997). 
10.Ins. by Act 14 of 2001, s. 27 (w.e.f. 1-4-2002). 

243 

 
 
 
 
 
 
 
 
                                                           
1[Explanation  3C.—For  the  removal  of  doubts,  it  is  hereby  declared  that  a  deduction  of  any  sum, 
being interest payable under clause (d) of this section, shall be allowed if such interest has been actually 
paid and any interest referred to in that clause which has been converted into a loan or borrowing shall not 
be deemed to have been actually paid.] 

2[Explanation  3D.—For  the  removal  of  doubts,  it  is  hereby  declared  that  a  deduction  of  any  sum, 
being interest payable under clause (e) of this section, shall be allowed if such interest has been actually 
paid and any interest referred to in that clause which has been converted into a loan or advance shall not 
be deemed to have been actually paid.] 

3[Explanation 4.—For the purposes of this section,— 

(a)  “public  financial  institutions”  shall  have  the  meaning  assigned  to  it  in  section  4A  of  the 

Companies Act, 1956 (1 of 1956); 

4[(aa) “scheduled bank” shall have the meaning assigned to it in the Explanation to clause (iii) of 

sub-section (5) of section 11;] 

(b)  “State  financial  corporation”  means  a  financial  corporation  established  under  section  3  or 
section 3A or an institution notified under section 46 of the State Financial Corporations Act, 1951 
(63 of 1951); 

(c) “State industrial investment corporation” means a Government company within the meaning 
of section 617 of the Companies Act, 1956 (1 of 1956), engaged in the business of providing long-
term finance for industrial projects and  5[eligible for deduction under clause (viii) of sub-section (1) 
ofsection 36].] 

6[(d)  “co-operative  bank”,  primary  agricultural  credit  society”  and  “primary  co-operative 
agricultural and rural development bank” shall have the meanings respectively assigned to them in the 
Explanation to sub-section (4) of section 80P.] 

7[43C. Special provision for computation of cost of acquisition of certain assets.—(1) Where an 
asset [not being an asset referred to in sub-section (2) of section 45] which becomes the property of an 
amalgamated company under a scheme of amalgamation, is sold after the 29th day of February, 1988, by 
the amalgamated company as stock-in-trade of the business carried on by it, the cost of acquisition of the 
said  asset  to  the  amalgamated  company  in  computing  the  profits  and  gains  from  the  sale  of  such  asset 
shall be the cost of acquisition of the said asset to the amalgamating company, as increased by the cost, if 
any, of any improvement made thereto, and the expenditure, if any, incurred, wholly and exclusively in 
connection with such transfer by the amalgamating company. 

(2) Where an asset [not being an asset referred to in sub-section (2) of section 45] which becomes the 
property of the assessee on the total or partial partition of a Hindu undivided family or under a gift or will 
or an irrevocable trust, is sold after the 29th day of February, 1988, by the assessee as stock-in-trade of 
the business carried on by him, the cost of acquisition of the said asset to the assessee in computing the 
profits  and  gains  from  the  sale  of  such  asset  shall  be  the  cost  of  acquisition  of  the  said  asset  to  the 
transferor or the donor, as the case may be, as increased by the cost, if any, of any improvement  made 
thereto, and the expenditure, if any, incurred, wholly and exclusively in connection with such transfer (by 
way  of  effecting  the  partition,  acceptance  of  the  gift,  obtaining  probate  in  respect  of  the  will  or  the 
creation of the trust), including the payment of gift-tax, if any, incurred by the transferor or the donor, as 
the case may be.] 

1. Ins. by Act 21 of 2006, s. 12 (w.e.f. 1-4-1989). 
2. Ins. by s. 12, ibid. (w. e. f. 1-4-1997). 
3. Ins. by Act 12 of 1990, s. 13 (w.e.f. 1-4-1991). 
4. Subs. by Act 27 of 1999, s. 27 (w.e.f. 1-4-2000). 
5. Subs. by Act 10 of 2000, s. 20 (w.e.f. 1-4-2000). 
6. Ins. by Act 7 of 2017, s. 17 (w.e.f. 1-4-2018). 
7. Ins. by Act 26 of 1988, s. 13 (w.e.f. 1-4-1988). 

244 

                                                           
1[43CA. Special provision for full value of consideration for transfer of assets other than capital 
assets in certain cases.—(1) Where the consideration received or accruing as a result of the transfer by 
an assessee of an asset (other than a capital asset), being land or building or both, is less than the value 
adopted or assessed or assessable by any authority of a State Government for the purpose of payment of 
stamp  duty  in  respect  of  such  transfer,  the  value  so  adopted  or  assessed  or  assessable  shall,  for  the 
purposes of computing profits and gains from transfer of such asset, be deemed to be the full value of the 
consideration received or accruing as a result of such transfer. 

2[Provided that where the value adopted or assessed or assessable by the authority for the purpose of 
payment of stamp duty does not exceed one hundred and five per cent. of the consideration received or 
accruing  as  a  result  of  the transfer,  the consideration so  received  or  accruing  as  a  result  of the  transfer 
shall, for the purposes of computing profits and gains from transfer of such asset, be deemed to be the full 
value of the consideration.] 

(2) The provisions of sub-section (2) and sub-section (3) of section 50C shall, so far as may be, apply 

in relation to determination of the value adopted or assessed or assessable under sub-section (1). 

(3) Where the date of agreement fixing the value of consideration for transfer of the asset and the date 
of registration of such transfer of asset are not the same, the value referred to in sub-section (1) may be 
taken as the value assessable by any authority of a State Government for the purpose of payment of stamp 
duty in respect of such transfer on the date of the agreement. 

(4) The provisions of sub-section (3) shall apply only in a case where the amount of consideration or 
a part thereof has been received  3[by way of an account payee cheque or an account payee bank draft or 
by  use  of  electronic  clearing  system  through  a  bank  account]  on  or  before  the  date  of  agreement  for 
transfer of the asset.] 

4[43CB.  Computation  of  income  from  construction  and  service  contracts.—(1)  The  profits  and 
gains arising from a construction contract or a contract for providing services shall be determined on the 
basis  of  percentage  of  completion  method  in  accordance  with  the  income  computation  and  disclosure 
standards notified under sub-section (2) of section 145: 

Provided that profits and gains arising from a contract for providing services,— 

(i)  with  duration  of  not  more  than  ninety  days  shall  be  determined  on  the  basis  of  project 

completion method; 

(ii) involving indeterminate number of acts over a specific period of time shall be determined on 

the basis of straight line method. 

1. Ins. by Act 17 of 2013, s. 10 (w.e.f. 1-4-2014). 

2. Ins. by Act 13 of 2018, s. 14 (w.e.f. 1-4-2019). 

3. Subs. by s. 14, ibid., for “by any mode other than cash” (w.e.f. 1-4-2019). 

4. Ins. by Act 13 of 2018, s. 15 (w.r.e.f. 1-4-2017). 

245 

                                                           
(2) For the purposes of percentage of completion method, project completion method or straight line 

method referred to in sub-section (1)— 

(i) the contract revenue shall include retention money; 

(ii)  the  contract  costs  shall  not  be  reduced  by  any  incidental  income  in  the  nature  of  interest, 

dividends or capital gains.] 

1[43D.  Special  provision  in  case  of  income  of  public  financial  institutions,  public  companies, 

etc.—Notwithstanding anything to the contrary contained in any other provision of this Act,— 

(a) in the case of a public financial institution or a scheduled bank or  2[a co-operative bank other 
than a primary agricultural credit society or a primary co-operative agricultural and rural development 
bank or] a State financial corporation or a State industrial investment corporation, the income by way 
of interest in relation to such categories of bad or doubtful debts as may be prescribed having regard 
to the guidelines issued by the Reserve Bank of India in relation to such debts; 

(b) in the case of a public company, the income by way of interest in relation to such categories 
of bad or doubtful debts as may be prescribed having regard to the guidelines issued by the National 
Housing Bank in relation to such debts, 

shall be chargeable to tax in the previous year in which it is credited by the public financial institution or 
the scheduled bank or 2[a co-operative bank other than a primary agricultural credit society or a primary 
co-operative  agricultural  and  rural  development  bank  or]  the  State  financial  corporation  or  the  State 
industrial investment corporation or the public company to its profit and loss account for that year or, as 
the case may be, in which it is actually received by that institution or bank or corporation or company, 
whichever is earlier. 

Explanation.—For the purposes of this section,— 

(a) “National  Housing  Bank”  means  the  National  Housing  Bank  established  under  section  3  of 

the National Housing Bank Act, 1987 (53 of 1987); 

(b) “public company” means a company,— 

(i)   which  is  a  public  company  within  the  meaning  of  section  3  of  the  Companies                 

Act, 1956 (1 of 1956); 

(ii)  whose  main  object  is  carrying  on  the  business  of  providing  long-term  finance  for 

construction or purchase of houses in India for residential purposes; and 

(iii)  which 

is 

registered 

in  accordance  with 

the  Housing  Finance  Companies                           

(NHB)  Directions,  1989  given  under  section  30  and  section  31  of  the  National  Housing  Bank  
Act, 1987 (53 of 1987); 

1. Subs. by Act 27 of 1999, s. 28, for Section 43D (w.e.f. 1-4-2000). 

2. Ins. by Act 7 of 2017, s. 18 (w.e.f. 1-4-2018). 

246 

                                                           
 
(c)  “public  financial  institution”  shall  have  the  meaning  assigned  to  it  in  section  4A  of  the 

Companies Act, 1956 (1 of 1956); 

(d)  “scheduled  bank”  shall  have  the  meaning  assigned  to  it  in  clause  (ii)  of  the Explanation to 

clause (viia) of sub-section (1) of section 36; 

(e)  “State 

financial  corporation”  means  a 

financial  corporation  established  under                             

section 3 or section 3A or an institution notified under section 46 of the State Financial Corporations 
Act, 1951 (63 of 1951); 

(f) “State industrial investment corporation” means a Government company within the meaning 
of section 617 of the Companies Act, 1956 (1 of 1956), engaged in the business of providing long-
term finance for industrial projects.] 

1[(g)  “co-operative  bank”,  “primary  agricultural  credit  society”  and  “primary  co-operative 
agricultural and rural development bank” shall have the meanings respectively assigned to them in the 
Explanation to sub-section (4) of section 80P.] 

44. Insurance  business.—Notwithstanding  anything  to  the  contrary  contained  in  the  provisions  of 
this  Act  relating  to  the  computation  of  income  chargeable  under  the  head  “Interest  on  securities”, 
“Income from house property”, “Capital gains” or “Income from other sources”, or in section 199 or in 
2[section  28 to  43B],  the  profits  and  gains  of  any  business  of  insurance,  including  any  such  business 
carried on by a mutual insurance company or by a co-operative society, shall be computed in accordance 
with the rules contained in the First Schedule. 

3[44A. Special provision for deduction in the case of trade, professional or similar association.—
(1) Notwithstanding anything to the contrary contained in this Act, where the amount received during a 
previous  year  by  any  trade,  professional  or  similar  association  (other  than  an  association  or  institution 
referred to in clause (23A) of section 10) from its members, whether by way of subscription or otherwise 
(not being remuneration received for rendering any specific services to such members) falls short of the 
expenditure incurred by such association during that previous year (not being expenditure deductible in 
computing  the  income  under  any  other  provision  of  this  Act  and  not  being  in  the  nature  of  capital 
expenditure)  solely  for  the  purposes  of  protection  or  advancement  of  the  common  interests  of  its 
members, the amount so fallen short (hereinafter referred to as deficiency) shall, subject to the provisions 
of this section, be allowed as a deduction in computing the income of the association assessable for the 
relevant assessment year under the head “Profits and gains of business or profession” and if there is no 
income  assessable  under  that  head  or  the  deficiency  allowable  exceeds  such  income,  the  whole  or  the 
balance of the deficiency, as the case may be, shall be allowed as a deduction in computing the income of 
the association assessable for the relevant assessment year under any other head. 

(2) In computing the income of the association for the relevant assessment year under sub-section (1), 
effect shall first be given to any other provision of this Act under which any allowance or loss in respect 
of  any  earlier  assessment  year  is  carried  forward  and  set  off  against  the  income  for  the  relevant 
assessment year. 

(3) The amount of deficiency to be allowed as a deduction under this section shall in no case exceed 
one-half  of  the  total  income  of  the  association  as  computed  before  making  any  allowance  under  this 
section. 

(4) This section applies only to that trade, professional or similar association the income of which or 
any  part  thereof  is  not  distributed  to  its  members  except  as  grants  to  any  association  or  institution 
affiliated to it.] 

1. Ins. by Act 7 of 2017, s. 18 (w.e.f. 1-4-2018). 
2. Subs. by Act 4 of 1988, s. 126, for “section 28 to 43A” (w.e.f 1-4-1989). 
3. Ins. by Act 5 of 1964, s. 11 (w.e.f. 1-4-1964). 

247 

                                                           
1[44AA.  Maintenance  of  accounts  by  certain  persons  carrying  on  profession  or  business.—(1) 
Every  person  carrying  on  legal,  medical,  engineering  or  architectural  profession  or  the  profession  of 
accountancy or technical consultancy or interior decoration or any other profession as is notified by the 
Board in the Official Gazette shall keep and maintain such books of account and other documents as may 
enable the 2[Assessing Officer] to compute his total income in accordance with the provisions of this Act. 

(2)  Every  person  carrying  on  business  or  profession  [not  being  a  profession  referred  to  in                       

sub-section (1)] shall,— 

 (i)  if his income from business or profession exceeds  3[one lakh twenty thousand] rupees or his 
total sales, turnover or gross receipts, as the case may be, in business or profession exceed or exceeds 
4[ten lakh] rupees in any one of the three years immediately preceding the previous year; or 

(ii)  where  the  business  or  profession  is  newly  set  up  in  any  previous  year,  if  his  income  from 
business  or  profession  is  likely  to  exceed  3[one  lakh  twenty  thousand]  rupees  or  his  total  sales, 
turnover or gross receipts, as the case may be, in business or profession are or is likely to exceed 4[ten 
lakh] rupees, 5[during such previous year; or 

(iii) where the profits and gains from the business are deemed to be the profits and gains of the 
assessee  under  6[section  44AE] 7[or  section  44BB or  section  44BBB],  as  the  case  may  be,  and  the 
assessee has claimed his income to be lower than the profits or gains so deemed to be the profits and 
gains of his business, as the case may be, during such 8[previous year; or]] 

9[(iv) where the provisions of sub-section (4) of section 44AD are applicable in his case and his 

income exceeds the maximum amount which is not chargeable to income-tax in any previous year,] 

keep and maintain such books of account and other documents as may enable the  2[Assessing Officer] to 
compute his total income in accordance with the provisions of this Act. 

10[Provided  that  in  the  case  of  a  person  being  an  individual  or  a  Hindu  undivided  family,  the 
provisions of clause  (i) and  clause  (ii)  shall have  effect,  as  if  for the  words  “one  lakh  twenty  thousand 
rupees”, the words “two lakh fifty thousand rupees” had been substituted: 

Provided  further  that  in  the  case  of  a  person  being  an  individual  or  a  Hindu  undivided  family,  the 
provisions of clause (i) and clause (ii) shall have effect, as if for the words “ten lakh rupees”, the words 
“twenty-five rupees” had been substituted.] 

(3) The Board may, having regard to the nature of the business or profession carried on by any class 
of  persons,  prescribe,  by  rules,  the  books  of  account  and  other  documents  (including  inventories, 
wherever necessary) to be kept and maintained under sub-section (1) or sub-section (2), the particulars to 
be contained therein and the form and the manner in which and the place at which they shall be kept and 
maintained. 

(4)  Without  prejudice  to  the  provisions  of  sub-section  (3),  the  Board  may  prescribe,  by  rules,  the 

period  for  which  the  books  of  account  and  other  documents  to  be  kept  and  maintained  under                        
sub-section (1) or sub-section (2) shall be retained.] 

1. Ins. by Act 41 of 1975, s. 11 (w.e.f. 1-4-1976). 
2. Subs. by Act 4 of 1988, s. 2, for Income-tax Officer” (w.e.f. 1-4-1988). 
3. Subs. by Act 21 of 1998, s. 20, for “forty thousand” (w.e.f. 1-4-1999). 
4. Subs. by s. 20, ibid., for “five hundred thousand” (w.e.f. 1-4-1999). 
5. Subs. by Act 26 of 1997, s. 10, for “during such previous year” (w.e.f. 1-4-1998). 
6. Subs.  by Act  33 of 2009, s. 18, for “section 44AD or section 44AE or section 44AF” (w.e.f. 1-4-2011). 
7. Ins. by Act 32 of 2003, s.  22 (w.e.f. 1-4-2004). 
8. Subs. by Act 33 of 2009. S. 18, for “previous year” (w.e.f. 1-4-2011). 
9. Subs. by Act 28 of 2016, s. 24, for clause (iv) (w.e.f. 1-4-2017). 
10. Ins. by Act 7 of 2017, s. 19 (w.e.f. 1-4-2018). 

248 

                                                           
 
 
1[44AB. Audit  of  accounts  of  certain  persons  carrying  on  business  or  profession.—Every 

person,— 

(a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in 

business exceed or exceeds 2[one crore rupees] in any previous year 3***; or 

(b) carrying on profession shall, if his gross receipts in profession exceed  4[fifty lakh rupees] in 

any 5[previous year; or 

(c) carrying on the business shall, if the profits and gains from the business are deemed to be the 
profits and gains of such person under  6[section 44AE]  7[or section 44BB or section 44BBB], as the 
case may be, and he has claimed his income to be lower than the profits or gains so deemed to be the 
profits and gains of his business, as the case may be, in any 8[previous year; or] 3***] 

9[(d)  carrying  on  the 10[profession] shall,  if  the  profits  and  gains  from  the 10[profession] are 
deemed to be the profits and gains of such person 11[under section 44ADA] and he has claimed such 
income  to  be  lower  than  the  profits  and  gains  so  deemed  to  be  the  profits  and  gains  of 
his 10[profession] and  his  income  exceeds  the  maximum  amount  which  is  not  chargeable  to  
income-tax in any 12[previous year; or]] 

13[(e)  carrying  on  the  business  shall,  if  the  provisions  of  sub-section  (4)  of  section  44AD  are 
applicable  in  his  case  and  his  income  exceeds  the  maximum  amount  which  is  not  chargeable  to 
income-tax in any previous year,] 

get his accounts of 14[such previous year] audited by an accountant before the specified date and 15[furnish 
by] that date the report of such audit in the prescribed form duly signed and verified by such accountant 
and setting forth such particulars as may be prescribed: 

16[Provided  that  this  section  shall  not  apply  to  the  person,  who  declares  profits  and  gains  for  the 
previous  year in  accordance  with the  provisions  of  sub-section (1)  of  section  44AD  and  his  total  sales, 
turnover  or  gross  receipts,  as  the  case  may  be,  in  business  does  not  exceed  two  crore  rupees  in  such 
previous year:] 

17[18[Provided further that] this section shall not apply to the person, who derives income of the nature 
referred to in 19*** section 44B or  20[section 44BBA], on and from the 1st day of April, 1985 or, as the 
case may be, the date on which the relevant section came into force, whichever is later: 

1. Ins. by Act 21 of 1984, s. 11 (w.e.f. 1-4-1985). 
2. Subs. by Act 23 of 2012, s. 13, for “sixty lakh rupees” (w.e.f. 1-4-2013). 
3.  The  words  and  figures  “or  years  relevant  to  the  assessment  year  commencing  on  the  first  day  of  April,  1985,  or  any 

subsequent assessment year” omitted by Act 26 of 1988, s. 14 (w.e.f. 1-4-1989). 
4. Subs. by Act 28 of 2016, s. 25, for “twenty-five lakh rupees” (w.e.f. 1-4-2017). 
5. Subs. by Act 26 of 1997, s. 11, for “previous year” (w.e.f. 1-4-1998). 
6. Subs. by Act 33 of 2009, s. 19, for “section 44AD or section 44AE or section 44AF” (w.e.f. 1-4-2011). 
7. Ins. by Act 32 of 2003, s. 23 (w.e.f. 1-4-2004). 
8. Subs. by Act 33 of 2009, s. 19, for “previous year,” (w.e.f. 1-4-2011). 
9. Ins. by s. 19, ibid. (w.e.f. 1-4-2011). 
10. Subs. by Act 28 of 2016, s. 25, for “Business” (w.e.f. 1-4-2017). 
11. Subs. by s. 25, ibid., for “under section 44AD” (w.e.f. 1-4-2017). 
12. Subs. by s. 25, ibid., for “previous year” (w.e.f. 1-4-2017). 
13. Ins. by s. 25, ibid. (w.e.f. 1-4-2017). 
14. Subs. by Act 26 of 1988, s. 14, for “such previous year or years” (w.e.f. 1-4-1989). 
15. Subs. by Act 22 of 1995, s. 13, for “obtain before” (w.e.f. 1-7-1995). 
16. Ins. by Act 7 of 2017, s. 20 (w.e.f. 1-4-2017). 
17. Subs. by Act 18 of 1992, s. 20, for “Provided that” (w.e.f. 1-4-1985). 
18. Subs. by Act 7 of 2017, s. 20, for “Provided that” (w.e.f. 1-4-2017). 
19. The words, figures and letters “section 44AC or” omitted by Act 22 of 1995, s. 13 (w.e.f. 1-7-1995). 
20. Subs. by Act 32 of 2003, s. 23, for “section 44BB or section 44BBA or section 44BBB” (w.e.f. 1-4-2004). 

249 

                                                           
1[Provided  also]  that] in a case  where  such person is required  by  or  under any  other  law  to  get his 
accounts audited 2***, it shall be sufficient compliance with the provisions of this section if such person 
gets  the  accounts  of  such  business  or  profession  audited  under  such  law  before  the  specified  date  and 
3[furnishes by] that date the report of the audit as required under such other law and a further report 4[by 
an accountant] in the form prescribed under this section. 

Explanation.—For the purposes of this section,— 

(i)   “accountant”  shall  have  the  same  meaning  as  in  the Explanation below  sub-section  (2)  of  

section 288; 

5[(ii) “specified date”, in relation to the accounts of the assessee of the previous year relevant to 
an assessment year, means 6[the due date for furnishing the return of income under sub-section (1) of 
section 139].]] 

44AC.  [Special  provision  for  computing  profits  and  gains  from  the  business  of  trading  in 

certain goods.] Omitted by the Finance Act, 1992 (18 of 1992), s. 21 ( w.e.f. 1-4-1993). 

7[44AD.  Special  provision  for  computing  profits  and  gains  of  business  on  presumptive               

basis.—(1)  Notwithstanding  anything  to  the  contrary  contained  in  sections  28  to  43C,in  the  case  of  an 
eligible  assessee  engaged  in  an  eligible  business, a  sum  equal  to eight  per  cent  of  the  total turnover  or 
gross receipts of the assessee in the previous year on account of such business or, as the case may be, a 
sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed 
to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business 
or profession”. 

8[Provided that this sub-section shall have effect as if for the words “eight per cent.”, the words “six 
per  cent.”  had  been  substituted,  in  respect  of  the  amount  of  total  turnover  or  gross  receipts  which  is 
received by an account payee cheque or an account payee bank draft or use of electronic clearing system 
through  a  bank  account  during  the  previous  year  or  before  the  due  date  specified  in  sub-section  (1)  of 
section 139 in respect of that previous year.] 

(2)  Any  deduction  allowable  under  the  provisions  of  sections  30  to  38  shall,  for  the  purposes  of  
sub-section (1), be deemed to have been already given full effect to and no further deduction under those 
sections shall be allowed: 

9* 

* 

* 

* 

* 

(3)  The  written  down  value  of  any  asset  of  an  eligible  business  shall  be  deemed  to  have  been 
calculated as if the eligible assessee had claimed and had been actually allowed the deduction in respect 
of the depreciation for each of the relevant assessment years. 

10[(4)  Where  an  eligible  assessee  declares  profit  for  any  previous  year  in  accordance  with  the 
provisions  of  this  section  and  he  declares  profit  for  any  of  the  five  assessment  years  relevant  to  the 
previous year succeeding such previous year not in accordance with the provisions of sub-section (1), he 
shall  not  be  eligible  to  claim  the  benefit  of  the  provisions  of  this  section  for  five  assessment  years 
subsequent to the assessment year relevant to the previous year in which the profit has not been declared 
in accordance with the provisions of sub-section (1). 

1. Subs. by Act 7 of 2017, s. 20, for “Provided further” (w.e.f. 1-4-2017). 
2. The words “by an accountant” omitted by Act 32 of 1985, s. 13 (w.e.f. 1-4-1985). 
3. Subs. by Act 22 of 1995, s. 13, for “obtains before” (w.e.f. 1-7-1995). 
4. Ins. by Act 14 of 2001, s. 28 (w.e.f. 1-4-2001). 
5. Subs. by s. 28, ibid., for clause (ii) (w.e.f. 1-4-2001). 
6. Subs. by Act 23 of 2012, s. 13, for “the 30th day of September of the assessment year” (w.e.f. 1-4-2012).  
7. Subs. by Act 33 of 2009, s. 20, for section 44AD (w.e.f. 1-4-2011). 
8. Ins. by Act 7 of 2017, s. 21 (w.e.f. 1-4-2017). 
9. The proviso omitted by Act 28 of 2016, s. 26 (w.e.f. 1-4-2017). 
10. Subs. by s. 26, ibid., for sub-sections (4) and (5) (w.e.f. 1-4-2017). 

250 

 
 
 
 
 
 
 
 
                                                           
(5)  Notwithstanding  anything  contained  in  the  foregoing  provisions  of  this  section,  an  eligible 
assessee  to  whom  the  provisions  of  sub-section  (4)  are  applicable  and  whose  total  income  exceeds  the 
maximum  amount  which  is  not  chargeable  to  income-tax,  shall  be  required  to  keep  and  maintain  such 
books of account and other documents as required under sub-section (2) of section 44AA  and get them 
audited and furnish a report of such audit as required under section 44AB.] 

1[(6) The provisions of this section, notwithstanding anything contained in the foregoing provisions, 

shall not apply to— 

(i)  a person carrying on profession as referred to in sub-section (1) of  section 44AA; 

(ii)  a person earning income in the nature of commission or brokerage; or 

(iii) a person carrying on any agency business.] 

Explanation.—For the purposes of this section,— 

(a)  “eligibleassessee” means,— 

(i)  an individual, Hindu undivided family or a partnership firm, who is a resident, but not a 
limited liability partnership firm as defined under clause (n) of sub-section (1) of section 2 of the 
Limited Liability Partnership Act, 2008 (6 of 2009); and 

(ii)  who  has  not  claimed  deduction  under  any  of  the  sections  10A,  10AA,  10B,  10BAor 
deduction under any provisions of Chapter VIA under the heading ”C. - Deductions in respect of 
certain incomes” in the relevant assessment year; 

(b)  “eligible business” means,— 

(i)  any business except the business of plying, hiring or leasing goods carriages referred to in 

section 44AE; and 

(ii)  whose total turnover or gross receipts in the previous year does not exceed an amount of 

2[two crore rupees].] 

3[44ADA. Special  provision  for  computing  profits  and  gains  of  profession  on  presumptive 
basis.—(1) Notwithstanding anything contained in sections 28 to 43C, in the case of an assessee, being a 
resident in India, who is engaged in a profession referred to in sub-section (1) of section 44AAand whose 
total gross receipts do not exceed fifty lakh rupees in a previous year, a sum equal to fifty per cent. of the 
total gross receipts of the assessee in the previous year on account of such profession or, as the case may 
be, a sum higher than the aforesaid sum claimed to have been earned by the assessee, shall be deemed to 
be the profits and gains of such profession chargeable to tax under the head “Profits and gains of business 
or profession”. 

(2)  Any  deduction  allowable  under  the  provisions  of  sections  30  to  38shall,  for  the  purposes  of  
sub-section (1), be deemed to have been already given full effect to and no further deduction under those 
sections shall be allowed. 

1. Ins. by Act 23 of 2012, s. 14 (w.e.f. 1-4-2011). 
2. Subs. by Act 28 of 2016, s. 26, for “one crore rupees” (w.e.f. 1-4-2017). 
3. Ins. by s. 27, ibid. (w.e.f. 1-4-2017). 

251 

                                                           
(3) The written down value of any asset used for the purposes of profession shall be deemed to have 
been calculated as if the assessee had claimed and had been actually allowed the deduction in respect of 
the depreciation for each of the relevant assessment years. 

(4) Notwithstanding anything contained in the foregoing provisions of this section, an assessee who 
claims  that  his  profits  and  gains  from  the  profession  are  lower  than  the  profits  and  gains  specified  in  
sub-section  (1)  and  whose  total  income  exceeds  the  maximum  amount  which  is  not  chargeable  to  
income-tax,  shall  be  required  to  keep  and  maintain  such  books  of  account  and  other  documents  as 
required under sub-section (1) of section 44AA and get them audited and furnish a report of such audit as 
required under section 44AB.] 

1[44AE.  Special  provision  for  computing  profits  and  gains  of  business  of  plying,  hiring  or 
leasing goods carriages.—(1) Notwithstanding anything to the contrary contained in sections 28 to 43A, 
in the case of an assessee, who owns not more than ten goods carriages  2[at any time during the previous 
year] and who is engaged in the business of plying, hiring or leasing such goods carriages, the income of 
such  business  chargeable  to  tax  under  the  head  “Profits  and  gains  of  business  or  profession”  shall  be 
deemed  to  be  the  aggregate  of  the profits and  gains, from  all the  goods  carriages  owned  by  him  in  the 
previous year, computed in accordance with the provisions of sub-section (2). 

3[(2) For the purposes of sub-section (1), the profits and gains from each goods carriage,— 

(i) being a heavy goods vehicle, shall be an amount equal to one thousand rupees per ton of gross 
vehicle  weight  or  unladen  weight,  as  the  case  may  be,  for  every  month  or  part  of  a  month  during 
which the heavy goods vehicle is owned by the assessee in the previous year or an amount claimed to 
have been actually earned from such vehicle, whichever is higher; 

(ii)  other  than  heavy  goods  vehicle,  shall  be  an  amount  equal  to  seven  thousand  five  hundred 
rupees for every month or part of a month during which the goods carriage is owned by the assessee 
in  the  previous  year  or an amount  claimed  to  have  been  actually  earned from  such  goods  carriage, 
whichever is higher.] 

(3)  Any  deduction  allowable  under  the  provisions  of  sections  30  to  38shall,  for  the  purposes  of  
sub-section (1), be deemed to have been already given full effect to and no further deduction under those 
sections shall be allowed: 

4[Provided that  where  the  assessee  is  a  firm,  the  salary  and  interest  paid  to  its  partners  shall  be 
deducted from the income computed under sub-section (1) subject to the conditions and limits specified in  
clause (b) of section 40.] 

(4) The written down value of any asset used for the purpose of the business referred to in sub-section 
(1) shall be deemed to have been calculated as if the assessee had claimed and had been actually allowed 
the deduction in respect of the depreciation for each of the relevant assessment years. 

(5) The provisions of sections 44AA and 44ABshall not apply in so far as they relate to the business 
referred to in sub-section (1) and in computing the monetary limits under those sections, the gross receipts 
or, as the case may be, the income from the said business shall be excluded. 

5[(6)  Nothing  contained  in  the  foregoing  provisions  of  this  section  shall  apply,  where  the  assessee 
claims and produces evidence to prove that the profits and gains from the aforesaid business during the 
previous year relevant to the assessment year commencing on the 1st day of April, 1997 or any earlier 
assessment year, are lower than the profits and gains specified in sub-sections (1) and (2), and thereupon 
the Assessing Officer shall proceed to make an assessment of the total income or loss of the assessee and 
determine  the  sum  payable  by  the  assessee  on  the  basis  of  assessment  made  under  sub-section  (3)  of 
section 143.] 

1. Ins. by Act 32 of 1994, s. 16 (w.e.f. 1-4-1994). 
2. Ins. by Act 32 of 2003, s. 24 (w.e.f. 1-4-2004). 
3. Subs. by Act 13 of 2018, s. 16, for sub-section (2) (w.e.f. 1-4-2019). Earlier it was substituted by Act 25 of 2014, s. 16 

(w.e.f. 1-4-2015). 

4. Ins. by Act 26 of 1997, s. 13 (w.e.f. 1-4-1994). 
5. Ins. by Act 11 of 1999, s. 7 (w.e.f. 1-4-1997). 

252 

                                                           
1[(7) Notwithstanding anything contained in the foregoing provisions of this section, an assessee may 
claim lower profits and gains than the profits and gains specified in sub-sections (1) and (2), if he keeps 
and  maintains  such  books  of  account  and  other  documents  as  required  under  sub-section  (2)  of  
section  44AA  and  gets  his  accounts  audited  and  furnishes  a  report  of  such  audit  as  required  under 
section 44AB.] 

Explanation.—For the purposes of this section,— 

2[(a) the expressions “goods carriage”, “gross vehicle weight” and “unladen weight” shall have 

the respective meanings assigned to them in section 2 of the Motor Vehicles Act, 1988; 

(aa) the expression “heavy goods vehicle” means any goods carriage, the gross vehicle weight of 

which exceeds 12000 kilograms;’] 

(b) anassessee, who is in possession of a goods carriage, whether taken on hire purchase or on 
instalments and for which the whole or part of the amount payable is still due, shall be deemed to be 
the owner of such goods carriage.] 

3[44AF.  Special  provisions  for  computing  profits  and  gains  of  retail  business.—(1) 
Notwithstanding  anything  to  the  contrary  contained  in  sections  28  to  43C,in  the  case  of  an  assessee 
engaged in retail trade in any goods or merchandise, a sum equal to five per cent of the total turnover in 
the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum 
as declared by the assessee in his return of income shall be deemed to be the profits and gains of such 
business chargeable to tax under the head “Profits and gains of business or profession”: 

Provided that nothing contained in this sub-section shall apply in respect of an assessee whose total 

turnover exceeds an amount of forty lakh rupees in the previous year. 

(2)  Any  deduction  allowable  under  the  provisions  of  sections  30  to  38  shall,  for  the  purposes  of  
sub-section (1), be deemed to have been already given full effect to and no further deduction under those 
sections shall be allowed: 

Provided that where the assessee is a firm, the salary and interest paid to its partners shall be deducted 
from  the  income  computed  under  sub-section  (1)  subject  to  the  conditions  and  limits  specified  in  
clause (b) of section 40. 

(3)  The  written  down  value  of  any  asset  used  for  the  purpose  of  the  business  referred  to  in  
sub-section  (1)  shall  be  deemed  to  have  been  calculated  as  if  the  assessee  had  claimed  and  had  been 
actually allowed the deduction in respect of the depreciation for each of the relevant assessment years. 

(4) The provisions of sections 44AA and 44AB shall not apply in so far as they relate to the business 
referred to in sub-section (1) and in computing the monetary limits under those sections, the total turnover 
or, as the case may be, the income from the said business shall be excluded.] 

4[(5) Notwithstanding anything contained in the foregoing provisions of this section, an assessee may 
claim  lower  profits  and  gains  than  the  profits  and  gains  specified  in  sub-section  (1),  if  he  keeps  and 
maintains such books of account and other documents as required under sub-section (2) of section 44AA 
and gets his accounts audited and furnishes a report of such audit as required under section 44AB.] 

5[(6) Nothing contained in this section shall apply to any assessment year beginning on or after the 1st 

day of April, 2011.] 

1. Ins. by Act 27 of 1999, s. 30 (w.e.f. 1-4-1998). 
2. Subs. by  Act 13 of 2018, s. 16, for clause (a) (w.e.f. 1-4-2019) which was earlier substituted by  Act 25 of 2014, s. 16                 

(w.e.f. 1-4-2015). 

3. Ins. by Act 26 of 1997, s. 14 (w.e.f. 1-4-1998). 
4. Ins. by Act 27 of 1999, s. 31 (w.e.f. 1-4-1998). 
5. Ins. by Act 33 of 2009, s. 22 (w.e.f. 1-4-2009). 

253 

                                                           
1[44B.  Special  provision  for  computing  profits  and  gains  of  shipping  business  in  the  case  of  
non-residents.—(1)  Notwithstanding  anything  to  the  contrary  contained  in  sections  28  to  43A,  in  the 
case of an assessee, being a non-resident, engaged in the business of operation of ships, a sum equal to 
seven and a half per cent of the aggregate of the amounts specified in sub-section (2) shall be deemed to 
be the profits and gains of such business chargeable to tax under the head “Profits and gains of business 
or profession”. 

(2) The amounts referred to in sub-section (1) shall be the following, namely:— 

 (i)  the amount paid or payable (whether in or out of India) to the assessee or to any person on his 
behalf on account of the carriage of passengers, livestock, mail or goods shipped at any port in India; 
and 

(ii)  the  amount  received  or  deemed  to  be  received  in  India  by  or  on  behalf  of  the  assessee  on 

account of the carriage of passengers, livestock, mail or goods shipped at any port outside India.] 

2[Explanation.—For the purposes of this sub-section, the amount referred to in clause (i) or clause (ii) 
shall include the amount paid or payable or received or deemed to be received, as the case may be, by 
way of demurrage charges or handling charges or any other amount of similar nature.] 

3[44BB. Special  provision  for  computing  profits  and  gains  in  connection  with  the  business  of 
exploration, etc., of mineral oils.—(1) Notwithstanding anything to the contrary contained in sections 28 
to 41 and sections 43 and 43A, 4[in the case of an assessee, being a non-resident,] engaged in the business 
of providing services or facilities in connection with, or supplying plant and machinery on hire used, or to 
be used, in the prospecting for, or extraction or production of, mineral oils, a sum equal to ten per cent of 
the aggregate of the amounts specified in sub-section (2) shall be deemed to be the profits and gains of 
such business chargeable to tax under the head “Profits and gains of business or profession”: 

Provided that  this  sub-section  shall  not  apply  in  a  case  where  the  provisions  of  section  42  or  
section  44D  or 5[section  44DA  or]  section  115A  or section  293A  apply  for  the  purposes  of  computing 
profits or gains or any other income referred to in those sections. 

(2) The amounts referred to in sub-section (1) shall be the following, namely:— 

(a) the amount paid or payable (whether in or out of India) to the assessee or to any person on his 
behalf on account of the provision of services and facilities in connection with, or supply of plant and 
machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral 
oils in India; and 

(b)  the  amount  received  or  deemed  to  be  received  in  India  by  or  on  behalf  of  the  assessee  on 
account  of  the  provision  of  services  and  facilities  in  connection  with,  or  supply  of  plant  and 
machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral 
oils outside India. 

6[(3) Notwithstanding anything contained in sub-section (1), an assessee may claim lower profits and 
gains  than  the  profits  and  gains  specified  in  that  sub-section,  if  he  keeps  and  maintains  such  books  of 
account and  other  documents as required  under  sub-section (2)  of   section  44AA  and  gets  his  accounts 
audited and furnishes a report of such audit as required under section 44AB, and thereupon the Assessing 

1. Ins. by Act 25 of 1975, s. 8 (w.e.f. 1-4-1976). 
2. Ins. by Act 26 of 1997, s. 15 (w.e.f. 1-4-1976). 
3. Ins. by Act 11 of 1987, s. 11 (w.e.f. 1-4-1983). 
4. Subs. by Act 26 of 1988, s. 16, for “in the case of an assessee” (w.e.f. 1-4-1983). 
5. Ins. by Act 14 of 2010, s. 16 (w.e.f. 1-4-2011). 
6. Ins. by Act 32 of 2003, s. 25 (w.e.f. 1-4-2004). 

254 

                                                           
Officer  shall  proceed  to  make  an  assessment  of  the  total  income  or  loss  of  the  assessee  under  
sub-section (3) of section 143 and determine the sum payable by, or refundable to, the assessee.] 

Explanation.—For the purposes of this section,— 

(i)   “plant”  includes  ships,  aircraft,  vehicles,  drilling  units,  scientific  apparatus  and  equipment, 

used for the purposes of the said business; 

(ii) “mineral oil” includes petroleum and natural gas.] 

1[44BBA.  Special  provision  for  computing  profits  and  gains  of  the  business  of  operation  of 
aircraft  in  the  case  of  non-residents.—(1)  Notwithstanding  anything  to  the  contrary  contained 
in sections  28  to  43A,  in  the  case  of  an  assessee,  being  a  non-resident,  engaged  in  the  business  of 
operation  of  aircraft,  a  sum  equal  to  five  per  cent.  of  the  aggregate  of  the  amounts  specified  in  
sub-section (2) shall be deemed to be the profits and gains of such business chargeable to tax under the 
head “Profits and gains of business or profession”. 

(2) The amounts referred to in sub-section (1) shall be the following, namely:— 

(a) the amount paid or payable (whether in or out of India) to the assessee or to any person on his 
behalf on account of the carriage of passengers, livestock, mail or goods from any place in India; and 

(b)  the  amount  received  or  deemed  to  be  received  in  India  by  or  on  behalf  of  the  assessee  on 

account of the carriage of passengers, livestock, mail or goods from any place outside India.] 

2[44BBB. Special provision for computing profits and gains of foreign companies engaged in the 
business  of  civil  construction,  etc.,  in  certain  turnkey  power  projects.—3[(1)]  Notwithstanding 
anything  to  the  contrary  contained  insections  28  to  44AA,  in  the  case  of  an  assessee,  being  a  foreign 
company, engaged in the business of civil construction or the business of erection of plant or machinery 
or testing or commissioning thereof, in connection with a turnkey power project approved by the Central 
Government in this behalf 4***, a sum equal to ten per cent. of the amount paid or payable (whether in or 
out  of  India)  to  the  said  assessee  or  to  any  person  on  his  behalf  on  account  of  such  civil  construction, 
erection, testing or commissioning shall be deemed to be the profits and gains of such business chargeable 
to tax under the head “Profits and gains of business or profession”.] 

5[(2) Notwithstanding anything contained in sub-section (1), an assessee may claim lower profits and 
gains  than  the  profits  and  gains  specified  in  that  sub-section,  if  he  keeps  and  maintains  such  books  of 
account  and  other  documents  as  required  under  sub-section  (2)  of  section  44AA  and  gets  his  accounts 
audited and furnishes a report of such audit as required under section 44AB, and thereupon the Assessing 
Officer  shall  proceed  to  make  an  assessment  of  the  total  income  or  loss  of  the  assessee  under  
sub-section (3) of section 143 and determine the sum payable by, or refundable to, the assessee.] 

6[44C.  Deduction  of  head  office  expenditure  in  the  case  of  non-residents.—Notwithstanding 
anything to the contrary contained in sections 28 to 43A, in the case of an assessee, being a non-resident, 
no  allowance  shall  be  made,  in  computing  the income  chargeable  under  the  head  “Profits  and  gains of 
business or profession”, in respect of so much of the expenditure in the nature of head office expenditure 
as is in excess of the amount computed as hereunder, namely:— 

(a) an amount equal to five per cent of the adjusted total income; or 

1. Ins. by Act 11 of 1987, s. 12 (w.e.f. 1-4-1988). 
2. Ins. by Act 13 of 1989, s. 10 (w.e.f. 1-4-1990). 
3. The existing section numbered as sub-section (1) thereof by Act 32 of 2003, s. 26 (w.e.f. 1-4-2004). 
4. The words “and financed under any international aid programme” omitted by s. 26, ibid. (w.e.f. 1-4-2004). 
5. Ins. by s. 26, ibid. (w.e.f. 1-4-2004). 
6. Ins. by Act 66 of 1976, s. 10 (w.e.f. 1-6-1976). 

255 

 
                                                           
1* 

* 

* 

* 

* 

(c) the amount of so much of the expenditure in the nature of head office expenditure incurred by 

the assessee as is attributable to the business or profession of the assessee in India, 

whichever is the least: 

Provided that  in  a case  where the  adjusted total  income  of  the assessee is  a  loss,  the  amount  under 
clause  (a)  shall  be  computed  at  the  rate  of  five  per  cent.of  the  average  adjusted  total  income  of  the 
assessee. 

Explanation.—For the purposes of this section,— 

 (i)  “adjusted total income” means the total income computed in accordance with the provisions 
of this Act, without giving effect to the allowance referred to in this section or  in sub-section (2) of 
section 32or the deduction referred to in section 32Aor section 33or section 33A or the first proviso to 
clause  (ix)  of  sub-section  (1)  of  section  36  or  any  loss  carried  forward  under  sub-section  (1)  of            
section 72 or sub-section (2) of section 73  or  2[sub-section (1) or sub-section (3) of  section 74]  or  
sub-section (3) of  section 74A or the deductions under Chapter VI-A; 

(ii)  “average adjusted total income” means,— 

(a)   in  a  case  where  the  total  income  of  the  assessee  is  assessable  for  each  of  the  three 
assessment years immediately preceding the relevant assessment year, one-third of the aggregate 
amount of the adjusted total income in respect of the previous years relevant to the aforesaid three 
assessment years; 

(b)  in a case where the total income of the assessee is assessable only for two of the aforesaid 
three assessment years, one-half of the aggregate amount of the adjusted total income in respect 
of the previous years relevant to the aforesaid two assessment years; 

(c)  in a case where the total income of the assessee is assessable only for one of the aforesaid 
three assessment years, the amount of the adjusted total income in respect of the previous year 
relevant to that assessment year; 

3* 

* 

* 

* 

* 

(iv) “head office expenditure” means executive and general administration expenditure incurred 

by the assessee outside India, including expenditure incurred in respect of— 

(a) rent, rates, taxes, repairs or insurance of any premises outside India used for the purposes 

of the business or profession; 

(b) salary, wages, annuity, pension, fees, bonus, commission, gratuity, perquisites or profits 
in  lieu  of  or  in  addition  to  salary,  whether  paid  or  allowed  to  any  employee  or  other  person 
employed in, or managing the affairs of, any office outside India; 

(c) travelling by any employee or other person employed in, or managing the affairs of, any 

office outside India; and 

(d)  such  other  matters  connected  with  executive  and  general  administration  as  may  be 

prescribed.] 

1. Clause (b) omitted by Act 38 of 1993, s. 11 (w.e.f. 1-4-1993). 
2. Subs. by Act 11 of 1987, s. 74, for “sub-section (1) of section 74” (w.e.f. 1-4-1988). 
3. Clause (iii) omitted by Act 38 of 1993, s. 11 (w.e.f. 1-4-1993). 

256 

 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
1[44D. Special provisions for computing income by way of royalties, etc., in the case of foreign 
companies.—Notwithstanding anything to the contrary contained in sections 28 to 44C, in the case of an 
assessee, being a foreign company,— 

(a) the deductions admissible under the said sections in computing the income by way of royalty 
or  fees for  technical  services  received  2[from  Government  or  an  Indian  concern  in  pursuance of an 
agreement made by the foreign company with Government or with the Indian concern] before the 1st 
day  of  April,  1976,  shall  not  exceed  in  the  aggregate  twenty  per  cent  of  the  gross  amount  of  such 
royalty or fees as reduced by so much of the gross amount of such royalty as consists of lump sum 
consideration for the transfer outside India of, or the imparting of information outside India in respect 
of, any data, documentation, drawing or specification relating to any patent, invention, model, design, 
secret formula or process or trade mark or similar property; 

(b) no deduction in respect of any expenditure or allowance shall be allowed under any of the said 
sections  in  computing  the  income  by  way  of  royalty  or  fees  for  technical  services  received  [from 
Government or an Indian concern in pursuance of an agreement made by the foreign company with 
Government or with the Indian concern] after the 31st day of March, 1976 3[but before the 1st day of 
April, 2003;] 

 4* 

* 

* 

* 

          * 

Explanation.—For the purposes of this section,— 

(a) “fees for technical services” shall have the same meaning as in 5[Explanation 2 to clause (vii) 

of sub-section (1) of section 9] ; 

(b) “foreign company” shall have the same meaning as in section 80B; 

(c) “royalty” shall have the same meaning as in 6[Explanation 2 to clause (vi) of sub-section (1) 

of section 9]; 

(d) royalty received 2[from Government or an Indian concern in pursuance of an agreement made 
by  a  foreign  company  with  Government  or  with  the  Indian  concern]  after  the  31st  day  of  March, 
1976, shall be deemed to have been received in pursuance of an agreement made before the 1st day of 
April,  1976,  if  such  agreement  is  deemed,  for  the  purposes  of  the  proviso  to  clause  (vi)  of               
sub-section (1) of section 9, to have been made before the 1st day of April, 1976.] 

7[44DA.  Special  provision  for  computing  income  by  way  of  royalties,  etc.,  in  case  of  non-
residents.— (1) The income by way of royalty or fees for technical services received from Government 
or an Indian concern in pursuance of an agreement made by a non-resident (not being a company) or a 
foreign company with Government or the Indian concern after the 31st day of March, 2003, where such 
non-resident  (not  being  a  company)  or  a  foreign  company  carries  on  business  in  India  through  a 
permanent  establishment  situated  therein,  or  performs  professional  services  from  a  fixed  place  of 

1. Ins. by Act 66 of 1976, s. 10 (w.e.f. 1-6-1976). 
2. Subs. by Act 11 of 1983, s. 19, for certain words (w.e.f. 1-6-1983). 
3. Ins. by Act 32 of 2003, s. 27 (w.e.f. 1-4-2004).  
4. Clause (c) and (d) omitted by Act 32 of 1994, s. 17 (w.e.f. 1-4-1995). 
5. Subs. by Act 29 of 1977, s. 29, for “the Explanation to, clause (vii) of sub-section (1) of section  9” (w.e.f. 1-4-1977).   
6. Subs. by s. 29, ibid., for “the Explanation to clause (vi) of sub- section (1) of section 9” (w.e.f 1-4-1977). 
7. Ins. by Act 32 of 2003, s. 28 (w.e.f 1-4-2004). 

257 

 
 
 
 
 
 
 
                                                           
profession situated therein, and the right, property or contract in respect of which the royalties or fees for 
technical services are paid is effectively connected with such permanent establishment or fixed place of 
profession,  as  the  case  may  be,  shall  be  computed  under  the  head  “Profits  and  gains  of  business  or 
profession” in accordance with the provisions of this Act : 

Provided that no deduction shall be allowed,— 

 (i) in respect of any expenditure or allowance which is not wholly and exclusively incurred for 

the business of such permanent establishment or fixed place of profession in India; or 

(ii) in respect of amounts, if any, paid (otherwise than towards reimbursement of actual expenses) 

by the permanent establishment to its head office or to any of its other offices : 

1[Provided  further that  the  provisions  of  section  44BB shall  not  apply  in  respect  of  the  income 

referred to in this section.] 

(2) Every non-resident (not being a company) or a foreign company shall keep and maintain books of 
account  and  other  documents  in  accordance  with  the  provisions  contained  in  section  44AA and  get  his 
accounts audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and 
furnish along with the return of income, the report of such audit in the prescribed form duly signed and 
verified by such accountant. 

Explanation.—For the purposes of this section,— 

(a) “fees for technical services” shall have the same meaning as in Explanation 2 to clause (vii) of         

sub-section (1) of section  9; 

(b) “royalty” shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of 

section 9; 

(c) “permanent establishment” shall have the same meaning as in clause (iiia) of section 92F.] 

2[44DB. Special provision for computing deductions in the case of business reorganization of co-

operative  banks.—(1)  The  deduction  under 
section  35DDA shall,  in  a  case  where  business  reorganisation  of  a  co-operative  bank  has  taken  place 
during the financial year, be allowed in accordance with the provisions of this section. 

section  35D, 

section  32, 

section  35DD or                      

(2)  The  amount  of  deduction  allowable  to  the  predecessor  co-operative  bank  under  section  32,       

section 35D, section 35DD or section DDA shall be determined in accordance with the formula— 

A    X   

   B
  C

where  A  =  the  amount  of  deduction  allowable  to  the  predecessor  co-operative  bank  if  the  business 

reorganisation had not taken place; 

B = the number of days comprised in the period beginning with the 1st day of the financial 
year and ending on the day immediately preceding the date of business reorganisation; and 

C = the total  number  of  days  in  the  financial  year  in which  the  business  reorganisation  has 
taken place. 

1. Ins. by Act 14 of 2010, s. 17 (w.e.f. 1-4-2011). 
2. Ins. by Act 22 of 2007, s. 15 (w.e.f. 1-4-2008). 

258 

 
 
 
 
                                                           
(3)  The  amount  of  deduction  allowable  to  the  successor  co-operative  bank  under  section  32,                 

section 35D, section 35DD or section 35DDA shall be determined in accordance with the formula—

A    X   

   B
  C

where  A  =  the  amount  of  deduction  allowable  to  the  predecessor  co-operative  bank  if  the  business 

reorganisation had not taken place; 

B = the number of days comprised in the period beginning with the date of business reorganisation 

and ending on the last day of the financial year; and 

C = the total number of days in the financial year in which the business reorganisation has taken 

place. 

(4)  The  provisions  of  section    35D,  section  35DD or  section  35DDA shall,  in  a  case  where  an 
undertaking  of  the  predecessor  co-operative  bank  entitled  to  the  deduction  under  the  said  section  is 
transferred before the expiry of the period specified therein to a successor co-operative bank on account 
of business reorganisation, apply to the successor co-operative bank in the financial years subsequent to 
the year of business reorganisation as they would have applied to the predecessor co-operative bank, as if 
the business reorganisation had not taken place. 

(5) For the purposes of this section,— 

(a) “amalgamated co-operative bank” means— 

 (i)  a co-operative bank with which one or more amalgamating co-operative banks merge; or 

(ii)   a  co-operative  bank  formed  as  a  result  of  merger  of  two  or  more  amalgamating             

co-operative banks; 

(b) “amalgamating co-operative bank” means— 

 (i)  a co-operative bank which merges with another co-operative bank; or 

(ii)  every co-operative bank merging to form a new co-operative bank; 

(c)  “amalgamation”  means  the  merger  of  an  amalgamating  co-operative  bank  or  banks  with  an 

amalgamated co-operative bank, in such manner that— 

 (i)  all the assets and liabilities of the amalgamating co-operative bank or banks immediately 
before the merger (other than the assets transferred, by sale or distribution on winding up, to the 
amalgamated  co-operative  bank)  become  the  assets  and  liabilities  of  the  amalgamated                
co-operative bank; 

(ii)   the  members  holding  seventy-five  per  cent  or  more  voting  rights  in  the  amalgamating  

co-operative bank become members of the amalgamated co-operative bank; and 

259 

  
 
 
 
(iii)  the  shareholders  holding  seventy-five  per  cent  or  more  in  value  of  the  shares  in  the 
amalgamating  co-operative  bank  (other  than  the  shares  held  by  the  amalgamated  co-operative 
bank or its nominee or its subsidiary, immediately before the merger) become shareholders of the 
amalgamated co-operative bank; 

(d) “business reorganisation” means the reorganisation of business involving the amalgamation or 

demerger of a co-operative bank; 

(e) ”co-operative bank” shall have the meaning assigned to it in clause (cci) of section 5 of the 

Banking Regulation Act, 1949 (10 of 1949); 

(f)  “demerger”  means  the  transfer  by  a  demerged  co-operative  bank  of  one  or  more  of  its 

undertakings to any resulting co-operative bank, in such manner that— 

 (i)   all  the  assets  and  liabilities  of  the  undertaking  or  undertakings  immediately  before  the 

transfer become the assets and liabilities of the resulting co-operative bank; 

(ii)  the assets and the liabilities are transferred to the resulting co-operative bank at values 
(other than change in the value of assets consequent to their revaluation) appearing in its books of 
account immediately before the transfer; 

(iii) the resulting co-operative bank issues, in consideration of the transfer, its membership to 

the members of the demerged co-operative bank on a proportionate basis; 

(iv)  the  shareholders  holding  seventy-five  per  cent  or  more  in  value  of  the  shares  in  the 
demerged co-operative bank (other than shares already held by the resulting bank or its nominee 
or  its  subsidiary  immediately  before  the  transfer),  become  shareholders  of  the  resulting  co-
operative  bank,  otherwise  than  as  a  result  of  the  acquisition  of  the  assets  of  the  demerged  co-
operative bank or any undertaking thereof by the resulting co-operative bank; 

(v)  the transfer of the undertaking is on a going concern basis; and 

(vi) the transfer is in accordance with the conditions specified by the Central Government, by 
notification in the Official Gazette, having regard to the necessity to ensure that the transfer is for 
genuine business purposes; 

(g) “demerged co-operative bank” means the co-operative bank whose undertaking is transferred, 

pursuant to a demerger, to a resulting bank; 

(h) “predecessor co-operative bank” means the amalgamating co-operative bank or the demerged 

co-operative bank, as the case may be; 

 (i)   “successor  co-operative  bank”  means  the  amalgamated  co-operative  bank  or  the  resulting 

bank, as the case may be; 

(j)  “resulting co-operative bank” means— 

 (i) one or more co-operative banks to which the undertaking of the demerged co-operative 

bank is transferred in a demerger; or 

(ii) any co-operative bank formed as a result of demerger.] 

260 

E. — Capital gains 

45. Capital gains. — 1[(1)] Any profits or gains arising from the transfer of a capital asset effected in                      

previous year shall, save as otherwise provided in  2[sections 3*** 54,  4*** 5[54B,  6[54D,  7[54E, 8[54EA, 
54EB,] 54F, 9[54G and 54H]]]]], be chargeable to income-tax under the head “Capital gains”, and shall be 
deemed to be the income of the previous year in which the transfer took place. 

10[(1A) Notwithstanding anything contained in sub-section (1), where any person receives at any time 
during  any  previous  year  any  money  or  other  assets  under  an  insurance  from  an  insurer  on  account  of 
damage to, or destruction of, any capital asset, as a result of— 

 (i)  flood, typhoon, hurricane, cyclone, earthquake or other convulsion of nature; or 

(ii)  riot or civil disturbance; or 

(iii) accidental fire or explosion; or 

(iv)  action  by  an  enemy  or  action  taken  in  combating  an  enemy  (whether  with  or  without  a 

declaration of war), 

then, any profits or gains arising from receipt of such money or other assets shall be chargeable to 
income-tax under the head “Capital gains” and shall be deemed to be the income of such person of the 
previous year in which such money or other asset was received and for the purposes of section 48, value 
of any money or the fair market value of other assets on the date of such receipt shall be deemed to be the 
full value of the consideration received or accruing as a result of the transfer of such capital asset. 

Explanation.—For the purposes of this sub-section, the expression “insurer” shall have the meaning 

assigned to it in clause (9) of section 2 of the Insurance Act, 1938 (4 of 1938).] 

11[(2)  Notwithstanding  anything  contained  in  sub-section  (1),  the  profits  or  gains  arising  from  the 
transfer by way of conversion by the owner of a capital asset into, or its treatment by him as stock-in-
trade of a business carried on by him shall be chargeable to income-tax as his income of the previous year 
in which such stock-in-trade is sold or otherwise transferred by him and, for the purposes of section 48, 
the fair market value of the asset on the date of such conversion or treatment shall be deemed to be the 
full value of the consideration received or accruing as a result of the transfer of the capital asset.] 

12[(2A)  Where  any  person  has  had  at  any  time  during  previous  year  any  beneficial  interest  in  any 
securities, then, any profits or gains arising from transfer made by the depository or participant of such 
beneficial  interest  in  respect  of  securities  shall  be  chargeable  to  income-tax  as  the  income  of  the 
beneficial  owner  of  the  previous  year  in  which  such  transfer  took  place  and  shall  not  be  regarded  as                    

1. Sub-section (I) renumbered as sub-section (1) thereof by Act 5 of 1964, s. 12 (w.e.f. 1-4-1964).  
2. Subs. by Act 19 of 1970, s. 11, for “sections 53 and 54” (w.e.f. 1-4-1970).    
3. The figures “53,” omitted by Act 18 of 1992, s. 22 (w.e.f. 1-4-1993). 
4. The figures and letter “54C” omitted by Act 66 of 1976, s. 26 (w.e.f. 1-4-1976).   
5. Subs. by Act 29 of 1977, s. 29, for “54B and 54D” (w.e.f. 1-4-1978). 
6. Subs. by Act 14 of 1982, s. 32 for “54D and 54E” (w.e.f. 1-4-1983) 
7. Subs. by Act 11 of 1987, s. 13, for “54E and 54F (w.e.f. 1-10-1987). 
8. Subs. by Act 33 of 1996, s. 19, for “54E” (w.e.f. 1-10-1996). 
9. Subs. by Act 49 of 1991, s. 17, for “and 54G” (w.e.f. 1-4-1991). 
10. Ins. by Act 27 of 1999, s. 32 (w.e.f. 1-4-2000). 
11. Ins. by Act 67 of 1984, s. 12 (w.e.f. 1-4-1985). 
12. Ins. by Act 22 of 1996, s. 30 and the Schedule (w.e.f. 20-9-1995).  

261 

                                                           
income  of  the  depository  who  is  deemed  to  be  the  registered  owner  of  securities  by  virtue  of                 
sub-section (1) of section 10 of the Depositories Act, 1996, and for the purposes of— 

(i)  section 48; and 

(ii)  proviso to clause (42A) of section 2, 

the cost of acquisition and the period of holding of any securities shall be determined on the basis of the 
first-in-first-out method. 

Explanation.—For the purposes of this sub-section, the expressions “beneficial owner”, “depository” 

and  “security”  shall  have  the  meanings  respectively  assigned  to  them  in  clauses  (a),  (e)  and  (l)  of                
sub-section (1) of section 2 of the Depositories Act, 1996.] 

1[(3) The  profits  or  gains  arising  from  the  transfer  of a  capital  asset  by  a  person  to  a  firm  or  other 
association of persons or body of individuals (not being a company or a co-operative society) in which he 
is or becomes a partner or member, by way of capital contribution or otherwise, shall be chargeable to tax 
as his income of the previous year in which such transfer takes place and, for the purposes of section 48, 
the amount recorded in the books of account of the firm, association or body as the value of the capital 
asset  shall  be  deemed  to  be  the  full  value  of  the  consideration  received  or  accruing  as  a  result  of  the 
transfer of the capital asset. 

(4) The profits or gains arising from the transfer of a capital asset by way of distribution of capital 
assets  on  the  dissolution  of  a  firm  or  other  association  of  persons  or  body  of  individuals  (not  being  a 
company  or  a  co-operative  society)  or  otherwise,  shall  be  chargeable  to  tax  as  the  income  of  the  firm, 
association or body, of the previous year in which the said transfer takes place and, for the purposes of 
section 48, the fair market value of the asset on the date of such transfer shall be deemed to be the full 
value of the consideration received or accruing as a result of the transfer.] 

 (5)  Notwithstanding  anything  contained  in  sub-section  (1),  where  the  capital  gain  arises  from  the 
transfer of a capital asset, being a transfer by way of compulsory acquisition under any law, or a transfer 
the consideration for which was determined or approved by the Central Government or the Reserve Bank 
of India, and the compensation or the consideration for such transfer is enhanced or further enhanced by 
any  court,  Tribunal  or  other  authority,  the  capital  gain  shall  be  dealt  with  in  the  following  manner,   
namely:— 

(a) the capital gain computed with reference to the compensation awarded in the first instance or, 
as  the  case  may  be,  the  consideration  determined  or  approved  in  the  first  instance  by  the  Central 
Government  or the  Reserve  Bank  of  India  shall be chargeable as  2[income  under  the head  “Capital 
gains” of the previous year in which such compensation or part thereof, or such consideration or part 
thereof, was first received]; and  

(b) the amount by which the compensation or consideration is enhanced or further enhanced by 
the  court,  Tribunal  or  other  authority  shall  be  deemed  to  be  income  chargeable  under  the  head 
“Capital gains” of the previous year in which such amount is received by the assessee: 

3[Provided that any amount of compensation received in pursuance of an interim order of a court, 
Tribunal or other authority shall be deemed to be income chargeable under the head “Capital gains” 
of the previous year in which the final order of such court, Tribunal or other authority is made;] 

1. Ins. by Act 11 of 1987, s. 13 (w.e.f. 1-4-1988). 
2. Subs. by Act 49 of 1991, s. 17, for “income under the head “Capital gains” of the previous year in which the transfer took 

place” (w.e.f. 1-4-1988). 

3. Ins. by Act 25 of 2014, s. 17 (w.e.f. 1-4-2015).  

262 

                                                           
1[(c) where in the assessment for any year, the capital gain arising from the transfer of a capital 
asset is computed by taking the compensation or consideration referred to in clause (a) or, as the case 
may  be,  enhanced  compensation  or  consideration  referred  to  in  clause  (b),  and  subsequently  such 
compensation  or  consideration  is  reduced  by  any  court,  Tribunal  or  other  authority,  such  assessed 
capital  gain  of  that  year  shall  be  recomputed  by  taking  the  compensation  or  consideration  as  so 
reduced by such court, Tribunal or other authority to be the full value of the consideration.] 

Explanation.—For the purposes of this sub-section,— 

 (i) in relation to the amount referred to in clause (b), the cost of acquisition and the cost of 

improvement shall be taken to be nil; 

(ii) the provisions of this sub-section shall apply also in a case where the transfer took place 

prior to the 1st day of April, 1988; 

(iii)  where  by  reason  of  the  death  of  the  person  who  made  the  transfer,  or  for  any  other 
reason, the enhanced compensation or consideration is received by any other person, the amount 
referred  to  in  clause  (b)  shall  be  deemed  to  be  the  income,  chargeable  to  tax  under  the  head 
“Capital gains”, of such other person.] 

2[(5A)  Notwithstanding  anything  contained  in  sub-section  (1),  where  the  capital  gain  arises  to  an 
assessee, being an individual or a Hindu undivided family, from the transfer of a capital asset, being land 
or building or both, under a specified agreement, the capital gains shall be chargeable to income-tax as 
income of the previous year in which the certificate of completion for the whole or part of the project is 
issued by the competent authority; and for the purposes of section 48, the stamp duty value, on the date of 
issue of the said certificate, of his share, being land or building or both in the project, as increased by the 
consideration received in cash, if any, shall be deemed to be the full value of the consideration received or 
accruing as a result of the transfer of the capital asset: 

Provided that the provisions of this sub-section shall not apply where the assessee transfers his share in 
the project on or before the date of issue of the said certificate of completion, and the capital gains shall be 
deemed to be the income of the previous year in which such transfer takes place and the provisions of this 
Act, other than the provisions of this sub-section, shall apply for the purpose of determination of full value 
of consideration received or accruing as a result of such transfer. 

Explanation.—For the purposes of this sub-section, the expression— 

(i) “competent authority” means the authority empowered to approve the building plan by or 

under any law for the time being in force; 

(ii)  “specified  agreement”  means  a  registered  agreement  in  which  a  person  owning  land  or 
building  or  both,  agrees  to  allow  another  person  to  develop  a  real  estate  project  on  such  land  or 
building or both, in consideration of a share, being land or building or both in such project, whether 
with or without payment of part of the consideration in cash; 

(iii) “stamp duty value” means the value adopted or assessed or assessable by any authority of the 
Government for the purpose of payment of stamp duty in respect of an immovable property being land 
or building or both.’.] 

3[(6)  Notwithstanding  anything  contained  in  sub-section  (1),  the  difference  between  the  repurchase 
price of the units referred to in sub-section (2) of section 80CCB and the capital value of such units shall 
be deemed to be the capital gains arising to the assessee in the previous year in which such repurchase 
takes place or the plan referred to in that section is terminated and shall be taxed accordingly. 

Explanation.—For  the  purposes  of  this  sub-section,  “capital  value  of  such  units”  means  any 

amount invested by the assessee in the units referred to in sub-section (2) of section 80CCB.] 

1. Ins. by Act 32 of 2003, s. 29 (w.e.f. 1-4-2004).  
2. Ins. by Act 7 of 2017, s. 22 (w.e.f 1-4-2018). 
3. Ins. by Act 12 of 1990, s. 15 (w.e.f. 1-4-1991). 

263 

                                                           
46. Capital  gains  on  distribution  of  assets  by  companies  in  liquidation.—(1)  Notwithstanding 
anything  contained  in section,  where  the  assets  of  a  company  are  distributed  to  its  shareholders  on  its 
liquidation,  such  distribution  shall  not  be  regarded  as  a  transfer  by  the  company  for  the  purposes 
of section 45. 

(2) Where a shareholder on the liquidation of a company receives any money or other assets from the 
company, he shall be chargeable to income-tax under the head “Capital gains”, in respect of the money so 
received  or  the  market  value  of  the  other  assets  on  the  date  of  distribution,  as  reduced  by  the  amount 
assessed  as  dividend  within  the  meaning  of  sub-clause  (c)  of  clause  (22)  of section  2 and  the  sum  so 
arrived at shall be deemed to be the full value of the consideration for the purposes of section 48. 

1[46A. Capital gains on purchase by company of its own shares or other specified securities.—
Where  a  shareholder  or  a  holder  of  other  specified  securities  receives  any  consideration  from  any 
company for purchase of its own shares or other specified securities held by such shareholder or holder of 
other specified securities, then, subject to the provisions of section 48, the difference between the cost of 
acquisition  and  the  value  of  consideration  received  by  the  shareholder  or  the  holder  of  other  specified 
securities, as the case may be, shall be deemed to be the capital gains arising to such shareholder or the 
holder of other specified securities, as the case may be, in the year in which such shares or other specified 
securities were purchased by the company. 

Explanation.—For the purposes of this section, “specified securities” shall have the meaning assigned 

to it in Explanation to section 77A of the Companies Act, 1956 (1 of 1956).] 

47. Transactions  not  regarded  as  transfer.—Nothing  contained  in section  45 shall  apply  to  the 

following transfers:— 

 (i)  any distribution of capital assets on the total or partial partition of a Hindu undivided family; 

2* 

* 

* 

          *                               * 

(iii) any transfer of a capital asset under a gift or will or an irrevocable trust : 

3[Provided that  this  clause  shall  not  apply  to  transfer  under  a  gift  or  an  irrevocable  trust  of  a 
capital asset being shares, debentures or warrants allotted by a company directly or indirectly to its 
employees  under  4[any  Employees’  Stock  Option  Plan  or  Scheme  of  the  company  offered  to  such 
employees in accordance with the guidelines issued by the Central Government in this behalf];] 

(iv) any transfer of a capital asset by a company to its subsidiary company, if— 

 (a) the parent company or its nominees hold the whole of the share capital of the subsidiary 

company, and 

 (b) the subsidiary company is an Indian company; 

5[(v) any transfer of a capital asset by a subsidiary company to the holding company, if— 

 (a) the whole of the share capital of the subsidiary company is held by the holding company, 

and 

 (b) the holding company is an Indian company:] 

1. Ins. by Act 27 of 1999, s. 33 (w.e.f. 1-4-2000). 
2. Clause (ii) omitted by Act 11 of 1987, s. 14 (w.e.f. 1-4-1988). 
3. Ins. by Act 10 of 2000, s. 21 (w.e.f. 1-4-2001). 
4. Subs. by Act 14 of 2001, s. 29, for “the Employees’ Stock option Plan or Scheme” (w.e.f. 1-4-2001). 
5. Ins. by Act 10 of 1965, s. 15 (w.e.f. 1-4-1965). 

264 

 
 
 
 
 
                                                           
1[Provided that  nothing  contained in  clause (iv)  or  clause  (v) shall apply  to  the  transfer  of a  capital 

asset made after the 29th day of February, 1988, as stock-in-trade;] 

2[(vi) any transfer, in a scheme of amalgamation, of a capital asset by the amalgamating company 

to the amalgamated company if the amalgamated company is an Indian company; 

3[(via) any transfer, in a scheme of amalgamation, of a capital asset being a share or shares held in 
an Indian company, by the amalgamating foreign company to the amalgamated foreign company, if— 

(a)  at  least  twenty-five  per  cent  of  the  shareholders  of  the  amalgamating  foreign  company 

continue to remain shareholders of the amalgamated foreign company, and 

(b)  such  transfer  does  not  attract  tax  on  capital  gains  in  the  country,  in  which  the 

amalgamating company is incorporated;] 

4[(viaa)  any  transfer,  in  a  scheme  of  amalgamation  of  a  banking  company  with  a  banking 
institution  sanctioned  and  brought  into  force  by  the  Central  Government  under  sub-section  (7)  of 
section  45  of  the  Banking  Regulation  Act,  1949  (10  of  1949),  of  a  capital  asset  by  the  banking 
company to the banking institution. 

Explanation.—For the purposes of this clause,— 

 (i) “banking company” shall have the same meaning assigned to it in clause (c) of section 5 

of the Banking Regulation Act, 1949 (10 of 1949); 

(ii)  “banking  institution”  shall  have  the  same  meaning  assigned  to  it  in  sub-section  (15)  of 

section 45 of the Banking Regulation Act, 1949 (10 of 1949);] 

5[(viab) any transfer, in a scheme of amalgamation, of a capital asset, being a share of a foreign 
company, referred to in the Explanation 5 to clause (i) of sub-section (1) of section 9, which derives, 
directly or indirectly, its value substantially from the share or shares of an Indian company, held by 
the amalgamating foreign company to the amalgamated foreign company, if— 

(A) at  least  twenty-five  per  cent.  of the  shareholders of  the  amalgamating  foreign  company 

continue to remain shareholders of the amalgamated foreign company; and 

(B)  such  transfer  does  not  attract  tax  on  capital  gains  in  the  country  in  which  the 

amalgamating company is incorporated;] 

6[(vib) any transfer, in a demerger, of a capital asset by the demerged company to the resulting 

company, if the resulting company is an Indian company; 

(vic)  any  transfer  in  a  demerger,  of  a  capital  asset,  being  a  share  or  shares  held  in  an  Indian 

company, by the demerged foreign company to the resulting foreign company, if— 

(a) the shareholders holding not less than three-fourths in value of the shares of the demerged 

foreign company continue to remain shareholders of the resulting foreign company; and 

1. Ins. by Act 26 of 1988, s. 17 (w.e.f. 1-4-1988).  
2. Ins. by Act 20 of 1967, s. 19 (w.e.f. 1-4-1967). 
3. Ins. by Act 18 of 1992, s. 23 (w.e.f. 1-4-1993). 
4. Ins. by Act 18 of 2005, s. 15 (w.e.f. 1-4-2005). 
5. Ins. by Act 20 of 2015, s. 14 (w.e.f. 1-4-2016). 
6. Ins. by Act 27 of 1999, s. 34 (w.e.f. 1-4-2000). 

265 

                                                           
 
(b) such transfer does not attract tax on capital gains in the country, in which the demerged 

foreign company is incorporated: 

Provided that the provisions of sections 391 to 394 of the Companies Act, 1956 (1 of 1956) 

shall not apply in case of demergers referred to in this clause; 
1[(vica)  any  transfer  in  a  business  reorganisation,  of  a  capital  asset  by  the  predecessor                

co-operative bank to the successor co-operative bank; 

(vicb) any transfer by a shareholder, in a business reorganisation, of a capital asset being a share 
or shares held by him in the predecessor co-operative bank if the transfer is made in consideration of 
the allotment to him of any share or shares in the successor co-operative bank. 

Explanation.—For  the  purposes  of  clauses  (vica)  and  (vicb),  the  expressions  “business 
reorganisation”,  “predecessor  co-operative  bank”  and  “successor  co-operative  bank”  shall  have  the 
meanings respectively assigned to them in section 44DB;] 

2[(vicc) any transfer in a demerger, of a capital asset, being a share of a foreign company, referred 
to  in  the Explanation  5 to  clause  (i)  of  sub-section  (1)  of section  9,  which  derives,  directly  or 
indirectly,  its  value  substantially  from  the  share  or  shares  of  an  Indian  company,  held  by  the 
demerged foreign company to the resulting foreign company, if— 

(a)  the  shareholders,  holding  not  less  than  three-fourths  in  value  of  the  shares  of  the 
demerged  foreign  company,  continue  to  remain  shareholders  of  the  resulting  foreign  company; 
and 

(b) such transfer does not attract tax on capital gains in the country in which the demerged 

foreign company is incorporated: 

Provided that the provisions of sections 391 to 394 of the Companies Act, 1956 (1 of 1956) 

shall not apply in case of demergers referred to in this clause;] 

(vid)  any  transfer  or  issue  of  shares  by  the  resulting  company,  in  a  scheme  of  demerger  to  the 
shareholders of the demerged company if the transfer or issue is made in consideration of demerger of 
the undertaking;] 

(vii) any transfer by a shareholder, in a scheme of amalgamation, of a capital asset being a share 

or shares held by him in the amalgamating company, if— 

(a) the transfer is made in consideration of the allotment to him of any share or shares in the 

amalgamated company except where the shareholder itself is the amalgamated company, and 

(b) the amalgamated company is an Indian company; 

3[(viia) any transfer of a capital asset, being bonds or 4[Global Depository Receipts] referred to in 

sub-section (1) of section 115AC, made outside India by a non-resident to another non-resident; 

5[(viiaa) any transfer, made outside India, of a capital asset being rupee denominated bond of an 

Indian company outside India, by a non-resident to another non-resident;] 

6[(viiab) any transfer of a capital asset, being— 

(a) bond or Global Depository Receipt referred to in sub-section (1) of section 115AC; or 

(b) rupee denominated bond of an Indian company; or 

(c) derivative, 

made by a non-resident on a recognised stock exchange located in any  International Financial Services 
Centre and where the consideration for such transaction is paid or payable in foreign currency. 

1. Ins. by Act 22 of 2007, s. 16 (w.e.f. 1-4-2008). 
2. Ins. by Act 20 of 2015, s. 14 (w.e.f. 1-4-2016). 
3. Ins. by Act 18 of 1992, s. 23 (w.e.f. 1-6-1992). 
4. Subs. by Act 14 of 2001, s. 29, for “shares” (w.e.f. 1-4-2002).  
5. Ins. by Act 7 of 2017, s. 23 (w.e.f. 1-4-2018).  
6. Ins. by Act 13 of 2018, s. 17 (w.e.f. 1-4-2019). 

266 

                                                           
Explanation.—For the purposes of this clause,— 

(a)  “International  Financial  Services  Centre”  shall  have  the  meaning  assigned  to  it  in           

clause (q) of section 2 of the Special Economic Zones Act, 2005; 

(b)  “recognised  stock  exchange”  shall  have  the  meaning  assigned  to  it  in  clause  (ii)  of 

Explanation 1 to clause (5) of section 43; 

(c)  “derivative”  shall  have  the  meaning  assigned  to  it  in  clause  (ac)  of  section  2  of  the 

Securities Contracts (Regulation) Act, 1956.] 
1[(viib) any transfer of a capital asset, being a Government Security carrying a periodic payment 
of interest, made outside India through an intermediary dealing in settlement of securities, by a non-
resident to another non-resident. 

Explanation.—For  the  purposes  of  this  clause,  “Government  Security”  shall  have  the  meaning 
assigned  to  it  in  clause  (b)  of  section  2  of  the  Securities  Contracts  (Regulation)  Act,  1956  (42  of 
1956);] 

2[(viic)  any  transfer  of  Sovereign  Gold  Bond  issued  by  the  Reserve  Bank  of  India  under  the 

Sovereign Gold Bond Scheme, 2015, by way of redemption, by an assessee being an individual;] 
3[(viii) any transfer of agricultural land in India effected before the 1st day of March, 1970;] 
4[(ix)  any  transfer  of  a  capital  asset,  being  any  work  of  art,  archaeological,  scientific  or  art 
collection,  book,  manuscript,  drawing,  painting,  photograph  or  print,  to  the  Government  or  a 
University or the National Museum, National Art Gallery, National Archives or any such other public 
museum or institution as may be notified by the Central Government in the Official Gazette to be of 
national importance or to be of renown throughout any State or States. 

Explanation.—For  the  purposes  of  this  clause,  “University”  means  a  University  established  or 
incorporated by or under a Central, State or Provincial Act and includes an institution declared under 
section  3  of  the  University  Grants  Commission  Act,  1956  (3  of  1956),  to  be  a  University  for  the 
purposes of that Act;] 

5[(x)  any  transfer  by  way  of  6[conversion  of  bonds  or  debentures],  debenture-stock  or  deposit 

certificates in any form, of a company into shares or debentures of that company;] 

7[(xa)  any  transfer  by  way  of  conversion  of  bonds  referred  to  in  clause  (a)  of  sub-section  (1) 

of section 115AC into shares or debentures of any company;] 

8[(xb) any transfer by way of conversion of preference shares of a company into equity shares of 

that company;] 

9[(xi) any transfer made on or before the 10[31st day of December, 1998] by a person (not being a 
company)  of  a  capital  asset  being  membership  of  a  recognised  stock  exchange  to  a  company  in 
exchange of shares allotted by that company to the transferor. 

Explanation.—For the purposes of this clause, the expression “membership of a recognised stock 
exchange”  means  the  membership  of  a  stock  exchange  in  India  which  is  recognised  under  the 
provisions of the Securities Contracts (Regulation) Act, 1956 (42 of 1956); 

(xii) any transfer of a capital asset, being land of a sick industrial company, made under a scheme 

prepared  and  sanctioned  under  section  18  of  the  Sick  Industrial  Companies  (Special  Provisions)            
Act,  1985  (1  of  1986)  where  such  sick  industrial  company  is  being  managed  by  its  workers’                     
co-operative: 

1. Ins. by Act 25 of 2014, s. 18 (w.e.f. 1-4-2015). 
2. Ins. by Act 28 of 2016, s. 28 (w.e.f. 1-4-2017). 
3. Ins. by Act 19 of 1970, s. 11 (w.e.f. 1-4-1970). 
4. Ins. by Act 66 of 1976, s. 11 (w.e.f. 1-4-1977). 
5. Ins. by Act 49 of 1991, s. 18 (w.e.f. 1-4-1962). 
6. Subs. by Act 18 of 1992, s. 23 for “conversion of debentures” (w.e.f. 1-4-1962). 
7. Ins. by Act 18 of 2008, s. 14 (w.e.f. 1-4-2008). 
8. Ins. by Act 7 of 2017, s. 23 (w.e.f. 1-4-2018). 
9. Ins. by Act 26 of 1997, s. 16 (w.e.f. 1-4-1998).   
10. Subs. by Act 21 of 1998, s. 21 for “31st day of December, 1997” (w.e.f. 1-4-1998). 

267 

                                                           
Provided that  such  transfer  is  made  during  the  period  commencing  from  the  previous  year  in 
which the said company has become a sick industrial company under sub-section (1) of section 17 of 
that  Act  and  ending  with  the  previous  year  during  which  the  entire  net  worth  of  such  company 
becomes equal to or exceeds the accumulated losses. 

Explanation.—For the purposes of this clause, “net worth” shall have the meaning assigned to it 
in clause (ga) of sub-section (1) of section 3 of the Sick  Industrial Companies (Special Provisions) 
Act, 1985 (1 of 1986);] 

1[(xiii)  2[any transfer of a capital asset or intangible asset by a firm to a company as a result of 
succession of the firm by a company in the business carried on by the firm, or any transfer of a capital 
asset  to  a  company  in  the  course  of  3[demutualisation  or  corporatisation]  of  a  recognised  stock 
exchange in India as a result of which an association of persons or body of individuals is succeeded 
by such company:] 

Provided that— 

(a)  all  the  assets  and  liabilities  of  the  firm  or  of  the  association  of  persons  or  body  of 
individuals  relating  to  the  business  immediately  before  the  succession  become  the  assets  and 
liabilities of the company; 

(b) all the partners of the firm immediately before the succession become the shareholders of 
the company in the same proportion in which their capital accounts stood in the books of the firm 
on the date of the succession; 

(c) the partners of the firm do not receive any consideration or benefit, directly or indirectly, 

in any form or manner, other than by way of allotment of shares in the company; and 

(d) the aggregate of the shareholding in the company of the partners of the firm is not less 
than fifty per cent of the total voting power in the company and their shareholding continues to be 
as such for a period of five years from the date of the succession; 

4[(e)  the  3[demutualisation  or  corporatisation]  of  a  recognised  stock  exchange  in  India  is 
carried  out  in  accordance  with  a  scheme  for  3[demutualisation  or  corporatisation]  which  is 
approved  by  the  Securities  and  Exchange  Board  of  India  established  under  section  3  of  the 
Securities and Exchange Board of India Act, 1992 (15 of 1992);] 

5[(xiiia)  any  transfer  of  a  capital  asset  being  a  membership  right  held  by  a  member  of  a 
recognised stock exchange in India for acquisition of shares and trading or clearing rights acquired by 
such member in that recognised stock exchange in accordance with a scheme for demutualisation or 
corporatisation which is approved by the Securities and Exchange Board of India  established under 
section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);] 

6[(xiiib) any transfer of a capital asset or intangible asset by a private company or unlisted public 
company (hereafter in this clause referred to as the company) to a limited liability partnership or any 
transfer  of  a  share  or  shares  held  in the  company  by  a  shareholder  as  a result  of  conversion  of  the 
company  into  a  limited  liability  partnership  in  accordance  with  the  provisions  of  section  56  or               
section 57 of the Limited Liability Partnership Act, 2008 (6 of 2009): 

1. Ins. by Act 21 of 1998, s. 21 (w.e.f.1-4-1999). 
2. Subs. by Act 14 of 2001, s. 29, for certain words (w.e.f. 1-4-2002). 
3. Subs. by Act 32 of 2003, s. 30, for “corporatisation” (w.e.f. 1-4-2004).   
4. Ins. by Act 14 of 2001, s. 29 (w.e.f. 1-4-2002). 
5. Ins. by Act 32 of 2003, s. 30 (w.e.f. 1-4-2004). 
6. Ins. by Act 14 of 2010, s. 18 (w.e.f. 1-4-2011). 

268 

                                                           
Provided that— 

(a) all the assets and liabilities of the company immediately before the conversion become the 

assets and liabilities of the limited liability partnership; 

(b)  all  the  shareholders  of  the  company  immediately  before  the  conversion  become  the 
partners of the limited liability partnership and their capital contribution and profit sharing ratio 
in the limited liability partnership are in the same proportion as their shareholding in the company 
on the date of conversion; 

(c) the shareholders of the company do not receive any consideration or benefit, directly or 
indirectly, in any form or manner, other than by way of share in profit and capital contribution in 
the limited liability partnership; 

(d) the aggregate of the profit sharing ratio of the shareholders of the company in the limited 
liability partnership shall not be less than fifty per cent at any time during the period of five years 
from the date of conversion; 

(e)  the  total  sales,  turnover  or  gross  receipts  in  the  business  of  the  company  in  any  of  the 
three  previous  years  preceding  the  previous  year  in  which  the  conversion  takes  place  does  not 
exceed sixty lakh rupees; 1*** 

2[(ea) the total value of the assets as appearing in the books of account of the company in any 
of the three previous years preceding the previous year in which the conversion takes place does 
not exceed five crore rupees; and] 

(f)  no  amount  is  paid,  either  directly  or  indirectly,  to  any  partner  out  of  balance  of 
accumulated profit standing in the accounts of the company on the date of conversion for a period 
of three years from the date of conversion. 

Explanation.—For the purposes of this clause, the expressions “private company” and “unlisted 
public  company”  shall  have  the  meanings  respectively  assigned  to  them  in  the  Limited  Liability 
Partnership Act, 2008 (6 of 2009);] 

(xiv) where a sole proprietary concern is succeeded by a company in the business carried on by it 
as  a  result  of  which  the  sole  proprietary  concern  sells  or  otherwise  transfers  any  capital  asset  or 
intangible asset to the company : 

Provided that— 

(a)  all  the  assets  and  liabilities  of  the  sole  proprietary  concern  relating  to  the  business 

immediately before the succession become the assets and liabilities of the company; 

(b) the shareholding of the sole proprietor in the company is not less than fifty per cent of the 
total voting power in the company and his shareholding continues to remain as such for a period 
of five years from the date of the succession; and 

(c) the sole proprietor does not receive any consideration or benefit, directly or indirectly, in 

any form or manner, other than by way of allotment of shares in the company; 

1. The word “and” omitted by Act 28 of 2016, s. 28 (w.e.f. 1-4-2017). 
2. Ins. by s. 28, ibid. (w.e.f. 1-4-2017). 

269 

                                                           
(xv) any transfer in a scheme for lending of any securities under an agreement or arrangement, 
which the assessee has entered into with the borrower of such securities and which is subject to the 
guidelines issued by the Securities and Exchange Board of India, established under section 3 of the 
Securities  and  Exchange  Board  of  India  Act,  1992  (15  of  1992)  1[or  the  Reserve  Bank  of  India 
constituted under sub-section (1) of section 3 of the Reserve Bank of India Act, 1934 (2 of 1934)], in 
this regard; 

2[(xvi) any transfer of a capital asset in a transaction of reverse mortgage under a scheme made 

and notified by the Central Government;] 

3[(xvii) any transfer of a capital asset, being share of a special purpose vehicle to a business trust 

in exchange of units allotted by that trust to the transferor. 

Explanation.—For  the  purposes  of  this  clause,  the  expression  “special  purpose  vehicle”  shall 

have the meaning assigned to it in the Explanation to clause (23FC) of section 10;] 

4[(xviii) any transfer by a unit holder of a capital asset, being a unit or units, held by him in the 
consolidating  scheme  of  a  mutual  fund,  made  in  consideration  of  the  allotment  to  him  of  a  capital 
asset, being a unit or units, in the consolidated scheme of the mutual fund: 

Provided that the consolidation is of two or more schemes of equity oriented fund or of two or 

more schemes of a fund other than equity oriented fund. 

Explanation.—For the purposes of this clause,— 

(a) “consolidated scheme” means the scheme with which the consolidating scheme merges or 

which is formed as a result of such merger; 

(b) “consolidating scheme” means the scheme of a mutual fund which merges under the process 
of  consolidation  of  the  schemes  of  mutual  fund  in  accordance  with  the  Securities  and  Exchange 
Board of India (Mutual Funds) Regulations, 1996 made under the Securities and Exchange Board 
of India Act, 1992 (15 of 1992); 

(c) “equity oriented fund” shall have the meaning assigned to it in clause (38) of section 10; 

(d) “mutual fund” means a mutual fund specified under clause (23D) of section 10.] 

5[(xix) any transfer by a unit holder of a capital asset, being a unit or units, held by him in the 
consolidating  plan  of  a  mutual  fund  scheme,  made  in  consideration  of  the  allotment  to  him  of  a 
capital asset, being a unit or units, in the consolidated plan of that scheme of the mutual fund. 

Explanation.—For the purposes of this clause,— 

(a)  “consolidating  plan”  means  the  plan  within  a  scheme  of  a  mutual  fund  which  merges 
under  the  process  of  consolidation  of  the  plans  within  a  scheme  of  mutual  fund  in  accordance 

1. Ins. by Act 20 of 2002, s. 23 (w.e.f. 1-4-2003). 
2. Ins. by Act 18 of 2008, s. 14 (w.e.f. 1-4-2008). 
3. Ins. by Act 25 of 2014, s. 18 (w.e.f. 1-4-2015). 
4. Ins. by Act 20 of 2015, s. 14 (w.e.f. 1-4-2016). 
5. Ins. by Act 28 of 2016, s. 28 (w.e.f. 1-4-2017). 

270 

                                                           
with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 made under 
the Securities and Exchange Board of India Act, 1992 (15 of 1992); 

(b) “consolidated plan” means the plan with which the consolidating plan merges or which is 

formed as a result of such merger; 

(c) “mutual fund” means a mutual fund specified under clause (23D) of section 10.] 

1[47A. Withdrawal of exemption in certain cases.—(1) Where at any time before the expiry of a 
period of eight years from the date of the transfer of a capital asset referred to in clause (iv) or, as the case 
may be, clause (v) of section 147,— 

 (i)  such capital asset is converted by the transferee company into, or is treated by it as, stock-in-

trade of its business; or 

(ii) the parent company or its  nominees or, as the case may be, the holding company ceases or 

cease to hold the whole of the share capital of the subsidiary company, 

the  amount  of  profits  or  gains  arising  from  the  transfer  of  such  capital  asset  not  charged  under                     
section  45 by  virtue  of  the  provisions  contained  in  clause  (iv)  or,  as  the  case  may  be,  clause  (v)  of             
 section  47 shall,  notwithstanding  anything  contained  in  the  said  clauses,  be  deemed  to  be  income 
chargeable under the head “Capital gains” of the previous year in which such transfer took place.] 

2[(2) Where at any time, before the expiry of a period of three years from the date of the transfer of a 
capital asset referred to in clause (xi) of section 47, any of the shares allotted to the transferor in exchange 
of  a  membership  in  a  recognised  stock  exchange  are  transferred,  the  amount  of  profits  and  gains  not 
charged  under  section  45 by  virtue  of  the  provisions  contained  in  clause  (xi)  of section  47 shall, 
notwithstanding anything contained in the said clause, be deemed to be the income chargeable under the 
head “Capital gains” of the previous year in which such shares are transferred.] 

3[(3)  Where any  of  the  conditions laid  down in  the  proviso  to  clause  (xiii)  or the  proviso to  clause 
(xiv) of section 47 are not complied with, the amount of profits or gains arising from the transfer of such 
capital  asset  or  intangible  asset  not  charged  under section  45 by  virtue  of  conditions  laid  down  in  the 
proviso to clause (xiii) or the proviso to clause (xiv) of section 47 shall be deemed to be the profits and 
gains chargeable to tax of the successor company for the previous year in which the requirements of the 
proviso to clause (xiii) or the proviso to clause (xiv), as the case may be, are not complied with.] 

4[(4)  Where  any  of  the  conditions  laid  down  in  the  proviso  to  clause  (xiiib)  of section  47 are  not 
complied with, the amount of profits or gains arising from the transfer of such capital asset or intangible 
assets  or  share  or  shares  not  charged  under section  45 by  virtue  of  conditions  laid  down  in  the  said 
proviso  shall  be  deemed  to  be  the  profits  and  gains  chargeable  to  tax  of  the  successor  limited  liability 
partnership or the shareholder of the predecessor company, as the case may be, for the previous year in 
which the requirements of the said proviso are not complied with.] 

1. Ins. by Act 67 of 1984, s. 13 (w.e.f. 1-4-1985). 
2. Ins. by Act 26 of 1997, s. 17 (w.e.f. 1-4-1998). 
3. Ins.by Act 21 of 1998, s. 22 (w.e.f. 1-4-1999). 
4. Ins. by Act 14 of 2010, s. 19 (w.e.f. 1-4-2011). 

271 

                                                           
1[48. Mode  of  computation.—The  income  chargeable  under  the  head  “Capital  gains”  shall  be 
computed, by deducting from the full value of the consideration received or accruing as a result of the 
transfer of the capital asset the following amounts, namely:— 

 (i)  expenditure incurred wholly and exclusively in connection with such transfer; 

(ii)  the cost of acquisition of the asset and the cost of any improvement thereto: 

Provided that in the case of an assessee, who is a non-resident, capital gains arising from the transfer 
of a capital asset being shares in, or debentures of, an Indian company shall be computed by converting 
the cost of acquisition, expenditure incurred wholly and exclusively in connection with such transfer and 
the full value of the consideration received or accruing as a result of the transfer of the capital asset into 
the  same  foreign  currency  as  was  initially  utilised  in  the  purchase  of  the  shares  or  debentures,  and  the 
capital  gains  so  computed  in  such  foreign  currency  shall  be  reconverted  into  Indian  currency,  so, 
however,  that  the  aforesaid  manner  of  computation  of  capital  gains  shall  be  applicable  in  respect  of 
capital  gains  accruing  or  arising  from  every  reinvestment  thereafter  in,  and  sale  of,  shares  in,  or 
debentures of, an Indian company: 

Provided  further that  where  long-term  capital  gain  arises  from  the  transfer  of  a  long-term  capital 
asset, other than capital gain arising to a non-resident from the transfer of shares in, or debentures of, an 
Indian company referred to in the first proviso, the provisions of clause (ii) shall have effect as if for the 
words “cost of acquisition” and “cost of any improvement”, the words “indexed cost of acquisition” and 
“indexed cost of any improvement” had respectively been substituted: 

2[Provided also that nothing contained in the first and second provisos shall apply to the capital gains 
arising from the transfer of a long-term capital asset being an equity share in a company or a unit of an 
equity oriented fund or a unit of a business trust referred to in section 112A:] 

3[Provided also that nothing contained in the second proviso shall apply to the long-term capital gain 

arising from the transfer of a long-term capital asset, being a bond or debenture other than— 

(a)  capital indexed bonds issued by the Government; or 

(b)  Sovereign Gold Bond issued by the Reserve Bank of India under the Sovereign Gold Bond 

Scheme, 2015: 

Provided  also that  in  case  of  an  assessee  being  a  non-resident,  any  gains  arising  on  account  of 
appreciation of rupee against a foreign currency at the time of redemption of rupee denominated bond of 
an  Indian  company  4[held]  by  him,  shall  be  ignored  for  the  purposes  of  computation  of  full  value  of 
consideration under this section:] 

5[Provided also that where shares, debentures or warrants referred to in the proviso to clause (iii) of 
section 47 are transferred under a gift or an irrevocable trust, the market value on the date of such transfer 
shall be deemed to be the full value of consideration received or accruing as a result of transfer for the 
purposes of this section:] 

6[Provided  also that  no  deduction  shall  be  allowed  in  computing  the  income  chargeable  under  the 
head “Capital gains” in respect of any sum paid on account of securities transaction tax under Chapter VII 
of the Finance (No. 2) Act, 2004 (23 of 2004).] 

1. Subs. by Act 18 of 1992, s. 24, for section 48 (w.e.f. 1-4-1993). 
2. Ins. by Act 13 of 2018, s. 18 (w.e.f. 1-4-2018). 
3.  Subs.  by  Act  28  of  2016,  s.  29,  for  the  third  proviso  (w.e.f.  1-4-2017)  which  was  earlier  inserted  by  Act  26  of  1997,                    

s. 18 (w.e.f. 1-4-1998). 

4. Subs. by Act 7 of 2017, s. 24 to read as “subscribed” (w.e.f. 1-4-2018). 
5. Ins. by Act 10 of 2000, s. 22 (w.e.f. 1-4-2001).  
6. Ins. by Act 23 of 2004, s. 12 (w.e.f. 1-4-2005).  

272 

                                                           
Explanation.—For the purposes of this section,— 

(i)  “foreign  currency”  and  “Indian  currency”  shall  have  the  meanings  respectively  assigned  to 

them in section 2 of 1[the Foreign Exchange Management Act, 1999 (42 of 1999);] 

(ii)  the  conversion  of  Indian  currency  into  foreign  currency  and  the  reconversion  of  foreign 

currency into Indian currency shall be at the rate of exchange prescribed in this behalf; 

(iii)  “indexed  cost  of  acquisition”  means  an  amount  which  bears  to  the  cost  of  acquisition  the 
same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost 
Inflation Index for the first year in which the asset was held by the assessee or for the year beginning 
on the 2[1st day of April, 2001,] whichever is later; 

(iv) “indexed cost of any improvement” means an amount which bears to the cost of improvement 
the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the 
Cost Inflation Index for the year in which the improvement to the asset took place; 

3[(v)  “Cost  Inflation  Index”,  in  relation  to  a  previous  year,  means  such  Index  as  the  Central 
Government  may,  having  regard  to  seventy-five  per  cent  of  average  rise  in  the 4[Consumer  Price 
Index (urban)] for the immediately preceding previous year to such previous year, by notification in 
the Official Gazette, specify, in this behalf.]] 

49. Cost with reference to certain modes of acquisition.—5[(1)] Where the capital asset became the 

property of the assessee— 

(i)  on any distribution of assets on the total or partial partition of a Hindu undivided family; 

(ii)  under a gift or will; 

(iii) (a) by succession, inheritance or devolution, or 

6[(b)  on  any  distribution  of  assets  on  the  dissolution  of  a  firm,  body  of  individuals,  or  other 
association  of  persons,  where  such  dissolution  had  taken  place  at  any  time  before  the  1st  day  of  
April, 1987, or] 

(c) on any distribution of assets on the liquidation of a company, or 

(d) under a transfer to a revocable or an irrevocable trust, or 

(e)  under  any  such  transfer  as  is  referred  to  in  clause  (iv)  7[or  clause  (v)]  8[or  clause  (vi)]  9[or 
clause (via)] 10[or clause (viaa) or clause (viab) or clause (vib)  11[or clause (vic)] or clause (vica) or 
clause (vicb) or clause (vicc)] 12[or clause (xiii) or clause (xiiib) or clause (xiv) of section 47]; 

13[(iv) such assessee being a Hindu undivided family, by the mode referred to in sub-section (2) 

of section 64 at any time after the 31st day of December, 1969,] 

1. Subs. by Act 17 of 2013, s. 4, for “the Foreign Exchange Regulation Act, 1973 (46 of 1973)” (w.e.f. 1-4-2013). 
2. Subs. by Act 7 of 2017, s. 24 for “1st day of April, 1981” (w.e.f. 1-4-2018). 
3. Subs. by Act 10 of 2000, s. 22, for clause (v) (w.e.f. 1-4-1993). 
4. Subs. by Act 25 of 2014, s. 19, for “Consumer Price Index for Urban non-manual employees” (w.e.f. 1-4-2016). 
5. Section 49 re-numbered as sub-section (1) thereof by Act 20 of 1967, s. 20 (w.e.f. 1-4-1967). 
6. Subs. by Act 11 of 1987, s. 16, for sub-clause (b) (w.e.f. 1-4-1988). 
7. Ins. by Act 10 of 1965, s. 16 (w.e.f. 1-4-1965). 
8. Ins. by Act 20 of 1967, s. 20 (w.e.f. 1-4-1967).   
9. Ins. by Act 18 of 1992, s. 25 (w.e.f. 1-4-1993). 
10. Subs. by Act 20 of 2015, s. 15, for “or clause (viaa) or clause (vica) or clause (vicb)” (w.e.f. 1-4-2016). 
11. Ins. by Act 7 of 2017, s. 25 (w.e.f. 1-4-2018). 
12. Subs. by Act 23 of 2012, s. 16, for “clause (xiiib) of section 47” (w.e.f. 1-4-1999).  
13. Ins. by Act 41 of 1975, s. 12 (w.e.f. 1-4-1976). 

273 

                                                           
the  cost  of  acquisition of the  asset  shall  be deemed  to  be the cost  for  which the  previous  owner  of  the 
property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the 
previous owner or the assessee, as the case may be. 

1[Explanation.—In this  2[sub-section] the expression “previous owner of the property” in relation to 
any capital asset owned by an assessee means the last previous owner of the capital asset who acquired it 
by  a  mode  of  acquisition  other  than  that  referred  to  in  clause  (i)  or  3[clause  (ii)  or  clause  (iii)  or                  
clause (iv)] of this 2[sub-section].] 

4[(2) Where the capital asset being a share or shares in an amalgamated company which is an Indian 
company became the property of the assessee in consideration of a transfer referred to in clause (vii) of 
section 47, the cost of acquisition of the asset shall be deemed to be the cost of acquisition to him of the 
share or shares in the amalgamating company.] 

5[(2A) Where the capital asset, being a share or debenture of a company, became the property of the 
assessee  in  consideration  of  a  transfer  referred  to in  clause  (x)  or clause (xa)  of section  47,  the  cost  of 
acquisition of the asset to the assessee shall be deemed to be that part of the cost of debenture, debenture-
stock, bond or deposit certificate in relation to which such asset is acquired by the assessee.] 

6[(2AA)  Where  the  capital gain  arises  from  the  transfer  of  specified  security  or sweat equity  shares 
referred to in sub-clause (vi) of clause (2) of section 17, the cost of acquisition of such security or shares 
shall be the fair market value which has been taken into account for the purposes of the said sub-clause.] 

7[(2AAA)  Where the capital  asset,  being  rights  of  a  partner  referred  to  in section  42  of  the  Limited 
Liability Partnership Act, 2008 (6 of 2009), became the property of the assessee on conversion as referred 
to  in  clause  (xiiib)  of  section  47,  the  cost  of  acquisition  of  the  asset  shall  be  deemed  to  be  the  cost  of 
acquisition to him of the share or shares in the company immediately before its conversion.] 

8[(2AB) Where the capital gain arises from the transfer of specified security or sweat equity shares, 
the cost of acquisition of such security or shares shall be the fair market value which has been taken into 
account  while  computing  the  value  of  fringe  benefits  under  clause  (ba)  of  sub-section  (1)  of            
section 115WC.] 

 9[(2ABB) Where the capital asset, being share or shares of a company, is acquired by a non-resident 
assessee  on  redemption  of  Global  Depository  Receipts  referred  to  in  clause (b) of  sub-section  (1)  of 
section 115AC held by such assessee, the cost of acquisition of the share or shares shall be the price of 
such share or shares prevailing on any recognised stock exchange on the date on which a request for such 
redemption was made. 

Explanation.—For  the  purposes  of  this  sub-section,  “recognised  stock  exchange”  shall  have  the 

meaning assigned to it in clause (ii) of the Explanation 1 to sub-section (5) of section 43.] 

 10[(2AC) Where the capital asset, being a unit of a business trust, became the property of the assessee 
in  consideration  of a  transfer  as referred to  in clause (xvii)  of  section 47,  the  cost  of acquisition  of  the 
asset shall be deemed to be the cost of acquisition to him of the share referred to in the said clause.] 

 9[(2AD) Where  the  capital  asset,  being  a  unit  or  units  in  a  consolidated  scheme  of  a  mutual  fund, 
became  the  property  of  the  assessee  in  consideration  of  a  transfer  referred  to  in  clause  (xviii) of        
section 47, the cost of acquisition of the asset shall be deemed to be the cost of acquisition to him of the 
unit or units in the consolidating scheme of the mutual fund.] 

1.  Ins. by Act 10 of 1965, s. 16 (w.e.f. 1-4-1965). 
2. Subs. by Act 20 of 1967, s. 20, for “section” (w.e.f. 1-4-1967).  
3. Subs. by Act 41 of 1975, s. 12, for “clause (ii) or clause (iii)” (w.e.f. 1-4-1976).     
4. Ins. by Act 20 of 1967, s. 20 (w.e.f. 1-4-1967). 
5. Subs. by Act 18 of 2008, s. 15, for sub-section (2A) (w.e.f. 1-4-2008).   
6. Subs. by Act 33 of 2009, s. 23, for sub-section (2AA) (w.e.f. 1-4-2010). 
7.  Ins. by Act 14 of 2010, s. 20 (w.e.f. 1-4-2011). 
8. Ins. by Act 22 of 2007, s. 17 (w.e.f 1-4-2008). 
9. Ins. by Act 20 of 2015, s. 15 (w.e.f. 1-4-2015). 
10. Ins. by Act 25 of 2014, s. 20 (w.e.f. 1-4-2015). 

274 

                                                           
1[(2AE) Where the capital asset, being equity share of a company, became the property of the assessee in 
consideration of a transfer referred to in clause (xb) of section 47, the cost of acquisition of the asset shall be 
deemed to be that part of the cost of the preference share in relation to which such asset is acquired by the 
assessee.] 

2[(2AF) Where the capital asset, being a unit or units in a consolidated plan of a mutual fund scheme, 
became the property of the assessee in consideration of a transfer referred to in clause (xix) of section 47, 
the cost of acquisition of the asset shall be deemed to be the cost of acquisition to him of the unit or units in 
the consolidating plan of the scheme of the mutual fund.]  

3* 

* 

 * 

* 

* 

4[(2C) The cost of acquisition of the shares in the resulting company shall be the amount which bears 
to the cost of acquisition of shares held by the assessee in the demerged company the same proportion as 
the net book value of the assets transferred in a demerger bears to the net worth of the demerged company 
immediately before such demerger. 

(2D) The cost of acquisition of the original shares held by the shareholder in the demerged company 

shall be deemed to have been reduced by the amount as so arrived at under sub-section (2C).] 

5[(2E) The provisions of sub-section (2), sub-section (2C) and sub-section (2D) shall, as far as may 

be,  also  apply  in  relation  to  business  reorganisation  of  a  co-operative  bank  as  referred  to  in                
section 44DB.] 

Explanation.—For the purposes of this section, “net worth” shall mean the aggregate of the paid up 
share  capital  and  general  reserves  as  appearing  in  the  books  of  account  of  the  demerged  company 
immediately before the demerger.] 

6[(3) Notwithstanding anything contained in sub-section (1), where the capital gain arising from the 
transfer  of  a  capital  asset  referred  to  in  clause  (iv)  or,  as  the  case  may  be,  clause  (v)  of  section  47 is 
deemed to be income chargeable under the head “Capital gains” by virtue of the provisions contained in 
section 47A, the cost of acquisition of such asset to the transferee-company shall be the cost for which 
such asset was acquired by it.] 

7[(4) Where the capital gain arises from the transfer of a property, the value of which has been subject 
to income-tax under clause (vii) 8[or clause (viia)] 2[or clause (x)] of sub-section (2) of section 56, the cost 
of acquisition of such property shall be deemed to be the value which has been taken into account for the 
purposes of the said clause (vii) 8[or clause (viia)] 2[or clause (x)].] 

9[(5) Where the capital gain arises from the transfer of an asset declared under the Income Declaration 
Scheme, 2016, and the tax, surcharge and penalty have been paid in accordance with the provisions of the 
Scheme on the fair market value of the asset as on the date of commencement of the Scheme, the cost of 
acquisition of the asset shall be deemed to be the fair market value of the asset which has been taken into 
account for the purposes of the said Scheme.] 

1. Ins. by Act 7 of 2017, s. 25 (w.e.f. 1-4-2018). 
2. Ins. by s. 25, ibid. (w.e.f. 1-4-2017).     
3. Sub-section (2B) omitted by Act 10 of 2000, s. 23 (w.e.f. 1-4-2000).  
4. Ins. by Act 27 of 1999, s. 35 (w.e.f. 1-4-2000). 
5. Ins. by Act 22 of 2007, s. 17 (w.e.f. 1-4-2008). 
6. Ins. by Act 67 of 1984, s. 14 (w.e.f. 1-4-1985). 
7. Ins. by Act 33 of 2009, s. 23 (w.e.f. 1-10-2009). 
8. Ins. by Act 14 of 2010, s. 20 (w.e.f. 1-6-2010).  
9. Ins. by Act 28 of 2016, s. 30 (w.e.f. 1-4-2017).  

275 

 
 
 
 
  
 
 
 
                                                           
1[(6) Where the capital gain arises from the transfer of a specified capital asset referred to in clause (c) of 
the Explanation to clause (37A) of section 10, which has been transferred after the expiry of two years from 
the end of the financial year in which the possession of such asset was handed over to the assessee, the cost of 
acquisition of such specified capital asset shall be deemed to be its stamp duty value as on the last day of the 
second financial year after the end of the financial year in which the possession of the said specified capital 
asset was handed over to the assessee. 

Explanation.––For the purposes of this sub-section, “stamp duty value” means the value adopted or 
assessed or assessable by any authority of the State Government for the purpose of payment of stamp duty 
in respect of an immovable property. 

(7) Where the capital gain arises from the transfer of a capital asset, being share in the project, in the 
form of land or building or both, referred to in sub-section (5A) of section 45, not being the capital asset 
referred to in the proviso to the said sub-section, the cost of acquisition of such asset, shall be the amount 
which is deemed as full value of consideration in that sub-section;] 

2[(8) Where the capital gain arises from the transfer of an asset, being the asset held by a trust or an 
institution in respect of which accreted income has been computed and the tax has been paid thereon in 
accordance with the provisions of Chapter XII-EB, the cost of acquisition of such asset shall be deemed to 
be  the  fair  market  value  of  the  asset  which  has  been  taken  into  account  for  computation  of  accreted 
income as on the specified date referred to in sub-section (2) of section 115TD.”.] 

3[(9)  Where the  capital  gain  arises from  the  transfer of  a  capital asset referred  to  in  clause  (via) of 
section 28, the cost  of acquisition  of  such  asset  shall  be  deemed  to  be the  fair market  value  which has 
been taken into account for the purposes of the said clause.] 

4[50.  Special  provision  for  computation  of  capital  gains  in  case  of  depreciable  assets.—
Notwithstanding  anything  contained  in  clause  (42A)  of  section  2,  where  the  capital  asset  is  an  asset 
forming  part  of  a  block  of  assets  in  respect  of  which  depreciation  has  been  allowed  under  this  Act  or 
under the Indian Income-tax Act, 1922 (11 of 1922), the provisions of sections 48 and 49 shall be subject 
to the following modifications:— 

(1) where the full value of the consideration received or accruing as a result of the transfer of the 
asset together with the full value of such consideration received or accruing as a result of the transfer 
of any other capital asset falling within the block of the assets during the previous year, exceeds  the 
aggregate of the following amounts, namely:— 

(i)  expenditure incurred wholly and exclusively in connection with such transfer or transfers; 

(ii)  the written down value of the block of assets at the beginning of the previous year; and 

(iii)  the  actual  cost  of  any  asset  falling  within  the  block  of  assets  acquired  during  the           

previous year, 

such excess shall be deemed to be the capital gains arising from the transfer of short-term capital assets; 

(2) where any block of assets ceases to exist as such, for the reason that all the assets in that block are 
transferred  during  the  previous  year,  the  cost  of  acquisition  of  the  block  of  assets  shall  be  the  written 
down value of the block of assets at the beginning of the previous year, as increased by the actual cost of 
any  asset  falling  within  that  block  of  assets,  acquired  by  the  assessee  during  the  previous  year  and  the 
income received or accruing as a result of such transfer or transfers shall be deemed to be the capital gains 
arising from the transfer of short-term capital assets.] 

5[50A. Special provision for cost of acquisition in case of depreciable asset.—Where the capital 

asset  is  an  asset  in  respect  of  which  a  deduction  on  account  of  depreciation  under  clause  (i)  of              
sub-section (1)  of  section 32 has  been  obtained  by  the  assessee in  any  previous  year,  the  provisions  of 
section  48 and  49 shall  apply  subject  to  the  modification  that  the  written  down  value,  as  defined  in              
clause (6) of section 43, of the asset, as adjusted, shall be taken as the cost of acquisition of the asset.] 

1. Ins. by Act 7 of 2017, s. 25 (w.e.f. 1-4-2018). 
2. Ins. by s. 25, ibid. (w.e.f. 1-6-2016). 
3. Ins. by Act 13 of 2018, s. 19 (w.e.f. 1-4-2019). 
4. Subs. by Act 46 of 1986, s. 9, for section 50 (w.e.f. 1-4-1988).  
5. Ins. by Act 21 of 1998, s. 23 (w.e.f. 1-4-1998).  

276 

                                                           
1[50B. Special provision for computation of capital gains in case of slump sale.—(1) Any profits 
or  gains  arising  from  the slump  sale  effected in the previous  year  shall be chargeable to income-tax  as 
capital gains arising from the transfer of long-term capital assets and shall be deemed to be the income of 
the previous year in which the transfer took place: 

Provided that any profits or gains arising from the transfer under the slump sale of any capital asset 
being  one  or  more  undertakings  owned  and  held  by  an  assessee  for  not  more  than  thirty-six  months 
immediately  preceding  the  date  of  its  transfer  shall  be  deemed  to  be  the  capital  gains  arising  from  the 
transfer of short-term capital assets. 

(2) In relation to capital assets being an undertaking or division transferred by way of such sale, the 
“net  worth”  of  the  undertaking  or  the  division,  as  the  case  may  be,  shall  be  deemed  to  be  the  cost  of 
acquisition  and  the  cost  of  improvement  for  the  purposes  of  section  48 and 49 and  no  regard  shall  be 
given to the provisions contained in the second proviso to section 48. 

(3) Every assessee, in the case of slump sale, shall furnish in the prescribed form along with the return 
of income, a report of an accountant as defined in the Explanation below sub-section (2) of section 288, 
indicating  the  computation  of  the  net  worth  of  the  undertaking  or  division,  as  the  case  may  be,  and 
certifying that the net worth of the undertaking or division, as the case may be, has been correctly arrived 
at in accordance with the provisions of this section. 

2[Explanation 1.—For the purposes of this section, “net worth” shall be the aggregate value of total 
assets of the undertaking or division as reduced by the value of liabilities of such undertaking or division 
as appearing in its books of account: 

Provided that any change in the value of assets on account of revaluation of assets shall be ignored for 

the purposes of computing the net worth. 

Explanation 2.—For computing the net worth, the aggregate value of total assets shall be,— 

(a) in the case of depreciable assets, the written down value of the block of assets determined in 

accordance  with  the  provisions  contained  in  sub-item  (C)  of  item  (i)  of  sub-clause  (c)  of              
clause (6) of section 43; 3*** 

4[(b)  in  the  case  of  capital  assets  in  respect  of  which  the  whole  of  the  expenditure  has  been 

allowed or is allowable as a deduction under section 35AD, nil; and 

(c) in the case of other assets, the book value of such assets.]]] 

5[50C.  Special  provision  for  full  value  of  consideration  in  certain  cases.—(1)  Where  the 
consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land 
or building or both, is less than the value adopted 6[or assessed or assessable] by any authority of a State 
Government (hereafter in this section referred to as the “stamp valuation authority”) for the purpose of 
payment of stamp duty in respect of such transfer, the value so adopted 6[or assessed or assessable] shall, 
for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as 
a result of such transfer.] 

 7[Provided that where the date of the agreement fixing the amount of consideration and the date of 
registration  for  the  transfer  of  the  capital  asset  are  not  the  same,  the  value  adopted  or  assessed  or 
assessable by the stamp  valuation authority on the date of agreement may be taken for the purposes of 
computing full value of consideration for such transfer: 

1. Ins. by Act 27 of 1999, s. 36 (w.e.f. 1-4-2000). 
2. Subs. by Act 10 of 2000, s. 24, for the Explanation (w.e.f. 1-4-2000).  
3. The word “and” omitted by Act 33 of 2009, s. 24 (w.e.f. 1-4-2010). 
4. Subs. by s. 24, ibid., for clause (b)  (w.e.f. 1-4-2010). 
5. Ins. by Act 20 of 2002, s. 24 (w.e.f. 1-4-2003). 
6. Subs. by Act 33 of 2009, s. 25, for “or assessed” (w.e.f. 1-10-2009). 
7. Ins. by Act 28 of 2016, s. 31 ( w.e.f. 1-4-2017). 

277 

                                                           
Provided further that the first proviso shall apply only in a case where the amount of consideration, or 
a part thereof, has been received by way of an account payee cheque or account payee bank draft or by 
use  of  electronic  clearing  system  through  a  bank  account,  on  or  before  the  date  of  the  agreement  for 
transfer.] 

1[Provided  also  that  where  the  value  adopted  or  assessed  or  assessable  by  the  stamp  valuation 
authority does not exceed one hundred and five per cent. of the consideration received or accruing as a 
result  of  the  transfer,  the  consideration  so  received  or  accruing  as  a  result  of  the  transfer  shall,  for  the 
purposes of section 48, be deemed to be the full value of the consideration.] 

(2) Without prejudice to the provisions of sub-section (1), where— 

(a)  the  assessee  claims  before  any  Assessing  Officer  that  the  value  adopted  2[or  assessed  or 
assessable]  by  the stamp  valuation  authority  under sub-section (1)  exceeds the  fair  market  value  of 
the property as on the date of transfer; 

(b)  the  value  so  adopted  2[or  assessed  or  assessable]  by  the  stamp  valuation  authority  under                 

sub-section (1) has not been disputed in any appeal or revision or no reference has been made before 
any other authority, court or the High Court, 

the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any 
such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of 
sub-section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, 
section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, 
apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer 
under sub-section (1) of section 16A of that Act. 

3[Explanation 1.]—For the purposes of this section, “Valuation Officer” shall have the same meaning 

as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957). 

4[Explanation 2.—For the purposes of this section, the expression “assessable” means the price which 
the stamp valuation authority would have, notwithstanding anything to the contrary contained in any other 
law for the time being in force, adopted or assessed, if it were referred to such authority for the purposes 
of the payment of stamp duty.] 

(3)  Subject  to  the  provisions  contained  in  sub-section  (2),  where  the  value  ascertained  under           

sub-section  (2)  exceeds the  value adopted  2[or assessed  or  assessable] by  the  stamp  valuation authority 
referred to in sub-section (1), the value so adopted 2[or assessed or assessable] by such authority shall be 
taken as the full value of the consideration received or accruing as a result of the transfer.] 

5[50CA. Special provision for full value of consideration for transfer of share other than quoted 
share.—(1) Where the consideration received or accruing as  a  result  of  the transfer  by an assessee of a 
capital asset, being share of a company other than a quoted share, is less than the fair market value of such 
share determined in such manner as may be prescribed, the value so determined shall, for the purposes of 
section 48, be deemed to be the full value of consideration received or accruing as a result of such transfer. 

Explanation.—For  the  purposes  of  this  section,  “quoted  share”  means  the  share  quoted  on  any 
recognised stock exchange with regularity from time to time, where the quotation of such share is based 
on current transaction made in the ordinary course of business.] 

6[50D. Fair market value deemed to be full value of consideration in certain cases. —Where the 
consideration  received  or  accruing  as  a  result  of  the  transfer  of  a  capital  asset  by  an  assessee  is  not 
ascertainable  or cannot  be determined,  then, for the purpose  of computing  income  chargeable to tax  as 
capital gains, the fair market value of the said asset on the date of transfer shall be deemed to be the full 
value of the consideration received or accruing as a result of such transfer.] 

1. Ins. by Act 13 of 2018, s. 20 (w.e.f. 1-4-2019). 
2. Subs. by Act 33 of 2009, s. 25, for “or assessed” (w.e.f. 1-10-2009). 
3. The Explanation renumbered as Explanation 1 thereof by s. 25, ibid. (w.e.f. 1-10-2009). 
4. Ins. by s. 25, ibid. (w.e.f. 1-10-2009). 
5. Ins. by Act 7 of 2017, s. 26 (w.e.f. 1-4-2018). 
6. Ins. by Act 23 of 2012, s. 17 (w.e.f. 1-4-2013). 

278 

                                                           
51. Advance money received.—Where any capital asset was on any previous occasion the subject of 
negotiations for its transfer, any advance or other money received and retained by the assessee in respect 
of such negotiations shall be deducted from the cost for which the asset was acquired or the written down 
value or the fair market value, as the case may be, in computing the cost of acquisition: 

1[Provided that  where  any  sum  of  money,  received  as  an  advance  or  otherwise  in  the  course  of 
negotiations for transfer of a capital asset, has been included in the total income of the assessee for any 
previous year in accordance with the provisions of clause (ix) of sub-section (2) of section 56, then, such 
sum shall not be deducted from the cost for which the asset was acquired or the written down value or the 
fair market value, as the case may be, in computing the cost of acquisition.] 

52. [Consideration for transfer in cases of understatement.]—Omitted by the Finance Act, 1987 (11 
of  1987),  s.  17  (w.e.f.  1-4-1988).  Earlier  amended  by  Act  5  of  1964,  s.  13  (w.e.f.  1-4-1964),  Act  25  of 
1975, s. 9 (w.e.f. 1-4-1974) and Act 19 of 1978, s. 9 (w.e.f. 1-4-1974). 

53. [Exemption of capital gains from a residential house.]—Omitted by the Finance Act, 1992 (18 of 
1992), s. 26 (w.e.f. 1-4-1993). Earlier substituted by Act 67 of 1984, s. 15 (w.e.f. 1-4-1985) and amended 
by Act 11 of 1987, s. 18 (w.e.f. 1-4-1988). 

54.  Profit  on  sale  of  property  used  for  residence.—2[(1)]  3[4[Subject  to  the  provisions  of  
sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family], the 
capital gain arises from the transfer of a long-term capital asset 5***, being buildings or lands appurtenant 
thereto, and being a residential house, the income of which is chargeable under the head “Income from 
house property” (hereafter in this section referred to as the original asset), and the assessee has within a 
period of 6[one year before or two years after the date on which the transfer took place purchased], or has 
within a period of three years after that date 7[constructed, one residential house in India], then], instead 
of the capital gain being charged to income-tax as income of the previous year in which the transfer took 
place, it shall be dealt with in accordance with the following provisions of this section, that is to say,— 

(i)   if  the  amount  of  the  capital  gain  8[is  greater  than  the  cost  of  9[the  residential  house]  so 
purchased  or  constructed  (hereafter  in  this  section  referred  to  as  the  new  asset)],  the  difference 
between the amount of the capital gain and the cost of the new asset shall be charged under section 45 
as the income of the previous year; and for the purpose of computing in respect of the new asset any 
capital gain arising from its transfer within a period of three years of its purchase or construction, as 
the case may be, the cost shall be nil; or 

(ii)  if the amount of the capital gain is equal to or less than the cost of the new asset, the capital 
gain shall not be charged under section 45; and for the purpose of computing in respect of the new 
asset  any  capital  gain  arising  from  its  transfer  within  a  period  of  three  years  of  its  purchase  or 
construction, as the case may be, the cost shall be reduced by the amount of the capital gain. 

1. Ins. by Act 25 of 2014, s. 21 (w.e.f. 1-4-2015). 
2. Section 54 renumbered as sub-section (1) thereof by Act 19 of 1978, s. 10 (w.e.f. 1-4-1974). 
3. Subs. by Act 14 of 1982, s. 11, for certain words (w.e.f. 1-4-1983). 
4. Subs. by Act 11 of 1987, s. 19, for “Where, in the case of an assessee being an individual” (w.e.f. 1-4-1988). 
5.  The  words  and  figures  “to  which  the  provisions  of  section  53  are  not  applicable”  omitted  by  Act  32  of  1985,  s.  14           

(w.e.f. 1-4-1985). 

6.  Subs.  by  Act  23  of  1986,  s.  11,  for  “one  year  before  or  after  the  date  on  which  the  transfer  took  place  purchased”              

(w.e.f. 1-4-1987). 

7. Subs. by Act 25 of 2014, s. 22, for “constructed, a residential house” (w.e.f. 1-4-2015). 
8. Subs. by Act 19 of 1978, s. 10, for “is greater than the cost of the new asset” (w.e.f. 1-4-1974). 
9. Subs. by Act 14 of 1982, s. 11, for “the house property” (w.e.f. 1-4-1983). 

279 

                                                           
1[Provided  that  where  the  amount  of  the  capital  gain  does  not  exceed  two  crore  rupees,  the 
assessee, may at his option, purchase or construct two residential houses in India, and where such an 
option has been exercised,–– 

(a)  the  provisions  of  this  sub-section  shall  have  effect  as  if  for  the  words  “one  residential 

house in India”, the words “two residential houses in India” had been substituted; 

(b) any reference in this sub-section and sub-section (2) to “new asset” shall be construed as a 
reference  to  the  two  residential  houses  in  India:  Provided  further  that  where  during  any 
assessment year, the assessee has exercised the option referred to in the first proviso, he shall not 
be subsequently entitled to exercise the option for the same or any other assessment year.] 

2* 

* 

* 

* 

* 

3[(2) The amount of the capital gain which is not appropriated by the assessee towards the purchase of 
the new asset made within one year before the date on which the transfer of the original asset took place, 
or  which  is  not  utilised  by  him  for  the  purchase  or  construction  of  the  new  asset  before  the  date  of 
furnishing  the  return  of  income  under   section  139,  shall  be  deposited  by  him  before  furnishing  such 
return  [such  deposit  being  made  in  any  case  not  later  than  the  due  date  applicable  in  the  case  of  the 
assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any 
such bank or institution as may be specified in, and utilised in accordance with, any scheme which the 
Central  Government  may,  by  notification  in  the  Official  Gazette,  frame  in  this  behalf  and  such  return 
shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if 
any, already utilised by the assessee for the purchase or construction of the new asset together  with the 
amount so deposited shall be deemed to be the cost of the new asset: 

Provided that  if  the  amount  deposited under  this  sub-section is not utilised  wholly  or  partly  for the 

purchase or construction of the new asset within the period specified in sub-section (1), then,— 

(i)   the amount  not  so  utilised  shall  be  charged  under  section  45 as the  income  of  the  previous 

year in which the period of three years from the date of the transfer of the original asset expires; and 

(ii)   the  assessee  shall  be  entitled  to  withdraw  such  amount  in  accordance  with  the  scheme 

aforesaid. 

4* 

* 

* 

* 

* 

54A. [Relief of tax on capital gains in certain cases.]—Omitted by the Finance (No. 2) Act, 1971 (32 
of 1971), s. 11 (w.e.f. 1-4-1972). Earlier inserted by Act 10 of 1965, s. 17 (1-4-1965). Again inserted by 
Act 4 of 1988, s. 16 (w.e.f. 1-4-1988) and omitted by Act 3 of 1989, s. 95 (w.e.f. 1-4-1989). 

5[54B.  Capital  gain  on  transfer  of  land  used  for  agricultural  purposes  not  to  be  charged  in 
certain cases.—6[(1)]  7[Subject to the provisions of sub-section (2), where the capital gain arises] from 

1. Ins. by Act 7 of 2019, s. 6 (w.e.f. 1-4-2020). 

2. The Explanation omitted by Act 11 of 1987, s. 19 (w.e.f. 1-4-1988). 

3. Subs. by s. 19, ibid., for sub-section (2) (w.e.f. 1-4-1988). 

4. The Explanation omitted by Act 18 of 1992, s. 27 (w.e.f. 1-4-1993). 

5. Ins. by Act 19 of 1970, s. 11 (w.e.f. 1-4-1970). 

6. Section 54B renumbered as sub-section (1) thereof by Act 19 of 1978, s. 11 (w.e.f. 1-4-1974). 

7. Subs. by Act 11 of 1987, s. 20, for “Where the capital gain arises” (w.e.f. 1-4-1988). 

280 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
the transfer of a capital asset being land which, in the two years immediately preceding the date on which 
the  transfer  took  place,  was  being  used  by  1[the  assessee  being  an  individual  or his  parent,  or  a  Hindu 
undivided  family]  for  agricultural  purposes  2[(hereinafter  referred  to  as  the  original  asset)],  and  the 
assessee  has,  within  a  period  of  two  years  after  that  date,  purchased  any  other  land  for  being  used  for 
agricultural  purposes,  then,  instead  of  the  capital  gain  being  charged  to  income-tax  as  income  of  the 
previous  year  in  which  the  transfer  took  place,  it  shall  be  dealt  with  in  accordance  with  the  following 
provisions of this section, that is to say,— 

(i)  if the amount of the capital gain is greater than the cost of the land so purchased (hereinafter 
referred to as the new asset), the difference between the amount of the capital gain and the cost of the 
new asset shall be charged under section 45 as the income of the previous year; and for the purpose of 
computing  in  respect  of  the  new  asset  any  capital  gain  arising  from  its  transfer  within  a  period  of 
three years of its purchase, the cost shall be nil; or 

(ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital 
gain shall not be charged under section 45; and for the purpose of computing in respect of the new 
asset any capital gain arising from its transfer within a period of three years of its purchase, the cost 
shall be reduced, by the amount of the capital gain.] 

3[(2) The amount of the capital gain which is not utilised by the assessee for the purchase of the new 
asset  before  the  date  of  furnishing  the  return  of  income  under  section  139,  shall  be  deposited  by  him 
before furnishing such return [such deposit being made in any case not later than the due date applicable 
in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an 
account  in  any  such  bank  or  institution  as  may  be  specified  in,  and  utilised  in  accordance  with,  any 
scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf 
and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), 
the amount,  if  any,  already  utilised  by  the assessee  for  the  purchase  of the new asset together  with the 
amount so deposited shall be deemed to be the cost of the new asset: 

Provided that  if  the  amount  deposited under  this  sub-section is not utilised  wholly  or  partly  for the 

purchase of the new asset within the period specified in sub-section (1), then,— 

(i)  the amount not so utilised shall be charged under section 45as the income of the previous year 

in which the period of two years from the date of the transfer of the original asset expires; and 

(ii)   the  assessee  shall  be  entitled  to  withdraw  such  amount  in  accordance  with  the  scheme 

aforesaid. 

4* 

* 

* 

* 

* 

54C. [Capital gain on transfer of jewellery held for personal use not to be charged in certain cases.]—
Omitted by the Finance Act, 1976 (66 of 1976) (w.e.f. 1-4-1976). Earlier inserted by Act 16 of 1972, s. 9 
(w.e.f. 1-4-1973). 

1. Subs. by Act 23 of 2012, s. 18, for “the assessee or a parent of his” (w.e.f. 1-4-2013). 

2. Ins. by Act 19 of 1978, s. 11 (w.e.f. 1-4-1974). 

3. Subs. by Act 11 of 1987, s. 20, for sub-section (2) (w.e.f. 1-4-1988). 

4. The Explanation omitted by Act 18 of 1992, s. 28 (w.e.f. 1-4-1993). 

281 

 
 
 
 
 
 
 
 
                                                           
1[54D.  Capital  gain  on  compulsory  acquisition  of  lands  and  buildings  not  to  be  charged  in 
certain cases.—2[(1)]  3[Subject to the provisions of sub-section (2), where the capital gain arises] from 
the transfer by way of compulsory acquisition under any law of a capital asset, being land or building or 
any right in land or building, forming part of an industrial undertaking belonging to the assessee which, in 
the  two  years  immediately  preceding  the  date  on  which  the  transfer  took  place,  was  being  used  by  the 
assessee for the purposes of the business of the said undertaking  4[(hereafter in this section referred to as 
the original asset)], and the assessee has within a period of three years after that date purchased any other 
land  or  building  or  any  right  in  any  other  land  or  building  or  constructed  any  other  building  for  the 
purposes of shifting or re-establishing the said undertaking or setting up another industrial undertaking, 
then, instead of the capital gain being charged to income-tax as the income of the previous year in which 
the transfer took place, it shall be dealt with in accordance with the following provisions of this section, 
that is to say,— 

(i)   if  the  amount  of  the  capital  gain  is  greater  than  the  cost  of  the  land,  building  or  right  so 
purchased or the building so constructed (such land, building or right being hereafter in this section 
referred to as the new asset), the difference between the amount of the capital gain and the cost of the 
new asset shall be charged under section 45 as the income of the previous year; and for the purpose of 
computing  in  respect  of  the  new  asset  any  capital  gain  arising  from  its  transfer  within  a  period  of 
three years of its purchase or construction, as the case may be, the cost shall be nil; or 

(ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital 
gain shall not be charged under section 45; and for the purpose of computing in respect of the new 
asset  any  capital  gain  arising  from  its  transfer  within  a  period  of  three  years  of  its  purchase  or 
construction, as the case may be, the cost shall be reduced by the amount of the capital gain.] 

5[(2)  The  amount  of  the  capital  gain  which  is  not  utilised  by  the  assessee  for  the  purchase  or 
construction of the new asset before the date of furnishing the return of income under section 139,shall be 
deposited by him before furnishing such return [such deposit being made in any case not later than the 
due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) 
of   section  139]  in  an  account  in  any  such  bank  or  institution  as  may  be  specified  in,  and  utilised  in 
accordance with, any scheme which the Central Government may, by notification in the Official Gazette, 
frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes 
of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of 
the new asset together with the amount so deposited shall be deemed to be the cost of the new asset: 

Provided that  if  the  amount  deposited under  this  sub-section is not utilised  wholly  or  partly  for the 

purchase or construction of the new asset within the period specified in sub-section (1), then,— 

(i)  the amount not so utilised shall be charged under section 45as the income of the previous year 

in which the period of three years from the date of the transfer of the original asset expires; and 

(ii)   the  assessee  shall  be  entitled  to  withdraw  such  amount  in  accordance  with  the  scheme 

aforesaid. 

6* 

* 

* 

* 

* 

1. Ins. by Act 21 of 1973, s. 7 (w.e.f. 1-4-1974). 
2. Section 54D numbered as sub-section (1) thereof by Act 19 of 1978, s. 12 (w.e.f. 1-4-1974). 
3. Subs. by Act 11 of 1987, s. 21, for “Where the capital gain arises” (w.e.f. 1-4-1988). 
4 Ins. by Act 19 of 1978, s. 12 (w.e.f. 1-4-1974). 
5. Subs. by Act 11 of 1987, s. 21, for sub-section (2) (w.e.f. 1-4-1988). 
6. The Explanation omitted by Act 18 of 1992, s. 29 (w.e.f. 1-4-1993). 

282 

 
 
 
 
 
 
 
                                                           
1[54E. Capital gain on transfer of capital not to be assets charged in certain cases.—(1) Where 
the capital gain arises from the transfer of a 2[long-term capital asset] 3[before the 1st day of April, 1992], 
(the  capital  asset  so  transferred  being  hereafter  in  this  section  referred  to  as  the  original  asset)  and  the 
assessee  has,  within  a  period  of  six  months  after  the  date  of  such  transfer,  invested  or  deposited  the 
4[whole or any part of the net consideration] in any specified asset (such specified asset being hereafter in 
this  section  referred  to  as  the  new  asset),  the  capital  gain  shall  be  dealt  with  in  accordance  with  the 
following provisions of this section, that is to say,— 

(a)  if the cost of the new asset is not less than the  5[net consideration] in respect of the original 

asset, the whole of such capital gain shall not be charged under section 45; 

(b)  if the cost of the new asset is less than the 5[net consideration] in respect of the original asset, 
so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of 
acquisition of the new asset bears to the 6[net consideration] shall not be charged under section 45: 

7[Provided that in a case where the original asset is transferred after the 28th day of February, 1983, 
the provisions of this sub-section shall not apply unless the assessee has invested or deposited the whole 
or, as the case may be, any part of the net consideration in the new asset by initially subscribing to such 
new asset:] 

8[Provided  further that  in  a  case  where  the  transfer  of  the  original  asset  is  by  way  of  compulsory 
acquisition  under  any  law  and  the  full  amount  of  compensation  awarded  for  such  acquisition  is  not 
received  by  the  assessee  on  the  date  of  such  transfer,  the  period  of  six  months  referred  to  in  this  
sub-section  shall,  in  relation  to  so  much  of  such  compensation  as  is  not  received  on  the  date  of  the 
transfer,  be  reckoned  from  the  date  immediately  following  the  date  on  which  such  compensation  is 
received by the assessee 9[or the 31st day of March, 1992, whichever is earlier].] 

Explanation 1.—10[For the purposes of this sub-section, “specified asset” means,— 

(a) in a case where the original asset is transferred before the 1st day of March, 1979, any of the 

following assets, namely:—] 

(i) securities of the Central Government or a State Government; 

(ii)  savings  certificates  as  defined  in  clause  (c)  of  section  2  of  the  Government  Savings 

Certificates Act, 1959 (46 of 1959); 

(iii)  units  in  the  Unit  Trust  of  India  established  under  the  Unit  Trust  of  India                             

Act, 1963 (52 of 1963); 

1. Ins. by Act 29 of 1977, s. 13 (w.e.f. 1-4-1978). 
2. Subs. by Act 11 of 1987, s. 22, for “capital asset, not being a short-term capital asset” (w.e.f. 1-4-1988). 
3. Ins. by Act 18 of 1992, s. 30 (w.e.f. 1-4-1992). 
4. Subs. by Act 21 of 1979, s. 8, for “full value of the consideration or any part thereof received or accruing as a result of 

such transfer” (w.e.f. 1-4-1979). 

5. Subs. by s. 8, ibid., for “full value of consideration received or accruing” (w.e.f. 1-4-1979). 
6. Subs. by s. 8, ibid., for “full value of such consideration” (w.e.f. 1-4-1979). 
7. Ins. by Act 11 of 1983, s. 20 (w.e.f. 1-4-1983). 
8. Ins. by Act 67 of 1984, s. 16 (w.e.f. 1-4-1984). 
9. Ins. by Act 18 of 1992, s. 30 (w.e.f. 1-4-1992). 
10. Subs. by Act 21 of 1979, s. 8, for ‘For the purposes of this sub-section and sub-section (3), “specified asset” means any 

of the following assets, namely:—’(w.e.f. 1-4-1979). 

283 

                                                           
(iv)  debentures  specified  by  the  Central  Government  for  the  purposes  of  clause  (ii)  of  

sub-section (1) of  section 80L; 

(v) shares in any Indian company which are issued to the public or are listed in a recognised 
stock exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 
1956), and any rules made thereunder, where the investment in such shares is made before the 1st 
day of March, 1978; 

1[(va) equity shares forming part of any eligible issue of capital, where the investment in such 

shares is made after the 28th day of February, 1978;] 

(vi) deposits for a period of not less than three years with the State Bank of India established 
under the State Bank of India Act, 1955 (23 of 1955), or any subsidiary bank as defined in  the 
State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959) or any nationalised bank, that is to 
say,  any  corresponding  new  bank,  constituted  under  section  3  of  the  Banking  Companies 
(Acquisition  and  Transfer  of  Undertakings)  Act,  1970  (5  of  1970),  or  any  co-operative  society 
engaged in carrying on the business of banking (including a co-operative land mortgage bank or a 
co-operative land development bank); 

2[(b)  in a case where the original asset is transferred after the 28th day of February, 1979  3[but 
before  the  1st  day  of  March,  1983],  such  National  Rural  Development  Bonds  as  the  Central 
Government may notify in this behalf in the Official Gazette;] 

3[(c)  in a case where the original asset is transferred after the 28th day of February, 1983  4[but 

before the 1st day of April, 1986], any of the following assets, namely:— 

(i)  securities of the Central Government which that Government may, by notification in the 

Official Gazette, specify in this behalf; 

(ii)  special series of units of the Unit Trust of India established under the Unit Trust of India 
Act,  1963  (52  of  1963),  which  the  Central  Government  may,  by  notification  in  the  Official 
Gazette, specify in this behalf; 

(iii)  such  National  Rural  Development  Bonds  as  have  been  notified  under  clause  (b) 
of Explanation  1 or  as  may  be  notified  in  this  behalf  under  this  clause  by  the  Central 
Government; 

(iv) such debentures issued by the Housing and Urban Development Corporation Limited [a 
Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956)], as the 
Central Government may, by notification in the Official Gazette, specify in this behalf;] 

4[(d)  in a case where the original asset is transferred after the 31st day of March, 1986, any of the 
assets  specified  in  clause  (c)  and  such  bonds  issued  by  any  public  sector  company,  as  the  Central 
Government may, by notification in the Official Gazette, specify in this behalf;] 

1. Ins. by Act 19 of 1978, s. 13 (w.e.f. 1-4-1978). 
2. Ins. by Act 21 of 1979, s. 8 (w.e.f. 1-4-1979). 
3. Ins. by Act 11 of 1983, s. 20 (w.e.f. 1-4-1983). 
4. Ins. by Act 23 of 1986, s. 12 (w.e.f. 1-4-1987). 

284 

                                                           
1* 

* 

* 

* 

*] 

2[(e) in a case where the original asset is transferred after the 31st day of March, 1989, any of the 
assets specified in clauses (c) and (d) and such debentures or bonds issued by the National Housing 
Bank established under section 3 of the National Housing Bank Act, 1987 (53 of 1987), as the Central 
Government may, by notification in the Official Gazette, specify in this behalf.] 

3[Explanation 2.—“Eligible issue of capital” shall have the meaning assigned to it in sub-section (3) 

of section 80CC.  

Explanation 3.—An assessee shall not be deemed to have invested 4[the whole or any part of the net 
consideration in any equity shares referred to in sub-clause (va) of clause (a)] of Explanation 1, unless the 
assessee  has  subscribed  to  or  purchased  the  shares  in  the  manner  specified  in  sub-section  (4)  of  
section 80CC. ] 

5[Explanation 4].—“Cost”, in relation to any new asset, being a deposit referred to in 6[sub-clause (vi) 

of clause (a)] of Explanation 1, means the amount of such deposit. 

7[Explanation  5.—”Net  consideration”,  in  relation  to  the  transfer  of  a  capital  asset,  means  the  full 
value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by 
any expenditure incurred wholly and exclusively in connection with such transfer.] 

8[(1A) Where the assessee deposits after the 27th day of April, 1978, the 9[whole or any part of the net 
consideration  in  respect]  of  the  original  asset  in  any  new  asset,  being  a  deposit  10[referred  to  in  
sub-clause (vi) of clause (a)] of Explanation 1 below sub-section (1), the cost of such new asset shall not 
be  taken  into  account  for  the  purposes  of that  sub-section  unless  the  following  conditions  are  fulfilled, 
namely:— 

(a)  the  assessee  furnishes,  along  with  the  deposit,  a  declaration  in  writing,  to  the  bank  or  the  
co-operative society referred to in the 11[said sub-clause (vi)] with which such deposit is made, to the 
effect  that  the  assessee  will  not  take  any  loan  or  advance  on  the  security  of  such  deposit  during  a 
period of three years from the date on which the deposit is made; 

(b) the assessee furnishes, along with the return of income for the assessment year relevant to the 
previous year in which the transfer of the original asset was effected or within such further time as 
may be allowed by the  12[Assessing Officer], a copy of the declaration referred to in clause (a) duly 
attested by an officer not below the rank of sub-agent, agent or manager of such bank or an officer of 
corresponding rank of such co-operative society. 

1. The Explanation omitted by Act 11 of 1987, s. 74 (w.e.f. 1-4-1987). 
2. Ins. by Act 13 of 1989, s. 12 (w.e.f. 1-4-1990). 
3. Ins. by Act 19 of 1978, s. 13 (w.e.f. 1-4-1978). 
4. Subs. by Act 21 of 1979, s. 8, for “the full value of the consideration or any part thereof in any equity shares referred to in 

clause (va)” (w.e.f. 1-4-1979). 

5. Explanation 2 renumbered as Explanation 4 by Act 19 of 1978, s. 13 (w.e.f. 1-4-1978). 
6. Subs. by Act 21 of 1979, s. 8, for “clause (vi)” (w.e.f. 1-4-1979). 
7. Ins. by s. 8, ibid. (w.e.f. 1-4-1979). 
8. Ins. by Act 19 of 1978, s. 13 (w.e.f. 1-4-1978). 
9. Subs. by Act 21 of 1979, s. 8, for “full value of the consideration or any part thereof received or accruing as a result of the 

transfer” (w.e.f. 1-4-1979). 

10. Subs. by s. 8, ibid., for “referred to in clause (vi)” (w.e.f. 1-4-1979). 
11. Subs. by s. 8, ibid., for “said clause (vi)” (w.e.f. 1-4-1979). 
12. Subs. by Act 4 of 1988, s. 2, “Income-tax Officer” (w.e.f. 1-4-1988).   

285 

 
 
 
 
 
 
 
                                                           
(1B) Where on the fulfilment of the conditions specified in sub-section (1A), the cost of the new asset 
referred to in that sub-section is taken into account for the purposes of sub-section (1), the assessee shall, 
within a period of ninety days from the expiry of the period of three years reckoned from the date of such 
deposit,  furnish  to  the  1[Assessing  Officer]  a  certificate  from  the  officer  referred  to  in  clause  (b)  of  
sub-section (1A) to the effect that the assessee has not taken any loan or advance on the security of such 
deposit during the said period of three years.] 

2[(1C) Notwithstanding anything contained in sub-section (1), where the capital gain arises from the 
transfer of the original asset, made after the 31st day of March, 1992, in respect of which the assessee had 
received any amount by way of advance on or before the 29th day of February, 1992 and had invested or 
deposited  the  whole  or  any  part  of  such  amount  in  the  new  asset  on  or  before  the  later  date,  then,  the 
provisions of clauses (a) and (b) of sub-section (1) shall apply in the case of such investment or deposit as 
they apply in the case of investment or deposit under that sub-section.] 

(2) Where the new asset is transferred, or converted (otherwise than by transfer) into money, within a 
period of three years from the date of its acquisition, the amount of capital gain arising from  the transfer 
of the original asset not charged under  section 45 on the basis of the cost of such new asset as provided in 
clause (a) or, as the case may be, clause (b), of sub-section (1) shall be deemed to be income chargeable 
under  the  head  “Capital  gains”  relating  to  3[long-term  capital  assets]  of the  previous  year  in  which  the 
new asset is transferred or converted (otherwise than by transfer) into money.] 

4[5[Explanation1].—Where the assessee deposits after the 27th day of April, 1978, the 6[whole or any 
part of the net consideration in respect] of the original asset in any new asset, being a deposit referred to 
in  7[sub-clause  (vi)  of  clause  (a)]  of Explanation  1 below  sub-section  (1),  and  such  assessee  takes  any 
loan or advance on the security of such deposit, he shall be deemed to have converted (otherwise than by 
transfer) such deposit into money on the date on which such loan or advance is taken.] 

8[Explanation  2.—In  a  case  where  the  original  asset  is  transferred  after  the  28th  day  of  February, 
1983 and the assessee invests the whole or any part of the net consideration in respect of the original asset 
in any new asset and such assessee takes any loan or advance on the security of such new asset, he shall 
be deemed to have converted (otherwise than by transfer) such new asset on the date on which such loan 
or advance is taken.] 

9* 

* 

* 

* 

* 

10[(3)]  Where  the  cost  of  the  equity  shares  referred  to  in  11[sub-clause  (va)  of  clause  (a)]  of  
Explanation 1 below sub-section (1) is taken into account for the purposes of clause (a) or clause (b) of 
sub-section (1) 12***, a deduction with reference to such cost shall not be allowed under section 80CC. 

1. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2. Ins. by Act 18 of 1992, s. 30 (w.e.f. 1-4-1992). 
3. Subs. by Act 11 of 1987, s. 22, for “capital assets other than short-term capital assets” (w.e.f. 1-4-1988). 
4. Ins. by Act 19 of 1978, s. 13 (w.e.f. 1-4-1978). 
5. The Explanation numbered as Explanation 1 by Act 11 of 1983, s. 20 (w.e.f. 1-4-1983). 
6. Subs. by Act 21 of 1979, s. 8, for “full value of the consideration or any part thereof received or accruing as a result of the 

transfer” (w.e.f. 1-4-1979). 

7. Subs. by s. 8, ibid., for “clause (vi)” (w.e.f. 1-4-1979). 
8. Ins. by Act 11 of 1983, s. 20 (w.e.f. 1-4-1983). 
9. Sub-sections (3), (4) and (5) omitted by Act 11 of 1987, s. 22 (w.e.f. 1-4-1988). 
10. Sub-section (6) renumbered as sub-section (3) by s. 22, ibid. (w.e.f. 1-4-1988). 
11. Subs. by Act 21 of 1979, s. 8, for “clause (va)” (w.e.f. 1-4-1979). 
12. The words, brackets, letters and figure “or clause (a) or clause (b) of sub-section (3)” omitted by Act 11 of 1987, s. 22 

(w.e.f. 1-4-1988). 

286 

 
 
 
 
 
 
 
 
                                                           
1[54EA.  Capital  gain  on  transfer  of  long-term  capital  assets  not  to  be  charged  in  the  case  of 
investment in 2[specified securities].—(1) Where the capital gain arises from the transfer of a long-term 
capital asset  3[before the 1st day of April, 2000] (the capital asset so transferred being hereafter in this 
section referred to as the original asset) and the assessee has, at any time within a period of six months 
after  the  date  of  such  transfer,  invested  the  whole  or  any  part  of  the  net  consideration  in  any  of  the 
4[bonds, debentures, shares of a public company or units of any mutual fund referred to in clause (23D) 
of section  10,]specified  by  the  Board  in  this  behalf  by  notification  in  the  Official  Gazette  (such  assets 
hereafter  in  this  section  referred to as the  2[specified securities]), the  capital  gain  shall  be  dealt  with  in 
accordance with the following provisions of this section, that is to say,— 

(a) if the cost of the  2[specified securities] is not less than the net consideration in respect of the 

original asset, the whole of such capital gain shall not be charged under section 45; 

(b)  if  the  cost  of  the  2[specified  securities]  is  less  than  the  net  consideration  in  respect  of  the 
original  asset,  so  much  of  the  capital  gain  as  bears  to  the  whole  of  the  capital  gain  the  same 
proportion as the cost of acquisition of the  2[specified securities] bears to the net consideration shall 
not be charged under section 45. 

(2)  Where  the  2[specified  securities]  are  transferred  or  converted  (otherwise  than  by  transfer)  into 
money at any time within a period of three years from the date of their acquisition, the amount of capital 
gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of 
such 2[specified securities] as provided in clause (a) or clause (b) of sub-section (1) shall be deemed to be 
the income chargeable under the head “Capital gains” relating to long-term capital assets of the previous 
year  in  which  the  2[specified  securities]  are  transferred  or  converted  (otherwise  than  by  transfer)  into 
money. 

Explanation.—In a case where the original asset is transferred and the assessee invests the whole or 
any  part  of  the  net  consideration  in  respect  of  the  original  asset  in  any  2[specified  securities]  and  such 
assessee takes any loan or advance on the security of such  2[specified securities], he shall be deemed to 
have converted (otherwise than by transfer) such  2[specified securities] into money on the date on which 
such loan or advance is taken. 

(3)  Where  the  cost  of  the  2[specified  securities]  has  been  taken  into  account  for  the  purposes  of  
clause (a) or clause (b) of sub-section (1), a rebate with reference to such cost shall not be allowed under 
section 88. 

Explanation.—For the purposes of this section,— 

(a) “cost”, in relation to any 2[specified securities], means the amount invested in such 2[specified 
securities] out of the net consideration received or accruing as a result of the transfer of the original 
asset; 

(b) “net consideration”, in relation to the transfer of a capital asset, means the full value of the 
consideration  received  or  accruing  as  a  result  of  the  transfer  of  the  capital  asset  as  reduced  by  the 
expenditure incurred wholly and exclusively in connection with such transfer.] 

1. Ins. by Act 33 of 1996, s. 20 (w.e.f. 1-10-1996). 
2. Subs. by Act 14 of 1997, s. 2, for “specified bonds or debentures” (w.e.f. 1-10-1996). 
3. Ins. by Act 10 of 2000, s. 25 (w.e.f. 1-4-2001). 
4.  Subs.  by  Act  14  of  1997,  s.  2,  for  “bonds,  debentures  or  units  of  any  mutual  fund  referred  to  in  clause  (23D)  of               

section 10” (w.e.f. 1-10-1996). 

287 

                                                           
54EB. Capital  gain  on  transfer  of  long-term  capital  assets  not  to  be  charged  in  certain                

cases.—(1) Where the capital gain arises from the transfer of a long-term capital asset 1[before the 1st day 
of April, 2000] (the capital asset so transferred being hereafter in this section  referred to as the original 
asset),  and  the  assessee  has,  at  any  time  within  a  period  of  six  months  after  the  date  of  such  transfer 
invested the whole or any part of capital gains, in any of the assets specified by the Board in this behalf 
by  notification  in the  Official  Gazette  (such  assets  hereafter in this  section referred to  as the long-term 
specified assets), the capital gain shall be dealt with in accordance with the following provisions of this 
section, that is to say,— 

(a) if the  cost  of the long-term  specified  asset  is  not less  than the capital  gain arising  from  the 

transfer of the original asset, the whole of such capital gain shall not be charged under section 45; 

(b) if the cost of the long-term specified asset is less than the capital gain arising from the transfer 
of the original asset, so much of the capital gain as bears to the whole of the capital gain the same 
proportion as the cost of acquisition of the long-term specified asset bears to the whole of the capital 
gain, shall not be charged under section 45. 

Explanation.—“Cost”, in relation to any long-term specified asset, means the amount invested in 
such specified asset out of capital gains received or accruing as a result of the transfer of the original 
asset. 

(2) Where the long-term specified asset is transferred or converted (otherwise than by transfer) into 
money at any time within a period of seven years from the date of its acquisition, the amount of capital 
gains arising from the transfer of the original asset not charged under section 45 on the basis of the cost of 
such  long-term  specified  asset  as  provided  in  clause  (a),  or  as  the  case  may  be,  clause  (b)  of                         
sub-section (1) shall be deemed to be the income chargeable under the head “Capital gains” relating to 
long-term  capital  assets  of  the  previous  year  in  which  the  long-term  specified  asset  is  transferred  or 
converted (otherwise than by transfer) into money. 

Explanation.—In a case where the original asset is transferred and the assessee invests the whole  or 
any part of the capital gain received or accrued as a result of transfer of the original asset in any long-term 
specified  asset  and  such  assessee  takes  any  loan  or  advance  on  the  security  of  such  specified  asset,  he 
shall  be  deemed  to  have  converted (otherwise than  by  transfer)  such  specified  asset  into  money  on  the 
date on which such loan or advance is taken. 

(3) Where the cost of the long-term specified asset has been taken into account for the purposes of 
clause (a) or clause (b) of sub-section (1), a deduction from the amount of income-tax with reference to 
such cost shall not be allowed under section 88.] 

2[54EC. Capital  gain  not to  be charged  on  investment in certain  bonds.—(1)  Where the  capital 
gain arises from the transfer of a long-term capital asset  3[, being land or building or both,] (the capital 
asset so transferred being hereafter in this section referred to as the original asset) and the assessee has, at 
any time within a period of six months after the date of such transfer, invested the whole or any part of 
capital gains in the long-term specified asset, the capital gain shall be dealt with in accordance with the 
following provisions of this section, that is to say,— 

(a) if the  cost  of the long-term  specified  asset  is  not less  than the capital  gain arising  from  the 

transfer of the original asset, the whole of such capital gain shall not be charged under section 45; 

1. Ins. by Act 10 of 2000, s. 26 (w.e.f. 1-4-2001). 

2. Ins. by s. 27, ibid. (w.e.f. 1-4-2001). 

3. Ins. by Act 13 of 2018, s. 21 (w.e.f. 1-4-2019). 

288 

                                                           
(b) if the cost of the long-term specified asset is less than the capital gain arising from the transfer 
of the original asset, so much of the capital gain as bears to the whole of the capital gain the same 
proportion as the cost of acquisition of the long-term specified asset bears to the whole of the capital 
gain, shall not be charged under section 45: 

1[Provided that the investment made on or after the 1st day of April, 2007 in the long-term specified 

asset by an assessee during any financial year does not exceed fifty lakh rupees:] 

2[Provided  further that  the  investment  made  by  an  assessee  in  the  long-term  specified  asset,  from 
capital gains arising from transfer of one or more original assets, during the financial year in which the 
original  asset  or  assets  are  transferred  and  in  the  subsequent  financial  year  does  not  exceed  fifty  lakh 
rupees.] 

(2) Where the long-term specified asset is transferred or converted (otherwise than by transfer) into 
money at any time within a period of three years from the date of its acquisition, the amount of capital 
gains arising from the transfer of the original asset not charged under section 45 on the basis of the cost of 
such  long-term  specified  asset  as  provided  in  clause  (a)  or,  as  the  case  may  be,  clause  (b)  of  
sub-section (1) shall be deemed to be the income chargeable under the head “Capital gains” relating to 
long-term  capital  asset  of  the  previous  year  in  which  the  long-term  specified  asset  is  transferred  or 
converted (otherwise than by transfer) into money. 

3[Provided that in case of long-term specified asset referred to in subclause (ii) of clause (ba) of the 
Explanation occurring after sub-section (3), this sub-section shall have effect as if for the words  “three 
years”, the words “five years” had been substituted.] 

Explanation.—In a case where the original asset is transferred and the assessee invests the whole or 
any part of the capital gain received or accrued as a result of transfer of the original asset in any long-term 
specified  asset  and  such  assessee  takes  any  loan  or  advance  on  the  security  of  such  specified  asset,  he 
shall  be  deemed  to  have  converted (otherwise than  by  transfer)  such  specified  asset  into  money  on  the 
date on which such loan or advance is taken. 

4[(3) Where the cost of the long-term specified asset has been taken into account for the purposes of 

clause (a) or clause (b) of sub-section (1),— 

(a) a deduction from the amount of income-tax with reference to such cost shall not be allowed 

under section 88 for any assessment year ending before the 1st day of April, 2006; 

(b) a deduction from the income with reference to such cost shall not be allowed under section 

80C for any assessment year beginning on or after the 1st day of April, 2006.] 

Explanation.—For the purposes of this section,— 

(a)  “cost”,  in  relation  to  any  long-term  specified  asset,  means  the  amount  invested  in  such 
specified asset out of capital gains received or accruing as a result of the transfer of the original 
asset; 

5[(b)  “long-term  specified  asset”  for  making  any  investment  under  this  section  during  the 
period commencing from the 1st day of April, 2006 and ending with the 31st day of March, 2007, 
means any bond, redeemable after three years and issued on or after the 1st day of April, 2006, 
but on or before the 31st day of March, 2007,— 

1. Ins. by Act 22 of 2007, s. 18 (w.e.f. 1-4-2007). 
2. Ins. by Act 25 of 2014, s. 23 (w.e.f. 1-4-2015). 
3. Ins. by Act 13 of 2018, s. 21 (w.e.f. 1-4-2019). 
4. Ins. by Act 18 of 2005, s. 17 (w.e.f. 1-4-2006). 
5. Subs. by Act 22 of 2007, s. 18, for clause (b) (w.e.f. 1-4-2006). 

289 

                                                           
(i)  by  the  National  Highways  Authority  of  India  constituted  under  section  3  of  the 

National Highways Authority of India Act, 1988 (68 of 1988); or 

(ii)  by  the  Rural  Electrification  Corporation  Limited,  a  company  formed  and  registered 

under the Companies Act, 1956 (1 of 1956), 

and notified by the Central Government in the Official Gazette for the purposes of this section with such 
conditions (including the condition for providing a limit on the amount of investment by an assessee in 
such bond) as it thinks fit:] 

1[Provided that where any bond has been notified before the 1st day of April, 2007, subject to the 
conditions specified in the notification, by the Central Government in the Official Gazette under the 
provisions of clause (b) as they stood immediately before their amendment by the Finance Act, 2007 
(22 of 2007), such bond shall be deemed to be a bond notified under this clause;] 

2[(ba) “long-term specified asset” for making any investment under this section,–– 

(i)  on  or  after  the  1st  day  of  April,  2007  but  before  the  1st  day  of  April,  2018,  means  any 
bond, redeemable after three years and issued on or after the 1st day of April, 2007 but before the 
1st day of April, 2018; 

(ii) on or after the 1st day of April, 2018, means any bond, redeemable after five years and 
issued  on  or  after  the  1st  day  of  April,  2018,  by  the  National  Highways  Authority  of  India 
constituted  under  section  3  of  the  National  Highways  Authority  of  India  Act,  1988  or  by  the 
Rural  Electrification  Corporation  Limited,  a  company  formed  and  registered  under  the 
Companies  Act,  1956  or  any  other  bond  notified  in  the  Official  Gazette  by  the  Central 
Government in this behalf.] 

3[54ED. Capital gain on transfer of certain listed securities or unit not to be charged in certain 
cases.—(1) Where the capital gain arises 4[from the transfer before the 1st day of April, 2006, of a long-
term capital asset,] being listed securities or unit (the capital asset so transferred being hereafter in this 
section referred to as the original asset), and the assessee has, within a period of six months after the date 
of such transfer, invested the whole or any part of the capital gain in acquiring equity shares forming part 
of an eligible issue of capital (such equity shares being hereafter in this section referred to as the specified 
equity shares), the said capital gain shall be dealt with in accordance with the following provisions of this 
section, that is to say,— 

(a)  if  the  cost  of  the  specified  equity  shares  is  not  less  than  the  capital  gain  arising  from  the 

transfer of the original asset, the whole of such capital gain shall not be charged under section 45; 

(b) if the cost of the specified equity shares is less than the capital gain arising from the transfer 
of the original asset, so much of the capital gain as bears to the whole of the capital gain the same 
proportion as the cost of the specified equity shares acquired bears to the whole of the capital gain 
shall not be charged under section 45. 

Explanation.—For the purposes of this sub-section,— 

(i)  “eligible  issue  of  capital”  means  an  issue  of  equity  shares  which  satisfies  the  following 

conditions, namely:— 

(a) the issue is made by a public company formed and registered in India; 

(b) the shares forming part of the issue are offered for subscription to the public; 

1. Ins. by Act 22 of 2007, s. 18 (w.e.f. 1-4-2006). 
2.  Subs.  by  Act  13  of  2018,  s.  21,  for  clause  (ba)  (w.e.f.  1-4-2019)  which  was  earlier  inserted  by  Act  22  of  2007,  s.  18  

(w.e.f. 1-4-2006) and later amended by Act 7 of 2017, s. 27 (w.e.f. 1-4-2018). 

3. Ins. by Act 14 of 2001, s. 32 (w.e.f. 1-4-2002). 
4. Subs. by Act 21 of 2006, s. 14, for “from the transfer of a long-term capital asset” (w.e.f. 1-4-2007). 

290 

                                                           
(ii)  “listed  securities”  shall  have  the  same  meaning  as  in  clause  (a)  of  the Explanation to  

sub-section (1) of section 112; 

(iii)  “unit”  shall  have  the  meaning  assigned  to  it  in  clause  (b)  of  the Explanation to  

section 115AB. 

(2) Where  the  specified equity  shares are  sold  or otherwise  transferred  within  a  period  of  one  year 
from the date of their acquisition, the amount of capital gain arising from the transfer of the original asset 
not charged under section 45 on the basis of the cost of such specified equity shares as provided in clause 
(a)  or,  as  the  case  may  be,  clause  (b),  of  sub-section  (1)  shall  be  deemed  to  be  the  income  chargeable 
under  the  head  “Capital  gains”  relating  to  long-term  capital  assets  of  the  previous  year  in  which  such 
equity shares are sold or otherwise transferred. 

1[(3)  Where  the  cost  of  the  specified equity  shares has  been  taken into  account for the purposes  of 

clause (a) or clause (b) of sub-section (1),— 

(a) a deduction from the amount of income-tax with reference to such cost shall not be allowed 

under section 88 for any assessment year ending before the 1st day of April, 2006; 

(b) a deduction from the income with reference to such cost shall not be allowed under section 

80C for any assessment year beginning on or after the 1st day of April, 2006.]] 

2[54EE. Capital gain not to be charged on investment in units of a specified fund.—(1) Where 
the capital gain arises from the transfer of a long-term capital asset (herein in this section referred to as 
the original asset) and the assessee has, at any time within a period of six months after the date of such 
transfer, invested the whole or any part of capital gains in the long-term specified asset, the capital gain 
shall be dealt with in accordance with the following provisions of this section, namely:— 

(a) if the  cost  of the long-term  specified  asset  is  not less  than the capital  gain arising  from  the 

transfer of the original asset, the whole of such capital gain shall not be charged under section 45; 

 (b)  if  the  cost  of  the  long-term  specified  asset  is  less  than  the  capital  gain  arising  from  the 
transfer of the original asset, so much of the capital gain as bears to the whole of the capital gain the 
same proportion as the cost of acquisition of the long-term specified asset bears to the whole of the 
capital gain, shall not be charged under section 45: 

Provided that the investment made on or after the 1st day of April, 2016, in the long-term specified 

asset by an assessee during any financial year does not exceed fifty lakh rupees: 

Provided  further that  the  investment  made  by  an  assessee  in  the  long-term  specified  asset,  from 
capital gains arising from the transfer of one or more original assets, during the financial year in which 
the original asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh 
rupees. 

(2) Where the long-term specified asset is transferred by the assessee at any time within a period of 
three years from the date of its acquisition, the amount of capital gains arising from the transfer of the 
original asset not charged under section 45 on the basis of the cost of such long-term specified asset as 
provided  in  clause  (a)  or,  as  the  case  may  be,  clause  (b)  of  sub-section  (1)  shall  be  deemed  to  be  the 
income chargeable under the head “Capital gains” relating to long-term capital asset of the previous year 
in which the long-term specified asset is transferred. 

1. Ins.  by Act 18 of 2005, s. 18 (w.e.f. 1-4-2006). 
2. Ins. by Act 28 of 2016, s. 32 (w.e.f 1-4-2017). 

291 

                                                           
Explanation 1.—In a case where the original asset is transferred and the assessee invests the whole or 
any part of the capital gain received or accrued as a result of transfer of the original asset in any long-term 
specified  asset  and  such  assessee  takes  any  loan  or  advance  on  the  security  of  such  specified  asset,  he 
shall  be  deemed  to  have  transferred  such  specified  asset  on  the  date  on  which  such  loan  or  advance  is 
taken. 

Explanation 2.—For the purposes of this section,— 

(a)  “cost”,  in  relation  to  any  long  -term  specified  asset,  means  the  amount  invested  in  such 
specified asset out of capital gains received or accruing as a result of the transfer of the original asset; 

(b) “long-term specified asset” means a unit or units, issued before the 1st day of April, 2019, of 

such fund as may be notified by the Central Government in this behalf.] 

1[54F. Capital gain on transfer of certain capital assets not to be charged in case of investment 
in residential house.—(1) 2[Subject to the provisions of sub-section (4), where, in the case of an assessee 
being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term 
capital asset, not being a residential house (hereafter in this section referred to as the original asset), and 
the assessee has, within a period of one year before or  3[two years] after the date on which the transfer 
took  place  purchased,  or has within a period of three years after that date 4[constructed, one residential 
house in India] (hereafter in this section referred to as the new asset), the capital gain shall be dealt with 
in accordance with the following provisions of this section, that is to say,— 

(a) if the cost of the new asset is not less than the net consideration in respect of the original asset, 

the whole of such capital gain shall not be charged under section 45; 

(b) if the cost of the new asset is less than the net consideration in respect of the original asset, so 
much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of 
the new asset bears to the net consideration, shall not be charged under section 45: 

5[Provided that nothing contained in this sub-section shall apply where— 

(a) theassessee,— 

(i) owns more than one residential house, other than the new asset, on the date of transfer 

of the original asset; or 

(ii) purchases any residential house, other than the new asset, within a period of one year 

after the date of transfer of the original asset; or 

(iii)  constructs any  residential  house,  other  than  the  new  asset,  within a  period of  three 

years after the date of transfer of the original asset; and 

(b)  the  income  from  such  residential  house,  other  than  the  one  residential  house  owned  on  the 

date of transfer of the original asset, is chargeable under the head “Income from house property”.] 

Explanation.—For the purposes of this section,— 

6* 

* 

* 

* 

* 

1. Ins. by Act 14 of 1982, s. 12 (w.e.f. 1-4-1983). 
2. Subs. by Act 11 of 1987, s. 23, for “Where, in the case of an assesse being an individual” (w.e.f. 1-4-1988). 
3. Ins. by s. 23, ibid. (w.e.f 1-4-1988). 
4. Subs. by Act 25 of 2014, s. 24, for “constructed, a residential house” (w.e.f. 1-4-2015). 
5. Subs. by Act 10 of 2000, s. 28, for the proviso (w.e.f 1-4-2001). 
6. Clause (i) omitted by Act 11 of 1987, s. 23 (w.e.f. 1-4-1988). 

292 

 
 
 
 
 
 
 
                                                           
1*** “net consideration”, in relation to the transfer of a capital asset, means the full value of the 
consideration  received  or  accruing  as  a  result  of  the transfer  of  the  capital  asset  as  reduced  by  any 
expenditure incurred wholly and exclusively in connection with such transfer. 

(2) Where the assessee purchases, within the period of 2[two years] after the date of the transfer of the 
original  asset,  or  constructs,  within  the  period  of  three  years  after  such  date,  any  residential  house,  the 
income from which is chargeable under the head “Income from house property”, other than the new asset, 
the amount of capital gain arising from the transfer of the original asset not charged under section 45 on 
the basis of the cost of such new asset as provided in clause (a), or, as the case may be, clause (b), of sub-
section (1), shall be deemed to be income chargeable under the head “Capital gains” relating to long-term 
capital assets of the previous year in which such residential house is purchased or constructed. 

(3) Where the new asset is transferred within a period of three years from the date of its purchase or, 
as the case may be, its construction, the amount of capital gain arising from the transfer of the original 
asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a) or, 
as the case may be, clause (b), of sub-section (1) shall be deemed to be income chargeable under the head 
“Capital  gains”  relating  to  long-term  capital  assets  of  the  previous  year  in  which  such  new  asset  is 
transferred.] 

3[(4)  The  amount  of  the  net  consideration  which  is  not  appropriated  by  the  assessee  towards  the 
purchase of the new asset made within one year before the date on which the transfer of the original asset 
took place, or which is not utilised by him for the purchase or construction of the new asset before the 
date  of  furnishing  the  return  of  income  under section  139,  shall  be  deposited  by  him  before  furnishing 
such return [such deposit being made in any case not later than the due date applicable in the case of the 
assessee  for  furnishing  the  return  of income  under  sub-section (1)  of section 139]  in  an  account in  any 
such  bank  or  institution  as  may  be  specified  in,  and  utilised  in  accordance  with,  any  schemewhich  the 
Central  Government  may,  by  notification  in  the  Official  Gazette,  frame  in  this  behalf  and  such  return 
shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if 
any, already utilised by the assessee for the purchase or construction of the new asset together with the 
amount so deposited shall be deemed to be the cost of the new asset: 

Provided that  if  the  amount  deposited under  this  sub-section is not utilised  wholly  or  partly  for the 

purchase or construction of the new asset within the period specified in sub-section (1), then,— 

(i) the amount by which— 

(a)  the  amount  of  capital  gain  arising  from  the  transfer  of  the  original  asset  not  charged 
under section 45 on the basis of the cost of the new asset as provided in clause (a) or, as the case 
may be, clause (b) of sub-section (1), exceeds 

(b) the amount that would not have been so charged had the amount actually utilised by the 
assessee  for  the  purchase  or  construction  of  the  new  asset  within  the  period  specified  in  
sub-section (1) been the cost of the new asset, 

shall be charged under section 45 as income of the previous year in which the period of three years from 
the date of the transfer of the original asset expires; and 

1. The bracket and figure “(ii)” omitted byAct 11 of 1987, s. 23 (w.e.f. 1-4-1988). 
2. Subs. by s. 23, ibid., for “one year” (w.e.f. 1-4-1988). 
3. Ins. by s. 23, ibid. (w.e.f. 1-4-1988). 

293 

                                                           
(ii)  the  assessee  shall  be  entitled  to  withdraw  the  unutilised  amount  in  accordance  with  the 

scheme aforesaid. 

1* 

* 

* 

* 

*] 

2[54G. Exemption  of  capital  gains  on  transfer  of  assets  in  cases  of  shifting  of  industrial 
undertaking from urban area.—(1) Subject to the provisions of sub-section (2), where the capital gain 
arises from the transfer of a capital asset, being machinery or plant or building or land or any rights in 
building or land used for the purposes of the business of an industrial undertaking situate in an urban area, 
effected in the course of, or in consequence of, the shifting of such industrial undertaking (hereafter in 
this section referred to as the original asset) to any area (other than an urban area) and the assessee has 
within a period of one year before or three years after the date on which the transfer took place,— 

(a) purchased new machinery or plant for the purposes of business of the industrial undertaking in 

the area to which the said undertaking is shifted ; 

(b) acquired building or land or constructed building for the purposes of his business in the said 

area; 

(c) shifted the original asset and transferred the establishment of such undertaking to such area; 

and 

(d)  incurred  expenses  on  such  other  purpose  as  may  be  specified  in  a  scheme  framed  by  the 

Central Government for the purposes of this section, 

then, instead of the capital gain being charged to income-tax as income of the previous year in which the 
transfer took place, it shall be dealt with in accordance with the following provisions of this section, that 
is to say,— 

 (i) if the amount of the capital gain is greater than the cost and expenses incurred in relation to all 
or any of the purposes mentioned in clauses (a) to (d) (such cost and expenses being hereafter in this 
section referred to as the new asset), the difference between the  amount of the capital gain and the 
cost of the new asset shall be charged under section 45 as the income of the previous year ; and for 
the purpose of computing in respect of the new asset any capital gain arising from its transfer within a 
period of three years of its being purchased, acquired, constructed or transferred, as the case may be, 
the cost shall be nil ; or 

(ii) if the amount of the capital gain is equal to, or less than, the cost of the new asset, the capital 
gain shall not be charged under section 45; and for the purpose of computing in respect of the new 
asset any capital gain arising from its transfer within a period of three years of its being purchased, 
acquired, constructed or transferred, as the case may be, the cost shall be reduced by the amount of 
the capital gain. 

Explanation.—In this sub-section, “urban area” means any such area within the limits of a municipal 
corporation  or  municipality  as  the  Central  Government  may,  having  regard  to  the  population, 
concentration of industries, need for proper planning of the area and other relevant factors, by general or 
special order, declare to be an urban area for the purposes of this sub-section. 

1. The Explanation omitted by 18 of 1992, s. 31 (w.e.f. 1-4-1993). 
2. Ins. by Act 11 of 1987, s. 24 (w.e.f. 1-4-1988). 

294 

 
 
 
 
 
 
 
                                                           
(2)  The  amount  of  capital  gain  which  is  not  appropriated  by  the  assessee  towards  the  cost  and 
expenses incurred in relation to all or any of the purposes mentioned in clauses (a) to (d) of sub-section 
(1) within one year before the date on which the transfer of the original asset took place, or which is not 
utilised by him for all or any of the purposes aforesaid before the date of furnishing the return of income 
under section 139, shall be deposited by him before furnishing such return [such deposit being made in 
any  case  not  later  than  the  due  date  applicable  in  the  case  of  the  assessee  for  furnishing  the  return  of 
income  under  sub-section  (1)  of section  139]  in  an  account  in  any  such  bank  or  institution  as  may  be 
specified  in,  and  utilised  in  accordance  with,  any  scheme  which  the  Central  Government  may,  by 
notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of 
such deposit ; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee 
for all or any of the purposes aforesaid together with the amount, so deposited shall be deemed to be the 
cost of the new asset: 

Provided that if the amount deposited under this sub-section is not utilised wholly or partly for all or 
any of the purposes mentioned in clauses (a) to (d) of sub-section (1) within the period specified in that 
sub-section, then,— 

(i) the amount not so utilised shall be charged under section 45 as the income of the previous year 

in which the period of three years from the date of the transfer of the original asset expires; and 

(ii)  theassessee  shall  be  entitled  to  withdraw  such  amount  in  accordance  with  the  scheme 

aforesaid. 

1* 

* 

* 

* 

* 

2[54GA. Exemption  of  capital  gains  on  transfer  of  assets  in  cases  of  shifting  of  industrial 
undertaking  from  urban  area  to  any  Special  Economic  Zone.—(1)  Notwithstanding  anything 
contained  in section  54G,  where  the  capital  gain  arises  from  the  transfer  of  a  capital  asset,  being 
machinery  or  plant  or  building  or  land  or  any  rights  in  building  or  land  used  for  the  purposes  of  the 
business of an industrial undertaking situate in an urban area, effected in the course of, or in consequence 
of the shifting of such industrial undertaking to any Special Economic Zone, whether developed in any 
urban area or any other area and the assessee has within a period of one year before or three years after 
the date on which the transfer took place,— 

(a) purchased machinery or plant for the purposes of business of the industrial undertaking in the 

Special Economic Zone to which the said undertaking is shifted; 

(b)  acquired  building  or  land  or  constructed  building  for  the  purposes  of  his  business  in  the 

Special Economic Zone; 

(c) shifted the original asset and transferred the establishment of such undertaking to the Special 

Economic Zone; and 

(d)  incurred  expenses  on  such  other  purposes  as  may  be  specified  in  a  scheme  framed  by  the 

Central Government for the purposes of this section, 

1. The Explanation omitted by Act 18 of 1992, s. 32 (w.e.f. 1-4-1993). 
2. Ins. by Act 28 of 2005, s. 27 and the Second Schedule (w.e.f. 10-2-2006). 

295 

 
 
 
 
 
 
 
 
                                                           
then, instead of the capital gain being charged to income-tax as income of the previous year in which the 
transfer took place, it shall, subject to the provisions of sub-section (2), be dealt with in accordance with 
the following provisions of this section, that is to say,— 

 (i) if the amount of the capital gain is greater than the cost and expenses incurred in relation to all 
or any of the purposes mentioned in clauses (a) to (d) (such cost and expenses being hereafter in this 
section referred to as the new asset), the difference between the amount of the capital gain and the 
cost of the new asset shall be charged under section 45 as the income of the previous year; and for the 
purpose of computing in respect of the new asset any capital gain arising from its transfer within a 
period of three years of its being purchased, acquired, constructed or transferred, as the case may be, 
the cost shall be Nil; or 

(ii) if the amount of the capital gain is equal to, or less than, the cost of the new asset, the capital 
gain shall not be charged under section 45, and for the purpose of computing in respect of the new 
asset any capital gain arising from its transfer within a period of three years of its being purchased, 
acquired, constructed or transferred, as the case may be, the cost shall be reduced by the amount of 
the capital gain. 

Explanation.—In this sub-section,— 

(a)  “Special  Economic  Zone”  shall  have  the  meaning  assigned  to  it  in  clause  (za)  of  the 

Special Economic Zones Act, 2005; 

(b)  “urban  area”  means  any  such  area  within  the  limits  of  a  municipal  corporation  or 
municipality as the Central Government may, having  regard to the population, concentration of 
industries, need for proper planning of the area and other relevant factors, by general or special 
order, declare to be an urban area for the purposes of this sub-section. 

(2)  The  amount  of  capital  gain  which  is  not  appropriated  by  the  assessee  towards  the  cost  and 
expenses  incurred  in  relation  to  all  or  any  of  the  purposes  mentioned  in  clauses  (a)  to  (d)  of  
sub-section (1) within one year before the date on which the transfer of the original asset took place, or 
which  is  not  utilised  by  him  for  all  or  any  of  the  purposes  aforesaid  before  the  date  of  furnishing  the 
return of income under section 139, shall be deposited by him before furnishing such return [such deposit 
being made in any case not later than the due date applicable in the case of the assessee for furnishing the 
return of income under sub-section (1) of section 139] in an account in any such bank or institution as 
may be specified in, and utilised in accordance with, any scheme which the Central Government may, by 
notification, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for 
the purposes of sub-section (1), the amount, if any, already utilised by the assessee for all or any of the 
aforesaid purposes together with the amount so deposited shall be deemed to be the cost of the new asset: 

Provided that if the amount deposited under this sub-section is not utilised wholly or partly for all or 
any of the purposes mentioned in clauses (a) to (d) of sub-section (1) within the period specified in that 
sub-section, then,— 

(i) the amount not so utilised shall be charged under section 45 as the income of the previous year 

in which the period of three years from the date of the transfer of the original asset expires; and 

(ii)  the  assessee  shall  be  entitled  to  withdraw  such  amount  in  accordance  with  the  scheme 

aforesaid.] 

296 

1[54GB.  Capital  gain  on  transfer  of  residential  property  not  to  be  charged  in  certain  

cases.—(1) Where,— 

(i)  the  capital  gain  arises  from  the  transfer  of  a  long-term  capital  asset,  being  a  residential 
property  (a  house  or  a  plot  of  land),  owned  by  the  eligible  assessee  (herein  referred  to  as  the 
assessee); and 

(ii)  the  assessee,  before  the  due  date  of  furnishing  of  return  of  income  under  sub-section  (1) 
of section  139,  utilises  the  net  consideration  for  subscription  in  the  equity  shares  of  an  eligible 
company (herein referred to as the company); and 

(iii)  the  company  has,  within  one  year  from  the  date  of  subscription  in  equity  shares  by  the 

assessee, utilised this amount for purchase of new asset, 

then, instead of the capital gain being charged to income-tax as the income of the previous year in which 
the transfer takes place, it shall be dealt with in accordance with the following provisions of this section, 
that is to say,— 

(a) if the amount of the net consideration is greater than the cost of the new asset, then, so much 
of the capital gain as it bears to the whole of the capital gain the same proportion as the cost of the 
new asset bears to the net consideration, shall not be charged under section 45 as the income of the 
previous year; or 

(b) if the amount of the net consideration is equal to or less than the cost of the new asset, the 

capital gain shall not be charged under section 45 as the income of the previous year. 

(2) The amount of the net consideration, which has been received by the company for issue of shares 
to the assessee, to the extent it is not utilised by the company for the purchase of the new asset before the 
due date of furnishing of the return of income by the assessee under section 139, shall be deposited by the 
company, before the said due date in an account in any such bank or institution as may be specified and 
shall be utilised in accordance with any scheme which the Central Government may, by notification in the 
Official Gazette, frame in this behalf and the return furnished by the assessee shall be accompanied by 
proof of such deposit having been made. 

(3) For the purposes of sub-section (1), the amount, if any, already utilised by the company for the 
purchase of the new asset together with the amount deposited under sub-section (2) shall be deemed to be 
the cost of the new asset: 

Provided that if the amount so deposited is not utilised, wholly or partly, for the purchase of the new 

asset within the period specified in sub-section (1), then,— 

(i) the amount by which— 

(a) the amount of capital gain arising from the transfer of the residential property not charged 

under section 45 on the basis of the cost of the new asset as provided in sub-section (1), 

exceeds— 

(b) the amount that would not have been so charged had the amount actually utilised for the 
purchase of the new asset within the period specified in sub-section (1)been the cost of the new 
asset, 

shall be charged under section 45 as income of the assessee for the previous year in which the period 
of one year from the date of the subscription in equity shares by the assessee expires; and 

(ii) the company shall be entitled to withdraw such amount in accordance with the scheme. 

1. Ins. by Act 23 of 2012, s. 19 (w.e.f. 1-4-2013). 

297 

                                                           
(4)  If  the  equity  shares  of  the  company  or  the  new  asset  acquired  by  the  company  are  sold  or 
otherwise transferred within a period of five years from the date of their acquisition, the amount of capital 
gain  arising  from  the  transfer  of  the  residential  property  not  charged  under section  45 as  provided  in  
sub-section  (1)  shall  be  deemed  to  be  the  income  of  the  assessee  chargeable  under  the  head  “Capital 
gains”  of  the  previous  year  in  which  such  equity  shares  or  such  new  asset  are  sold  or  otherwise 
transferred, in addition to taxability of gains, arising on account of transfer of shares or of the new asset, 
in the hands of the assessee or the company, as the case may be. 

(5) The provisions of this section shall not apply to any transfer of residential property made after the 

31st day of March, 2017. 

1[Provided that in  case  of  an  investment  in  eligible  start-up,  the  provisions  of this  sub-section shall 
have the effect as if for the figures, letters and words “31st day of March, 2017”, the figures, letters and 
words “31st day of March, 2019” had been substituted.] 

(6) For the purposes of this section,— 

(a) “eligible assessee” means an individual or a Hindu undivided family; 

(b) “eligible company” means a company which fulfils the following conditions, namely:— 

(i) it is a company incorporated in India  during the period from the 1st day of April of the 
previous year relevant to the assessment year in which the capital gain arises to the due date of 
furnishing of return of income under sub-section (1) of section 139 by the assessee; 

(ii)  it  is  engaged  in  the  business  of  manufacture  of  an  article  or  a  thing 1[or  in  an  eligible 

business;] 

(iii) it is a company in which the assessee has more than fifty per cent. share capital or more 

than fifty per cent. voting rights after the subscription in shares by the assessee; and 

(iv)  it  is  a  company  which  qualifies  to  be  a  small  or  medium  enterprise  under  the  Micro, 

Small and Medium Enterprises Act, 2006 (27 of 2006) 1[or is an eligible start-up]; 

1[(ba) “eligible start-up” and “eligible business” shall have the meanings respectively assigned to 

them in Explanation below sub-section (4) of section 80-IAC;] 

(c) “net consideration” shall have the meaning assigned to it in the Explanation to section 54F; 

(d) “new asset” means new plant and machinery but does not include— 

(i)  any  machinery  or  plant  which,  before  its  installation  by  the  assessee,  was  used  either 

within or outside India by any other person; 

(ii) any machinery or plant installed in any office premises or any residential accommodation, 

including accommodation in the nature of a guest-house; 

(iii) any office appliances including computers or computer software; 

(iv) any vehicle; or 

(v) any machinery or plant, the whole of the actual cost of which is allowed as a deduction 
(whether  by  way  of  depreciation  or  otherwise)  in  computing  the  income  chargeable  under  the 
head “Profits and gains of business or profession” of any previous year.] 

1. The proviso ins. by Act 28 of 2016, s. 33 (1-4-2017). 

298 

                                                           
1[Provided that in the case of an eligible start-up, being a technology driven start-up so certified by 
the  Inter-Ministerial  Board  of  Certification  notified  by  the  Central  Government in  the  Official  Gazette, 
the new asset shall include computers or computer software.] 

2[54H.  Extension  of  time for  acquiring  new asset  or  depositing or investing amount  of  capital 
gain.—Notwithstanding anything contained in sections 54, 54B, 54D 3*** 4[, 54EC]  and 54F, where the 
transfer  of  the  original  asset  is  by  way  of  compulsory  acquisition  under  any  law  and  the  amount  of 
compensation awarded for such acquisition is not received by the assessee on the  date of such transfer, 
the period for acquiring the new asset by the assessee referred to in those sections or, as the case may be, 
the period available to the assessee under those sections for depositing or investing the amount of capital 
gain in relation to such compensation as is not received on the date of the transfer, shall be reckoned from 
the date of receipt of such compensation: 

Provided that  where  the  compensation  in  respect  of  transfer  of  the  original  asset  by  way  of 
compulsory acquisition under any law is received before the 1st day of April, 1991, the aforesaid period 
or periods, if expired, shall extend up to the 31st day of December, 1991.] 

55. Meaning  of  “adjusted”,  “cost  of  improvement”  and  “cost  of  acquisition”.—(1)  For  the 

purposes of 5[sections 48 and 49],— 

6* 

* 

* 

* 

* 

7[(b) “cost of any improvement”,— 

(1)  in  relation  to  a  capital  asset  being  goodwill  of  a  business  8[or  a  right  to  manufacture, 
produce or process any article or thing] 9[or right to carry on any business 10[or profession]] shall 
be taken to be nil ; and 

(2) in relation to any other capital asset,—] 

(i)  where  the  capital  asset  became  the  property  of  the  previous  owner  or  the  assessee 
before the 11[1st day of April, 2001], 12*** means all expenditure of a capital nature incurred 
in  making  any  additions  or  alterations  to  the  capital  asset  on  or  after  the  said  date  by  the 
previous owner or the assessee, and 

(ii) in any other case, means all expenditure of a capital nature incurred in making any 
additions or alterations to the capital asset by the assessee after it became his property, and, 
where the capital asset became the property of the assessee by any of the modes specified in 
13[sub-section (1) of section 49], by the previous owner, 

but does not include any expenditure which is deductible in computing the income chargeable under 
the  head  “Interest  on  securities”,  “Income  from  house  property”,  “Profits  and  gains  of  business  or 
profession”, or “Income from other sources”, and the expression “improvement” shall be construed 
accordingly. 

1. Ins. by Act 28 of 2016, s. 33 (w.e.f. 1-4-2017). 
2. Ins. by Act 49 of 1991, s. 21 (w.e.f. 1-10-1991). 
3. The figures and letter “, 54E” omitted by Act 18 of 1992, s. 33 (w.e.f 1-4-1992). 
4. Subs. by Act 14 of 2001, s. 33, for “, 54EA, 54EB” (w.e.f. 1-4-2001). 
5. Subs. by Act  46 of 1986, s. 32, for “sections 48, 49 and 50” (w.e.f. 1-4-1988). 
6. Clause (a) omitted by s. 32, ibid. (w.e.f. 1-4-1988). 
7. Subs. by 11 of 1987, s. 25, for clause (b) (w.e.f. 1-4-1988). 
8. Ins. by Act 26 of 1997, s. 19 (w.e.f. 1-4-1998). 
9. Ins. by Act 20 of 2002, s. 26 (w.e.f. 1-4-2003). 
10. Ins. by Act 28 of 2016, s. 34 (w.e.f. 1-4-2017). 
11.  Subs.  by  Act  7  of  2017,  s.  28,  for  “1st  day  of  April,  1981”  (w.e.f.  1-4-2018).  Earlier  “1st  day  of  April,  1974”  was 
substituted by Act 23 of 1986, s. 13, for “1st day of January, 1964” (w.e.f. 1-4-1987) and later “1981” was substituted 
by Act 18 of 1992, s. 34, for “1974” (w.e.f. 1-4-1993). 

12.  The  words  “and  the  fair  market  value  of  the  asset  on  that  day  is  taken  as  the  cost  of  acquisition  at  the  option  of  the 

assessee,” omitted by s. 34, ibid. (w.e.f. 1-4-1993). 

13. Subs. by Act 20 of 1967, s. 21, for “section 49” (w.e.f. 1-4-1967). 

299 

 
 
 
 
 
 
 
                                                           
 
(2) 1[For the purposes of sections 48 and 49, “cost of acquisition”,— 

2[(a) in relation to a capital asset, being goodwill of a business  3[or a trade mark or brand name 
associated with a business]  4[or a right to manufacture, produce or process any article or thing]5[or 
right  to  carry  on  any  business 6[or  profession]],  tenancy  rights,  stage  carriage  permits  or  loom 
hours,— 

 (i)  in  the  case  of  acquisition  of  such  asset  by  the  assessee  by  purchase  from  a  previous 

owner, means the amount of the purchase price; and 

(ii) in any other case [not being a case falling under sub-clauses (i) to (iv) of sub-section (1) 

of section 49], shall be taken to be nil ; 

(aa)  7[in a case where, by virtue of holding a capital asset, being a share or any other security, 
within the meaning of clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 
1956) (hereafter in this clause referred to as the financial asset), the assessee— 

(A) becomes entitled to subscribe to any additional financial asset; or 

(B) is allotted any additional financial asset without any payment, 

then, subject to the provisions of sub-clauses (i) and (ii) of clause (b),— 

(i)  in  relation  to  the  original  financial  asset,  on  the  basis  of  which  the  assessee  becomes 
entitled  to  any  additional  financial  asset,  means  the  amount  actually  paid  for  acquiring  the 
original financial asset; 

(ii) in relation to any right to renounce the said entitlement to subscribe to the financial asset, 
when such right is renounced by the assessee in favour of any person, shall be taken to be nil in 
the case of such assessee; 

(iii) in relation to the financial asset, to which the assessee has subscribed on the basis of the 

said entitlement, means the amount actually paid by him for acquiring such asset; 

8[(iiia) in relation to the financial asset allotted to the assessee without any payment and on 
the  basis  of  holding  of  any  other  financial  asset,  shall  be  taken  to  be nil in  the  case  of  such 
assessee;] and 

(iv)  in  relation  to any  financial  asset  purchased  by  any  person in  whose  favour  the right to 
subscribe to such asset has been renounced, means the aggregate of the amount of the purchase 
price  paid  by  him  to  the  person  renouncing  such  right  and  the  amount  paid  by  him  to  the 
company or institution, as the case may be, for acquiring such financial asset;] 

9[(ab)  in  relation  to  a  capital  asset,  being  equity  share  or  shares  allotted  to  a  shareholder  of  a 
recognised  stock  exchange  in  India  under  a  scheme  for  10[demutualisation  or  corporatisation] 
approved by the Securities and Exchange Board of India established under section 3 of the Securities 
and Exchange Board of India Act, 1992 (15 of 1992), shall be the cost of acquisition of his original 
membership of the exchange: 

1.  Subs.  by  Act  11  of  1987,  s.  25,  for  the  “For  the  purposes  of  sections  48  and  49,  “cost of  acquisition”,  in  relation  to a 

capital asset,—” (w.e.f. 1-4-1988). 

2. Subs. by Act 32 of 1994, s. 18, for clause (a) (w.e.f. 1-4-1995).  
3. Ins. by 14 of 2001, s. 34 (w.e.f. 1-4-2002). 
4. Ins. by Act 26 of 1997, s. 19 (w.e.f. 1-4-1998). 
5. Ins. by 20 of 2002, s. 26 (w.e.f. 1-4-2003). 
6. Ins. by Act 28 of 2016, s. 34 (w.e.f. 1-4-2017). 
7.  Subs.  by  Act  22  of  1995,  s.  14,  for  “in  a  case  where,  “and  ending  with  “sub-clauses  (i)  and  (ii)  of  clause  (b)”  

(w.e.f. 1-4-1996). 

8. Ins. by Act 22 of 1995, s. 14 (w.e.f. 1-4-1996). 
9. Ins. by Act 14 of 2001, s. 34 (w.e.f. 1-4-2002). 
10. Subs. by Act 32 of 2003, s. 31, for “corporatisation” (w.e.f. 1-4-2004). 

300 

                                                           
1[(ac) subject to the provisions of sub-clauses (i) and (ii) of clause (b), in relation to a long-term 
capital asset, being an equity share in a company or a unit of an equity oriented fund or a unit of a 
business  trust  referred  to  in  section  112A,  acquired  before  the  1st  day  of  February,  2018,  shall  be 
higher of— 

(i) the cost of acquisition of such asset; and 

(ii) lower of— 

(A) the fair market value of such asset; and 

(B) the full value of consideration received or accruing as a result of the transfer of the 

capital asset. 

Explanation.—For the purposes of this clause,— 

(a) “fair market value” means,— 

(i) in a case where the capital asset is listed on any recognised stock exchange as on the 
31st day of January, 2018, the highest price of the capital asset quoted on such exchange on 
the said date: 

Provided that where there is no trading in such asset on such exchange on the 31st day of 
January,  2018,  the  highest  price  of  such  asset  on  such  exchange  on  a  date  immediately 
preceding the 31st day of January, 2018 when such asset was traded on such exchange shall 
be the fair market value; 

(ii) in  a  case  where the capital asset is a  unit  which is  not listed  on  a  recognised  stock 
exchange as on the 31st day of January, 2018, the net asset value of such unit as on the said 
date; 

(iii) in a case where the capital asset is an equity share in a company which is— 

(A) not listed on a recognised stock exchange as on the 31st day of January, 2018 but 

listed on such exchange on the date of transfer; 

(B) listed on a recognised stock exchange on the date of transfer and which became 
the  property  of  the  assessee  in  consideration  of  share  which  is  not  listed  on  such 
exchange  as  on  the  31st  day  of  January,  2018  by  way  of  transaction  not  regarded  as 
transfer under section 47, 

an amount which bears to the cost of acquisition the same proportion as Cost Inflation Index for 
the financial year 2017-2018 bears to the Cost Inflation Index for the first year in which the asset 
was held by the assessee or for the year beginning on the first day of April, 2001, whichever is 
later; 

(b)  “Cost  Inflation  Index”  shall  have  the  meaning  assigned  to  it  in  clause  (v)  of  the 

Explanation to section 48; 

(c)  “recognised  stock  exchange”  shall  have  the  meaning  assigned  to  it  in  clause  (ii)  of 

Explanation 1 to clause (5) of section 43.] 

1. Ins. by Act 13 of 2018, s. 22 (w.e.f. 1-4-2018). 

301 

                                                           
1[Provided that the cost of a capital asset, being trading or clearing rights of the recognised 
stock exchange acquired by a shareholder who has been allotted equity share or shares under such 
scheme of demutualisation or corporatisation, shall be deemed to be nil;] 

(b) in relation to any other capital asset,—] 

   (i)  where  the  capital  asset  became  the  property  of  the  assessee  before  the  2[1st  day  of          

April, 2001], means the cost of acquisition of the asset to the assessee or the fairmarket value of 
the asset on the 2[1st day of April, 2001], at the option of the assessee; 

(ii) where the capital asset became the property of the assessee by any of the modes specified 
in  3[sub-section  (1)  of section  49],  and  the  capital  asset  became  the  property  of  the  previous 
owner  before  the  2[1st  day  of  April,  2001],  means  the  cost  of  the  capital  asset  to  the  previous 
owner or the fairmarket value of the asset on the  2[1st day of April, 2001], at the option of the 
assessee; 

(iii)  where  the  capital  asset  became  the  property  of  the  assessee  on  the  distribution  of  the 
capital  assets  of  a  company  on  itsliquidation  and  the  assessee  has  been  assessed  to  income-tax 
under  the  head  “Capital  gains”  in  respect  of  that  asset  under section  46,  means  the  fairmarket 
value of the asset on the date of distribution; 

4* 

* 

* 

* 

* 

5[(v) where the capital asset, being a share or a stock of a company, became the property of 

the assessee on— 

(a)  the  consolidation and division  of  all  or  any  of  the  sharecapital  of the  company  into 

shares of larger amount than its existing shares, 

(b) the conversion of any shares of the company into stock, 

(c) the re-conversion of any stock of the company into shares, 

(d) the sub-division of any of the shares of the company into shares of smaller amount, or 

(e) the conversion of one kind of shares of the company into another kind, 

means the cost of acquisition of the asset calculated with reference to the cost of acquisition of the 
shares or stock from which such asset is derived.] 

(3) Where the cost for which the previous owner acquired the property cannot be ascertained, the cost 
of acquisition to the previous owner means the fair market value on the date on which the  capital asset 
became the property of the previous owner. 

6[55A. Reference  to  Valuation  Officer.—With  a  view  to  ascertaining  the  fair  market  value  of  a 
capital asset for the purposes of this Chapter, the  7[Assessing Officer] may refer the valuation of capital 
asset to a Valuation Officer— 

(a) in  a  case  where  the  value  of the  asset  as  claimed by  the  assessee  is  in  accordance  with the 
estimate  made  by  a  registered  valuer,  if  the  7[Assessing  Officer]  is  of  opinion  that  the  value  so 
claimed 8[is at variance with its fair market value]; 

1. Ins. by Act 32 of 2003, s. 31 (w.e.f. 1-4-2004). 
2.  Subs.  by  Act  7  of  2017,  s.  28,  for  “1st  day  of  April,  1981”  (w.e.f.  1-4-2018).  Earlier  “1st  day  of  April,  1974”  was 
substituted by Act 23 of 1986, s. 13, for “1st day of January, 1964” (w.e.f. 1-4-1987) and later “1981” was substituted 
by Act 18 of 1992, s. 34, for “1974” (w.e.f. 1-4-1993). 

3. Subs. by Act 20 of 1967, s. 21, for “section 49” (w.e.f. 1-4-1967). 
4. Clause (iv) omitted by Act 13 of 1966, s. 14 (w.e.f 1-4-1967). 
5. Ins. by Act 5 of 1964, s. 14 (w.e.f. 1-4-1964). 
6. Ins. by Act 45 of 1972, s. 2 (w.e.f. 1-1-1973). 
7. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
8. Subs. by Act 23 of 2012, s. 20, for “is less than its fair market value” (w.e.f. 1-7-2012). 

302 

 
 
 
 
 
 
 
                                                           
 
(b) in any other case, if the 1[Assessing Officer] is of opinion— 

 (i)  that  the  fair  market  value  of  the  asset  exceeds  the  value  of  the  asset  as  claimed  by  the 
assessee by more than such percentage of the value of the asset as so claimed or by more than 
such amountas may be prescribed in this behalf; or 

(ii)  that  having  regard  to  the  nature  of  the  asset  and  other  relevant  circumstances,  it  is 

necessary so to do, 

and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 
16A, clauses (ha) and (i) of sub-section (1) and sub-sections (3A) and (4) of section 23, sub-section (5) of 
section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall with 
the  necessary  modifications,  apply  in  relation  to such  reference as  they  apply  in  relation to  a reference 
made by the 1[Assessing Officer] under sub-section (1) of section 16A of that Act. 

Explanation.—In this section, “Valuation Officer” has the same meaning, as in clause (r) of section 2 

of the Wealth-tax Act, 1957 (27 of 1957).] 

56. Income  from  other  sources.—(1)  Income  of  every  kind  which  is  not  to  be  excluded  from  the 
total  income  under  this  Act  shall  be  chargeable  to  income-tax  under  the  head  “Income  from  other 
sources”, if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E. 

(2)  In  particular,  and  without  prejudice  to  the  generality  of  the  provisions  of  sub-section  (1),  the 
following  incomes,  shall  be  chargeable  to  income-tax  under  the  head  “Income  from  other  sources”, 
namely:— 

 (i) dividends; 

2[(ia) income referred to in sub-clause (viii) of clause (24) of section 2;] 

3[(ib) income referred to in sub-clause (ix) of clause (24) of section 2;] 

4[(ic)  income  referred  to  in  sub-clause  (x)  of  clause  (24)  of section  2,  if  such  income  is  not 

chargeable to income-tax under the head “Profits and gains of business or profession”;] 

5[(id) income by way of interest on securities, if the income is not chargeable to income-tax under 

the head “Profits and gains of business or profession”;] 

(ii)  income  from  machinery,  plant  or  furniture  belonging  to  the  assessee  and  let  on  hire,  if  the 

income is not chargeable to income-tax under the head “Profits and gains of business or profession”; 

(iii)  where  an  assessee  lets  on  hire  machinery,  plant  or  furniture  belonging  to  him  and  also 
buildings, and the letting of the buildings is inseparable from the letting of the said machinery, plant 
or furniture, the income from such letting, if it is not chargeable to income-tax under the head “Profits 
and gains of business or profession”; 

6[(iv)  income  referred  to  in  sub-clause  (xi)  of  clause  (24)  of section  2,  if  such  income  is  not 
chargeable to income-tax under the head “Profits and gains of business or profession” or under the 
head “Salaries”;] 

1. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2. Ins. by Act 10 of 1965, s. 18 (w.e.f. 1-4-1965). 
3. Ins. by Act 16 of 1972, s. 10 (w.e.f. 1-4-1972). 
4. Ins. by Act 11 of 1987, s. 26 (w.e.f. 1-4-1988). 
5. Ins. by Act 26 of 1988, s.18 (w.e.f. 1-4-1989). 
6. Ins. by Act 33 of 1996, s. 21 (w.e.f. 1-10-1996). 

303 

                                                           
1[(v)  where  any  sum  of  money  exceeding  twenty-five  thousand  rupees  is  received  without 
consideration by an individual or a Hindu undivided family from any person on or after the 1st day of 
September, 2004 2[but before the 1st day of April, 2006], the whole of such sum: 

Provided that this clause shall not apply to any sum of money received— 

(a) from any relative; or 

(b) on the occasion of the marriage of the individual; or 

(c) under a will or by way of inheritance; or 

(d) in contemplation of death of the payer; or 

3[(e) from any local authority as defined in the Explanation to clause (20) of section 10; or 

(f) from  any  fund  or  foundation  or  university  or  other  educational  institution  or  hospital or 

other medical institution or any trust or institution referred to in clause (23C) of section 10; or 

(g) from any trust or institution registered under section 12AA.] 

Explanation.—For the purposes of this clause, “relative” means— 

(i) spouse of the individual; 

(ii) brother or sister of the individual; 

(iii) brother or sister of the spouse of the individual; 

(iv) brother or sister of either of the parents of the individual; 

(v) any lineal ascendant or descendant of the individual; 

(vi) any lineal ascendant or descendant of the spouse of the individual; 

(vii) spouse of the person referred to in clauses (ii) to (vi);] 

4[(vi) where any sum of money, the aggregate value of which exceeds fifty thousand rupees, 
is received without consideration, by an individual or a Hindu undivided family, in any previous 
year from any person or persons on or after the 1st day of April, 2006 5[but before the 1st day of 
October, 2009], the whole of the aggregate value of such sum: 

Provided that this clause shall not apply to any sum of money received— 

(a) from any relative; or 

(b) on the occasion of the marriage of the individual; or 

(c) under a will or by way of inheritance; or 

(d) in contemplation of death of the payer; or 

(e) from any local authority as defined in the Explanation to clause (20) of section 10; or 

1. Ins. by Act 23 of 2004, s. 13 (w.e.f. 1-4-2005). 
2. Ins. by Act 29 of 2006, s. 10 (w.e.f. 1-4-2006). 
3. Ins. by Act 22 of 2007, s. 19 (w.e.f. 1-4-2005). 
4. Ins. by Act 29 of 2006, s. 10 (w.e.f. 1-4-2007). 
5. Ins. by Act 33 of 2009, s. 26 (w.e.f. 1-10-2009). 

304 

 
                                                           
(f) from any fund or foundation or university or other educational institution or hospital 
or  other  medical  institution  or  any  trust  or  institution  referred  to  in  clause  (23C)  of           
section 10; or 

(g) from any trust or institution registered under section 12AA. 

Explanation.—For the purposes of this clause, “relative” means— 

(i) spouse of the individual; 

(ii) brother or sister of the individual; 

(iii) brother or sister of the spouse of the individual; 

(iv) brother or sister of either of the parents of the individual; 

(v) any lineal ascendant or descendant of the individual; 

(vi) any lineal ascendant or descendant of the spouse of the individual; 

(vii) spouse of the person referred to in clauses (ii) to (vi);] 

1[(vii) where an individual or a Hindu undivided family receives, in any previous year, from 
any person or persons on or after the 1st day of October, 2009 2[but before the 1st day of April, 
2017],— 

(a) any sum of money, without consideration, the aggregate value of which exceeds fifty 

thousand rupees, the whole of the aggregate value of such sum; 

3[(b) any immovable property,— 

(i)  without  consideration,  the  stamp  duty  value  of  which  exceeds  fifty  thousand 

rupees, the stamp duty value of such property; 

(ii) for a consideration which is less than the stamp duty value of the property by an 
amount  exceeding  fifty  thousand  rupees,  the  stamp  duty  value  of  such  property  as 
exceeds such consideration: 

Provided that where the date of the agreement fixing the amount of consideration for the 
transfer of immovable property and the date of registration are not the same, the stamp duty 
value on the date of the agreement may be taken for the purposes of this sub-clause: 

Provided  further that  the  said  proviso  shall  apply  only  in  a  case  where  the  amount  of 
consideration referred to therein, or a part thereof, has been paid by any mode other than cash 
on or before the date of the agreement for the transfer of such immovable property;] 

(c) any property, other than immovable property,— 

(i)  without  consideration,  the  aggregate  fair  market  value  of  which  exceeds  fifty 

thousand rupees, the whole of the aggregate fair market value of such property; 

(ii)  for  a  consideration  which  is  less  than  the  aggregate  fair  market  value  of  the 
property by an amount exceeding fifty thousand rupees, the aggregate fair market value 
of such property as exceeds such consideration: 

Provided that  where  the  stamp  duty  value  of  immovable  property  as  referred  to  in 
sub-clause  (b)  is  disputed  by  the  assessee  on  grounds  mentioned  in  sub-section  (2) 
of section  50C,  the  Assessing  Officer  may  refer  the  valuation  of  such  property  to  a 

1. Ins. by Act 33 of 2009, s. 26 (w.e.f. 1-10-2009). 
2. Ins. by Act 7 of 2017, s. 29 (w.e.f. 1-4-2017). 
3.. Ins. by Act 17 of 2013, s. 11 (w.e.f. 1-4-2014). 

305 

 
                                                           
Valuation  Officer,  and  the  provisions  of section  50C and  sub-section  (15)  of  section 
155 shall, as far as may be, apply in relation to the stamp duty value of such property for 
the  purpose  of  sub-clause  (b)  as  they  apply  for  valuation  of  capital  asset  under  those 
sections: 

Provided  further that  this  clause  shall  not  apply  to  any  sum  of  money  or  any  property 

received— 

(a) from any relative; or 

(b) on the occasion of the marriage of the individual; or 

(c) under a will or by way of inheritance; or 

(d) in contemplation of death of the payer or donor, as the case may be; or 

(e) from any local authority as defined in the Explanation to clause (20) of section 10; or 

(f) from any fund or foundation or university or other educational institution or hospital 
or other medical institution or any trust or institution referred to in clause (23C) ofsection 10; 
or 

(g) from any trust or institution registered under 1[section 12AA; or] 

2[(h) by way of transaction not regarded as transfer under clause (vicb) or clause (vid) or 

clause (vii) of section 47.] 

Explanation.—For the purposes of this clause,— 

(a)  “assessable”  shall  have  the  meaning  assigned  to  it  in  the Explanation  2 to  sub-section  (2) 

of section 50C; 

(b)  “fair  market  value”  of  a  property,  other  than  an  immovable  property,  means  the  value 

determined in accordance with the method as may be prescribed; 

(c)  “jewellery”  shall  have  the  meaning  assigned  to  it  in  the Explanation to  sub-clause  (ii)  of 

clause (14) of section 2; 

(d) “property” 3[means the following capital asset of the assessee, namely:—] 

(i) immovable property being land or building or both; 

(ii) shares and securities; 

(iii) jewellery; 

(iv) archaeological collections; 

(v) drawings; 

(vi) paintings; 

(vii) sculptures; 4*** 

(viii) any work of art; 5[or] 

5[(ix) bullion;] 

1. Subs. by Act 28 of 2016, s. 35, for “section 12AA” (w.e.f. 1-4-2017). 
2. Ins. by s. 35, ibid. (w.e.f. 1-4-2017). 
3. Subs. by Act 14 of 2010, s. 21, for “means—” (w.r.e.f. 1-10-2009). 
4. The word “or” omitted by s. 21, ibid. (w.e.f. 1-6-2010). 
5. Ins. by s. 21, ibid. (w.e.f. 1-6-2010). 

306 

                                                           
 
1[(e) “relative” means,— 

(i) in case of an individual— 

(A) spouse of the individual; 

(B) brother or sister of the individual; 

(C) brother or sister of the spouse of the individual; 

(D) brother or sister of either of the parents of the individual; 

(E) any lineal ascendant or descendant of the individual; 

(F) any lineal ascendant or descendant of the spouse of the individual; 

(G) spouse of the person referred to in items (B) to (F); and 

(ii) in case of a Hindu undivided family, any member thereof;] 

(f) “stamp duty value” means the value adopted or assessed or assessable by any authority of the 
Central Government or a State Government for the purpose of payment of stamp duty in respect of an 
immovable property;] 

2[(viia) where a firm or a company not being a company in which the public are substantially 
interested, receives, in any previous year, from any person or persons, on or after the 1st day of 
June, 2010 3[but before the 1st day of April, 2017], any property, being shares of a company not 
being a company in which the public are substantially interested,— 

 (i)  without  consideration,  the  aggregate  fair  market  value  of  which  exceeds  fifty 

thousand rupees, the whole of the aggregate fair market value of such property; 

(ii) for a consideration which is less than the aggregate fair market value of the property 
by  an  amount  exceeding  fifty  thousand  rupees,  the  aggregate  fair  market  value  of  such 
property as exceeds such consideration: 

Provided that  this  clause  shall  not  apply  to  any  such  property  received  by  way  of  a 
transaction not regarded as transfer under clause (via) or clause (vic) or clause (vicb) or clause 
(vid) or clause (vii) of section 47. 

Explanation.—For  the  purposes  of  this  clause,  “fair  market  value”  of  a  property,  being  shares  of a 
company  not  being  a  company  in  which  the  public  are  substantially  interested, shall  have  the  meaning 
assigned to it in the Explanation to clause (vii);] 

1. Ins. by Act 23 of 2012, s. 21 (w.e.f. 1-10-2009). 
2. Ins. by Act 14 of 2010, s. 21 (w.e.f. 1-6-2010). 
3. Ins. by Act 7 of 2017, s. 29 (w.e.f. 1-4-2017). 

307 

                                                           
1[(viib)  where  a  company,  not  being  a  company  in  which  the  public  are  substantially 
interested, receives, in any previous year, from any person being a resident, any consideration for 
issue of shares that exceeds the face value of such shares, the aggregate consideration received for 
such shares as exceeds the fair market value of the shares: 

Provided that  this  clause  shall  not  apply  where  the  consideration  for  issue  of  shares  is 

received— 

 (i) by a venture capital undertaking from a venture capital company or a venture capital 

fund; or 

(ii) by  a  company  from  a class  or  classes  of  persons  as  may  be  notified  by  the  Central 

Government in this behalf. 

Explanation.—For the purposes of this clause,— 

(a) the fair market value of the shares shall be the value— 

(i) as may be determined in accordance with such method as may be prescribed; or 
(ii) as may be substantiated by the company to the satisfaction of the Assessing Officer, based 
on  the  value,  on  the  date  of  issue  of  shares,  of  its  assets,  including  intangible  assets  being 
goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business 
or commercial rights of similar nature, 

whichever is higher; 

(b)  “venture  capital  company”,  “venture  capital  fund”  and  “venture  capital  undertaking”  shall 
have  the  meanings  respectively  assigned  to  them  in  clause  (a),  clause  (b)  and  clause  (c) 
of 2[Explanation] to clause (23FB) of section 10;] 

3[(viii)  income  by  way  of  interest  received  on  compensation  or  on  enhanced  compensation 

referred to in clause (b) of section 145A;] 

4[(ix) any sum of money received as an advance or otherwise in the course of negotiations for 

transfer of a capital asset, if,— 

(a) such sum is forfeited; and 
(b) the negotiations do not result in transfer of such capital asset.] 

5[(x) where any person receives, in any previous year, from any person or persons on or after 

the 1st day of April, 2017,— 

(a) any sum of money, without consideration, the aggregate value of which exceeds fifty 

thousand rupees, the whole of the aggregate value of such sum; 

(b) any immovable property,— 

(A)  without  consideration,  the  stamp  duty  value  of  which  exceeds  fifty  thousand 

rupees, the stamp duty value of such property; 

6[(B)  for  a  consideration,  the  stamp  duty  value  of  such  property  as  exceeds  such 
consideration,  if  the  amount  of  such  excess  is  more  than  the  higher  of  the  following 
amounts, namely:–– 

(i) the amount of fifty thousand rupees; and 
(ii) the amount equal to five per cent. of the consideration:] 
Provided that where the date of agreement fixing the amount of consideration for 
the transfer of immovable property and the date of registration are not the same, the 
stamp  duty  value  on  the  date  of  agreement  may  be  taken  for  the  purposes  of  this            
sub-clause:  

1. Ins. by Act 23 of 2012, s. 21 (w.e.f. 1-4-2013). 
2. Subs. by Act 17 of 2013, s. 11, for “Explanation 1” (w.e.f. 1-4-2014). 
3. Ins. by Act 33 of 2009, s. 26 (w.e.f. 1-4-2010). 
4. Ins. by Act 25 of 2014, s. 25 (w.e.f. 1-4-2015). 
5. Ins. by Act 7 of 2017, s. 29 (w.e.f. 1-4-2017) 
6. Subs. by Act 13 of 2018, s. 23, for item (B) (w.e.f. 1-4-2019). 

308 

                                                           
Provided  further  that  the  provisions  of  the  first  proviso  shall  apply  only  in  a  case 
where the amount of consideration referred to therein, or a part thereof, has been paid by 
way of an account payee cheque or an account payee bank draft or by use of electronic 
clearing system through a bank account, on or before the date of agreement for transfer of 
such immovable property: 

Provided also that where the stamp duty value of immovable property is disputed by 
the  assessee  on  grounds  mentioned  in  sub-section  (2)  of  section  50C,  the  Assessing 
Officer  may  refer  the  valuation  of  such  property  to  a  Valuation  Officer,  and  the 
provisions  of  section  50C  and  sub-section  (15)  of  section  155  shall,  as  far  as  may  be, 
apply  in  relation  to  the  stamp  duty  value  of  such  property  for  the  purpose  of  this         
sub-clause as they apply for valuation of capital asset under those sections;  

(c) any property, other than immovable property,— 

(A)  without  consideration,  the  aggregate  fair  market  value  of  which  exceeds  fifty 

thousand rupees, the whole of the aggregate fair market value of such property; 

(B)  for  a  consideration  which  is  less  than  the  aggregate  fair  market  value  of  the 
property by an amount exceeding fifty thousand rupees, the aggregate fair market value 
of such property as exceeds such consideration:  

Provided  that  this  clause  shall  not  apply  to  any  sum  of  money  or  any  property 

received— 

(I) from any relative; or 

(II) on the occasion of the marriage of the individual; or 

(III) under a will or by way of inheritance; or 

(IV) in contemplation of death of the payer or donor, as the case may be; or 

(V)  from  any  local  authority  as  defined  in  the  Explanation  to  clause  (20)  of 

section 10; or  

(VI) from any fund or foundation or university or other educational institution or 
hospital  or  other  medical  institution  or  any  trust  or  institution  referred  to  in         
clause (23C) of section 10; or 

(VII)  from  or  by  any  trust  or  institution  registered  under  section  12A  or          

section 12AA; or 

(VIII)  by  any  fund  or  trust  or  institution  or  any  university  or  other  educational 
institution or any hospital or other medical institution referred to in sub-clause (iv) or 
sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10; or 

(IX)  by  way  of  transaction  not  regarded  as  transfer  under  clause  (i)  or  1[clause 
(iv)  or  clause  (v)  or]  clause  (vi)  or  clause  (via)  or  clause  (viaa)  or  clause  (vib)  or 
clause (vic) or clause (vica) or clause (vicb) or clause (vid) or clause (vii) of section 
47; or 

(X) from an individual by a trust created or established solely for the benefit of 

relative of the individual. 

Explanation.—For the purposes of this clause, the expressions “assessable”, “fair market 
value”,  “jewellery”,  “property”,  “relative”  and  “stamp  duty  value”  shall  have  the  same 
meanings as respectively assigned to them in the Explanation to clause (vii).] 
2[(xi)  any  compensation  or  other  payment,  due  to  or  received  by  any  person,  by  whatever 
name  called,  in  connection  with  the  termination  of  his  employment  or  the  modification  of  the 
terms and conditions relating thereto.] 

1. Ins. by Act 13 of 2018, s. 23 (w.e.f. 1-4-2018). 
2. Ins. by s. 23, ibid. (w.e.f. 1-4-2019). 

309 

                                                           
57. Deductions.—The  income  chargeable  under  the  head  “Income  from  other  sources”  shall  be 

computed after making the following deductions, namely:— 

(i)  1[in the case of dividends, other than dividends referred to in section 115-O],  2[or interest on 
securities], any reasonable sum paid by way of commission or remuneration to a banker or any other 
person for the purpose of realising such dividend 2[or interest] on behalf of the assessee; 

3[(ia)  in  the  case  of  income  of  the  nature  referred  to  in  sub-clause  (x)  of  clause  (24)  of                  

section 2 which is chargeable to income-tax under the head “Income from other sources”, deductions, 
so far as may be, in accordance with the provisions of clause (va) of sub-section (1) of section 36;] 

(ii) in  the  case  of  income  of  the  nature  referred  to in  clauses (ii) and (iii)  of sub-section  (2)  of 
section  56,  deductions,  so  far  as  may  be,  in  accordance  with  the  provisions  of  sub-clause  (ii)  of  
clause  (a)  and  clause  (c)  of  section  30,  section  31 and  4[sub-sections  (1)  5***  and  (2)  of                     
section 32] and subject to the provisions of 6[section 38]; 

7[(iia)  in  the  case  of  income  in  the  nature  of  family  pension,  a  deduction  of  a  sum  equal  to               

thirty-three and one-third per cent of such income or 8[fifteen thousand rupees], whichever is less. 

Explanation.—For  the  purposes  of  this  clause,  “family  pension”  means  a  regular  monthly  amount 

payable by the employer to a person belonging to the family of an employee in the event of his death;] 

(iii) any other expenditure (not being in the nature of capital expenditure) laid out or expended 

wholly and exclusively for the purposeof making or earning such income; 

9[(iv)  in  the  case  of  income  of  the  nature  referred  to  in  clause  (viii)  of  sub-section  (2)  of        

section  56,  a  deduction  of  a  sum  equal  to  fifty  per  cent  of  such  income  and  no  deduction  shall  be 
allowed under any other clause of this section.] 

10* 
11* 

* 

* 

* 

* 

* 

* 

* 

* 

58.  Amounts  not  deductible.—12[(1)]  Notwithstanding  anything  to  the  contrary  contained  in                 

section 57, the following amounts shall not be deductible in computing the income chargeable under the 
head “Income from other sources”, namely:— 

(a) in the case of any assessee,— 

 (i) any personal expenses of the assessee; 
13[(ia) any expenditure of the nature referred to in sub-section (12) of section 40A;] 

(ii) any interest chargeable under this Act which is payable outside India (not being interest 
on a loan issued for public subscription before the 1st day of April, 1938) on which tax has not 
been paid or deducted under Chapter XVII-B 14***; 

(iii) any payment which is chargeable under the head “Salaries”, if it is payable outside India, 

unless tax has been paid thereon or deducted therefrom under Chapter XVII-B; 

1. Subs. by Act 32 of 2003, s. 32, for “in the case of dividends” (w.e.f. 1-4-2004). 
2. Ins. by Act 26 of 1988, s.19 (w.e.f. 1-4-1989). 
3.  Ins. by Act 11 of 1987, s. 27 (w.e.f. 1-4-1988). 
4. Subs. by Act 42 of 1970, s. 14, for “sub-sections (1) and (2) of section 32” (w.e.f. 1-4-1970). 
5. The brackets, figure and letter “(1A)” omitted by Act 46 of 1986, s. 32 (w.e.f. 1-4-1988). 
6.  Subs. by s. 32, ibid., for “sections 34 and 38” (w.e.f. 1-4-1988). 
7. Ins. by Act 13 of 1989, s. 13 (w.e.f. 1-4-1990). 
8. Subs. by Act 26 of 1997, s. 20, for “twelve thousand rupees” (w.e.f. 1-4-1998). 
9. Ins. by Act 33 of 2009, s. 27 (w.e.f. 1-4-2010). 
10. The proviso omitted by Act 32 of 1994, s. 19 (w.e.f. 1-1995). 
11. The Explanation omitted by Act 26 of 1988, s. 19 (w.e.f. 1-4-1989). 
12. Section 58 renumbered as sub-section (1) thereof by Act 19 of 1968, s.8 (w.e.f. 1-4-1968). 
13. Ins. by Act 32 of 1985, s. 15 (w.e.f. 1-4-1986). 
14.  The  words  “and  in  respect  of  which  there  is  no  person  in  India  who  may  be  treated  as  in  agent  under  section  163” 

omitted by Act 26 of 1988, s. 20 (w.e.f. 1-4-1989). 

310 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
1* 

2* 

* 

* 

* 

* 

* 

* 

* 

* 

3[(1A) The provisions of  4[sub-clauses (ia) and (iia)] of clause (a) of section 40 shall, so far as may 
be, apply in computing the income chargeable under the head “Income from other sources” as they apply 
in computing the income chargeable under the head “Profits and gains of business or profession”.] 

5[(2) The provisions of section 40A shall, so far as may be, apply in computing the income chargeable 
under the head “Income from other sources” as they apply in computing the income chargeable under the 
head “Profits and gains of business or profession”.] 

6[(3) In the case of an assessee, being a foreign company, the provisions of section 44D shall, so far 
as  may  be,  apply  in  computing  the  income  chargeable  under  the  head  “Income  from  other  sources”  as 
they  apply  in  computing  the  income  chargeable  under  the  head  “Profits  and  gains  of  business  or 
profession”.] 

7[(4)  In  the  case  of  an  assessee  having  income  chargeable  under  the  head  “Income  from  other 
sources”, no deduction in respect of any expenditure or allowance in connection with such income shall 
be  allowed  under  any  provision  of  this  Act  in  computing  the  income  by  way  of  any  winnings  from 
lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from 
gambling or betting of any form or nature, whatsoever: 

Provided that  nothing  contained  in  this  sub-section  shall  apply  in  computing  the  income  of  an 
assessee,  being  the  owner of  horses  maintained by  him  for  running  in  horse races,  from  the  activity  of 
owning and maintaining such horses. 

Explanation.—For  the  purposes  of  this  sub-section,  “horse  race”  means  a  horse  race  upon  which 

wagering or betting may be lawfully made.] 

59. Profits chargeable to tax.—(1) The provisions of sub-section (1) of section 41 shall apply, so far 
as  may  be,  in  computing  the  income  of  an  assessee  under  section  56,  as  they  apply  in  computing  the 
income of an assessee under the head “Profits and gains of business or profession”. 

8* 
9* 

* 

* 

* 

* 

CHAPTER V 

* 

* 

* 

* 

INCOME OF OTHER PERSONS, INCLUDED IN ASSESSEE’S TOTAL INCOME 

60. Transfer of income where there is no transfer of assets.—All income arising to any person by 
virtue of a transfer whether revocable or not and whether effected before or after the commencement of 
this  Act  shall,  where  there  is  no  transfer  of  the  assets  from  which  the  income  arises,  be  chargeable  to 
income-tax as the income of the transferor and shall be included in his total income. 

61. Revocable transfer of assets.—All income arising to any person by virtue of a revocable transfer 
of assets shall be chargeable to income-tax as the income of the transferor and shall be included in his 
total income. 

62. Transfer irrevocable for a specified period.—(1) The provisions of section 61 shall not apply to 

any income arising to any person by virtue of a transfer— 

 (i) by way of trust which is not revocable during the lifetime of the beneficiary, and, in the case 

of any other transfer, which is not revocable during the lifetime of the transferee; or 

1. Clause (iv) omitted by Act 32 of 1971, s. 12 (w.e.f. 1-4-1972). 
2. Clause (b) omitted by Act 26 of 1988, s. 20 (w.e.f. 1-4-1989). 
3. Ins. by Act 41 of 1972, s. 3 (w.e.f. 1-4-1962).  
4. Subs. by Act 7 of 2017, s. 30, for “sub-clauses (iia) (w.e.f. 1-4-2018). 
5. Ins. by Act 19 of 1968, s. 8 (w.e.f. 1-4-1968). 
6. Ins. by Act 66 of 1976, s. 14 (w.e.f. 1-6-1976). 
7. Ins. by Act 23 of 1986, s. 14 (w.e.f. 1-4-1987). 
8. Sub-sections (2) and (3) omitted by Act of 46 of 1986, s. 32 (w.e.f. 1-4-1988).   
9. The Explanation omitted by s. 32, ibid. (w.e.f. 1-4-1988). 

311 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
(ii)  made  before  the  1st  day  of  April,  1961,  which  is  not  revocable  for  a  period  exceeding  six 

years: 

Provided that the transferor derives no direct or indirect benefit from such income in either case. 

(2) Notwithstanding anything contained in sub-section (1), all income arising to any person by virtue 
of any such transfer shall be chargeable to income-tax as the income of the transferor as and when the 
power to revoke the transfer arises, and shall then be included in his total income. 

63. “Transfer” and “revocable transfer” defined. —For the purposes of sections 60, 61 and 62 and 

of this section,— 

(a) a transfer shall be deemed to be revocable if— 

 (i) it contains any provision for the re-transfer directly or indirectly of the whole or any part 

of the income or assets to the transferor, or 

(ii) it, in any way, gives the transferor a right to re-assume power directly or indirectly over 

the whole or any part of the income or assets ; 

(b) “transfer” includes any settlement, trust, covenant, agreement or arrangement. 

64. Income of individual to include income of spouse, minor child, etc. — 1[2[(1)] In computing 
the  total  income  of  any  individual,  there  shall  be  included  all  such  income  as  arises  directly  or 
indirectly— 
3 * 

* 

* 

* 

* 

(ii)  to  the  spouse  of  such  individual  by  way  of  salary,  commission,  fees  or  any  other  form  of 
remuneration  whether  in  cash  or in  kind  from  a  concern in  which  such individual  has a  substantial 
interest: 

4[Provided that nothing in this clause shall apply in relation to any income arising to the spouse 
where  the  spouse  possesses  technical  or  professional  qualifications  and  the  income  is  solely 
attributable to the application of his or her technical or professional knowledge and experience ; 

* 

5* 
 (iv)  subject  to the  provisions  of  clause  (i)  of  section  27,  6***  to  the  spouse  of such  individual 
from  assets  transferred  directly  or  indirectly  to  the  spouse  by  such  individual  otherwise  than  for 
adequate consideration or in connection with an agreement to live apart; 

* 

* 

* 

* 

7* 
(vi) to the son’s wife, 8*** of such individual, from assets transferred directly or indirectly on or 
after the 1st day of June, 1973, to the son’s wife 7*** by such individual otherwise than for adequate 
consideration; 9*** 

* 

* 

* 

(vii)  to  any  person  or  association  of  persons  from  assets  transferred  directly  or  indirectly 
otherwise than for adequate consideration to the person or association of persons by such individual, 
to the extent to which the income from such assets is for the immediate or deferred benefit of his or 
her spouse; 10*** and 

1. Subs. by Act 41 of 1975, s. 13, for sub-section (1) (w.e.f. 1-4-1976).   
2. Section 64 re-numbered as sub-section (1) of that section by Act 42 of 1970, s. 16 (w.e.f. 1-4-1971). 
3.  Clause  (i)  omitted  by  Act  18  of  1992,  s.  35  (w.e.f.  1-4-1993).  Restored  by  Act  3  of  1989,  s.  95  as  earlier  omitted  by         

Act 4 of 1988, s. 17 (w.e.f. 1-4-1988). 

4.  Restored  to  its  original  position  by  Act  3  of  1989,  s.  95  (w.e.f.  1-4-1989).  Earlier  subs.  by  Act  4  of  1988,  s.  17                   

(w.e.f. 1-4-1988). 

5.  Clause  (iii)  omitted  byAct  18  of  1992,  s.  35  (w.e.f.  1-4-1993).  Prior  to  omission  restored  by  Act  4  of  1988,  s.  17                  

(w.e.f. 1-4-1989). Restored by Act 3 of 1989, s. 95 as earlier omitted by Act 4 of 1988, s. 17 (w.e.f. 1-4-1988). 

6.  The  words,  brackets  and  figures  “in  a  case  not  falling  under  clause  (i)  of  this  sub-section”  omitted  by  s.  35,  ibid.                 

(w.e.f. 1-4-1993). 

7. Clause (v) omitted by s. 35 ibid. (w.e.f. 1-4-1993). 
8. The words “or son’s minor child” omitted by s. 35, ibid. (w.e.f. 1-4-1993). 
9.  The words “and” omitted by Act 67 of 1984, s. 17 (w.e.f. 1-4-1985). 
10. The words “or minor child or both” omitted by Act 18 of 1992, s. 35 (w.e.f. 1-4-1993).  

312 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
1[(viii) to any person or association of persons from assets transferred directly or indirectly on or 
after the 1st day of June, 1973, otherwise than for adequate consideration, to the person or association 
of persons by such individual, to the extent to which the income from such assets is for the immediate 
or deferred benefit of his son’s wife 2***.] 

3[Explanation 1.—For the purposes of clause (ii), the individual in computing whose total income the 
income  referred  to  in  that  clause  is  to  be  included,  shall  be  the  husband  or  wife  whose  total  income 
(excluding the income referred to in that clause) is greater ; and where any such income is once included 
in the total income of either spouse, any such income arising in any succeeding year shall not be included 
in the total income of the other spouse unless the Assessing Officer is satisfied, after giving that spouse an 
opportunity of being heard, that it is necessary so to do.] 

Explanation 2.—For the purposes of clause (ii), an individual shall be deemed to have a substantial 

interest in a concern— 

 (i) in a case where the concern is a company, if its shares (not being shares entitled to a fixed rate 
of  dividend  whether  with  or  without  a  further  right  to  participate  in  profits)  carrying  not  less  than 
twenty per cent of the voting power are, at any time during the previous year, owned beneficially by 
such person or partly by such person and partly by one or more of his relatives; 

(ii) in any other case, if such person is entitled, or such person and one or more of his relatives are 
entitled in the aggregate, at any time during the previous year, to not less than twenty per cent of the 
profits of such concern. 

4* 

* 

* 

* 

* 

5[Explanation 3.—For  the  purposes  of  clauses  (iv)  and  (vi),  where  the  assets transferred  directly  or 
indirectly  by  an  individual  to  his  spouse  or  son's  wife  (hereafter  in  this Explanation referred  to  as  “the 
transferee”) are invested by the transferee,— 

 (i) in any business, such investment being not in the nature of contribution of capital as a partner 
in a firm or, as the case may be, for being admitted to the benefits of partnership in a firm, that part of 
the income arising out of the business to the transferee in any previous year, which bears the same 
proportion to the income of the transferee from the business as the value of the assets aforesaid as on 
the first day of the previous year bears to the total investment in the business by the transferee as on 
the said day; 

(ii) in the nature of contribution of capital as a partner in a firm, that part of the interest receivable 
by the transferee from the firm in any previous year, which bears the same proportion to the interest 
receivable by the transferee from the firm as the value of investment aforesaid as on the first day of 
the previous year bears to the total investment by way of capital contribution as a partner in the firm 
as on the said day, 

shall be included in the total income of the individual in that previous year.] 

6[(1A)  In  computing  the  total  income  of  any  individual,  there  shall  be  included  all  such  income  as 
arises or accrues to his minor child 7[, not being a minor child suffering from any disability of the nature 
specified in section 80U:] 

Provided that nothing contained in this sub-section shall apply in respect of such income as arises or 

accrues to the minor child on account of any— 

(a) manual work done by him; or 

1. Ins. by Act 67 of 1984, s. 17 (w.e.f. 1-4-1985). 
2. The words “or minor child or both” omitted by Act 18 of 1992, s. 35 (w.e.f. 1-4-1993). 
3. Subs. by s. 35, ibid., for Explanations 1 and 1A (w.e.f. 1-4-1993). 
4. Explanation 2A omitted by s. 35, ibid. (w.e.f. 1-4-1993). 
5. Subs. by s. 35, ibid., for Explanation 3 (w.e.f. 1-4-1993).  
6. Ins. by s. 35, ibid. (w.e.f. 1-4-1993). 
7. Ins. by Act 32 of 1994, s. 20 (w.e.f. 1-4-1995). 

313 

 
 
 
 
 
 
 
 
                                                           
(b) activity involving application of his skill, talent or specialised knowledge and experience. 

Explanation.—For  the  purposes  of  this  sub-section,  the  income  of  the  minor  child  shall  be 

included,— 

(a) where the marriage of his parents subsists, in the income of that parent whose total income 

(excluding the income includible under this sub-section) is greater ; or 

(b) where the marriage of his parents does not subsist, in the income of that parent who maintains 

the minor child in the previous year, 

and where any such income is once included in the total income of either parent, any such income 
arising  in  any  succeeding  year  shall  not  be  included  in  the  total  income  of  the other  parent,  unless  the 
Assessing Officer is satisfied, after giving that parent an opportunity of being heard, that it is necessary so 
to do.] 

1[(2) Where, in the case of an individual being a member of a Hindu undivided family, any property 
having been the separate property of the individual has, at any time after the 31st day of December, 1969, 
been converted by the individual into property belonging to the family through the act of impressing such 
separate property with the character of property belonging to the family or throwing it 2[into the common 
stock  of  the  family  or  been  transferred  by  the  individual,  directly  or  indirectly,  to the family  otherwise 
than for adequate consideration (the property so converted or transferred being hereinafter referred to as 
the converted property)], then, notwithstanding anything contained in any other provision of this Act or in 
any  other  law  for  the  time  being  in  force,  for  the  purpose  of  computation  of  the  total  income  of  the 
individual under this Act for any assessment year commencing on or after the 1st day of April, 1971,— 

(a) the individual shall be deemed to have transferred the converted property, through the family, 

to the members of the family for being held by them jointly ; 

(b) the income derived from the converted property or any part thereof  3*** shall be deemed to 

arise to the individual and not to the family ; 

4[(c) where the converted property has been the subject-matter of a partition (whether partial or 
total)  amongst  the  members  of  the  family,  the  income  derived  from  such  converted  property  as  is 
received  by  the  spouse  5***  on  partition  shall  be  deemed  to  arise  to  the  spouse  5***  from  assets 
transferred indirectly by the individual to the spouse  5*** and the provisions of sub-section (1) shall, 
so far as may be, apply accordingly:] 

Provided that the income referred to in clause (b) or clause (c) shall, on being included in the total 
income  of  the  individual,  be  excluded  from  the  total  income  of  the  family  or,  as  the  case  may  be,  the 
spouse 5*** of the individual. 

Explanation 6[1].—For the purposes of sub-section (2),— 
7*** “property” includes any interest in property, movable or immovable, the proceeds of sale thereof 
and any money or investment for the time being representing the proceeds of sale thereof and where the 
property is converted into any other property by any method, such other property. 

8* 
9[Explanation 2.—For the purposes of this section, “income” includes loss.] 

* 

* 

* 

* 

1. Ins. by Act 42 of 1970, s. 16 (w.e.f. 1-4-1971). 
2. Subs. by Act 21 of 1979, s. 9 for “into the common stock of the family (such property being hereinafter referred to as the 

converted property)” (w.e.f. 1-4-1980). 

3. The words “in so far as it is attributable to the interest of the individual in the property of the family” omitted by Act 41 of 

1975, s. 13 (w.e.f. 1-4-1976). 

4. Subs. by s. 13, ibid.,for clause (c) (w.e.f. 1-4-1976). 
5. The words “or minor child” omitted by Act 18 of 1992, s. 35 (w.e.f. 1-4-1993). 
6. The Explanation renumbered as Explanation 1 thereof by Act of 21 of 1979, s. 9 (w.e.f. 1-4-1980). 
7. The brackets and figure “(1)” omitted by Act 41 of 1975, s. 13 (w.e.f. 1-4-1976). 
8. Clause (2) omitted by s. 13, ibid. (w.e.f. 1-4-1976).  
9. Ins. by Act 21 of 1979, s. 9 (w.e.f. 1-4-1980). 

314 

 
 
 
 
 
 
 
 
                                                           
 
65. Liability of person in respect of income included in the income of another person.—Where, 
by reason of the provisions contained in this Chapter or in clause (i) of section 27, the income from any 
asset or from membership in a firm of a person other than the assessee is included in the total income of 
the  assessee,  the  person  in  whose  name  such  asset  stands  or  who  is  a  member  of  the  firm  shall, 
notwithstanding anything to the contrary contained in any other law for the time being in force, be liable, 
on the service of a notice of demand by the  1[Assessing Officer] in this behalf, to pay that portion of the 
tax levied on the assessee which is attributable to the income so included, and the provisions of Chapter 
XVII-D shall, so far as may be, apply accordingly: 

Provided that where any such asset is held jointly by more than one person, they shall be jointly and 

severally liable to pay the tax which is attributable to the income from the assets so included. 

CHAPTER VI 

AGGREGATION OF INCOME AND SET OFF OR CARRY FORWARD OF LOSS 

Aggregation of income 

66. Total income.—In computing the total income of an assessee, there shall be included all income 

on which no income-tax is payable under Chapter VII2***. 

67. [Method of computing a partner’s share in the income of the firm.] Omitted by the Finance 
Act, 1992, (18 of 1992), s. 36 (w.e.f. 1-4-1993). Earlier amended by Act 19 of 1968, s. 30 and the Third 
Schedule (w.e.f. 1-4-1969), Act 32 of 1971, s. 13 (w.e.f. 1-4-1971), subs. by Act 4 of 1988, s. 18 (w.e.f. 1-
4-1988) or restored by Act 3 of 1989, s. 95 (w.e.f. 1-4-1989). 

3[67A. Method of computing a member's share in income of association of persons or body of 
individuals.—(1)  In  computing  the  total  income  of  an  assessee  who  is  a  member  of  an  association  of 
persons  or a  body  of  individuals  wherein  the  shares of  the  members  are determinate  and  known  [other 
than a company or a cooperative society or a society registered under the Societies Registration Act, 1860 
(21 of 1860), or under any law corresponding to that Act in force in any part of India], whether the net 
result of the computation of the total income of such association or body is a profit or a loss, his share 
(whether a net profit or net loss) shall be computed as follows, namely:— 

(a) any interest, salary, bonus, commission or remuneration by whatever name called, paid to any 
member in respect of the previous year shall be deducted from the total income of the association or 
body  and  the  balance  ascertained  and apportioned  among  the  members  in the proportions in  which 
they are entitled to share in the income of the association or body; 

(b) where the amount apportioned to a member under clause (a) is a profit, any interest, salary, 
bonus,  commission  or  remuneration  aforesaid  paid  to  the  member  by  the  association  or  body  in 
respect  of  the  previous  year  shall  be  added  to  that  amount,  and  the  result  shall  be  treated  as  the 
member's share in the income of the association or body; 

(c)  where  the  amount  apportioned  to  a  member  under  clause  (a)  is  a  loss,  any  interest,  salary, 
bonus,  commission  or  remuneration  aforesaid  paid  to  the  member  by  the  association  or  body  in 

1. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2. The words, figures and letters “and any amount in respect of which the assessee is entitled to a deduction from the amount 
of  income-tax  on  his  total income  with  which  he  is  chargeable  for  any  assessment  year  in  accordance  with,  and  to  the 
extent provided in sections 87, 87A and 88” omitted by Act 20 of 1967, s. 33 and the Third Schedule (w.e.f. 1-4-1968). 

3. Ins. by Act 3 of 1989, s. 12 (w.e.f. 1-4-1989). 

315 

                                                           
respect of the previous year shall be adjusted against that amount, and the result shall be treated as the 
member’s share in the income of the association or body. 

(2)  The  share  of  a  member  in  the  income  or  loss  of  the  association  or  body,  as  computed  under  
sub-section (1), shall, for the purposes of assessment, be apportioned under the various heads of income 
in the same manner in which the income or loss of the association or body has been determined under 
each head of income. 

(3) Any interest paid by a member on capital borrowed by him for the purposes of investment in the 
association or body shall, in computing his share chargeable under the head “Profits and gains of business 
or profession” in respect of his share in the income of the association or body, be deducted from his share. 

Explanation.—In  this  section,  “paid”  has  the  same  meaning  as  is  assigned  to  it  in  clause  (2)  of  

section 43.] 

68. Cash credits.—Where any sum is found credited in the books of an assessee maintained for any 
previous  year,  and  the  assessee  offers  no  explanation  about  the  nature  and  source  thereof  or  the 
explanation  offered  by  him  is  not,  in  the  opinion  of  the  1[Assessing  Officer],  satisfactory,  the  sum  so 
credited may be charged to income-tax as the income of theassessee of that previous year: 

2[Provided that  where  the  assessee  is  a  company  (not  being  a  company  in  which  the  public  are 
substantially interested), and the sum so credited consists of share application money, share capital, share 
premium  or  any  such  amount  by  whatever  name  called,  any  explanation  offered  by  such  assessee-
company shall be deemed to be not satisfactory, unless— 

(a)  the  person,  being  a  resident  in  whose  name  such  credit  is  recorded  in  the  books  of  such 

company also offers an explanation about the nature and source of such sum so credited; and 

(b)  such  explanation  in  the  opinion  of  the  Assessing  Officer  aforesaid  has  been  found  to  be 

satisfactory: 

Provided further that nothing contained in the first proviso shall apply if the person, in whose name 
the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred 
to in clause (23FB)of section 10.] 

69. Unexplained  investments.—Where in the financial  year  immediately  preceding  the  assessment 
year  the  assessee  has  made  investments  which  are  not  recorded  in  the  books  of  account,  if  any, 
maintained by him for any source of income, and the assessee offers no explanation about the nature and 
source  of  the  investments  or  the  explanation  offered  by  him  is  not,  in  the  opinion  of  the  1[Assessing 
Officer],  satisfactory,  the  value of the investments  may  be  deemed  to  be the income  of  the  assessee  of 
such financial year. 

3[69A. Unexplained money, etc.—Where in any financial year the assessee is found to be the owner 
of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable 
article is not recorded in the books of account, if any, maintained by him for any source of income, and 

1. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2. Ins. by Act 23 of 2012, s. 22 (w.e.f. 1-4-2013). 
3. Ins. by Act 5 of 1964, s. 16 (w.e.f. 1-4-1964). 

316 

                                                           
the  assessee  offers  no  explanation  about  the  nature  and  source  of  acquisition  of  the  money,  bullion, 
jewellery  or  other  valuable  article,  or  the  explanation  offered  by  him  is  not,  in  the  opinion  of  the 
1[Assessing  Officer],  satisfactory,  the  money  and  the  value  of  the  bullion,jewellery  or  other  valuable 
article may be deemed to be the income of the assessee for such financial year.] 

2[69B.  Amount  of  investments,  etc.,  not  fully  disclosed  in  books  of  account.—Where  in  any 
financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or 
other  valuable  article,  and  the  1[Assessing  Officer]  finds  that  the  amount  expended  on  making  such 
investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded 
in  this  behalf  in  the  books  of  account  maintained  by  the  assessee  for  any  source  of  income,  and  the 
assessee offers no explanation about such excess amount or the explanation offered by him is not, in the 
opinion of the  1[Assessing Officer], satisfactory, the excess amount may be deemed to be the income of 
the assessee for such financial year.] 

3[69C.  Unexplained  expenditure,  etc. —Where in  any  financial  year  an assessee  has incurred  any 
expenditure  and  he  offers  no  explanation  about  the  source  of  such  expenditure  or  part  thereof,  or  the 
explanation,  if  any,  offered  by  him  is  not,  in  the  opinion  of  the  1[Assessing  Officer],  satisfactory,  the 
amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income 
of the assessee for such financial year: 

4[Provided that,  notwithstanding  anything  contained  in  any  other  provision  of  this  Act,  such 
unexplained  expenditure  which  is  deemed  to  be  the  income  of  the  assessee  shall  not  be  allowed  as  a 
deduction under any head of income.] 

69D. Amount borrowed or repaid on hundi.—Where any amount is borrowed on a hundi from, or 
any amount due thereon is repaid to, any person otherwise than through an account payee cheque drawn 
on a bank, the amount so borrowed or repaid shall be deemed to be the income of the person borrowing or 
repaying the amount aforesaid for the previous year in which the amount was borrowed or repaid, as the 
case may be: 

Provided that, if in any case any amount borrowed on a hundi has been deemed under the provisions 
of  this  section  to  be  the  income  of  any  person,  such  person  shall  not  be  liable  to  be  assessed  again  in 
respect of such amount under the provisions of this section on repayment of such amount. 

Explanation.—For the purposes of this section, the amount repaid shall include the amount of interest 

paid on the amount borrowed.] 

Set off, or carry forward and set off 

5[70. Set off of loss from one source against income from another source under the same head of 
income.—(1)  Save  as  otherwise  provided  in  this  Act,  where  the  net  result  for  any  assessment  year  in 
respect of any source falling under any head of income, other than “Capital gains”, is a loss, the assessee 
shall be entitled to have the amount of such loss set off against his income from any other source under 
the same head. 

1. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2. Ins. by Act 10 of 1965, s. 19 (w.e.f. 1-4-1965). 
3. Ins. by Act 41 of 1975, s. 14 (w.e.f. 1-4-1976). 
4. Ins. by Act 21 of 1998, s. 25 (w.e.f. 1-4-1999). 
5. Subs. by Act 20 of 2002, s. 27, for section 70 (w.e.f. 1-4-2003). 

317 

                                                           
(2)  Where  the  result  of  the  computation  made  for  any  assessment  year  under  sections  48  to  55in 
respect of any short-term capital asset is a loss, the assessee shall be entitled to have the amount of such 
loss set off against the income, if any, as arrived at under a similar computation made for the assessment 
year in respect of any other capital asset. 

(3)  Where  the  result  of  the  computation  made  for  any  assessment  year  under sections  48  to  55  in 
respect of any capital asset (other than a short-term capital asset) is a loss, the assessee shall be entitled to 
have the amount of such loss set off against the income, if any, as arrived at under a similar computation 
made for the assessment year in respect of any other capital asset not being a short-term capital asset.] 

1[71.Set  off  of  loss  from  one  head  against  income  from  another.—(1)  Where  in  respect  of  any 
assessment year the net result of the computation under any head of income, other than “Capital gains”, is 
a loss and the assessee has no income under the head “Capital gains”, he shall, subject to the provisions of 
this Chapter, be entitled to have the amount of such loss set off against his income, if any, assessable for 
that assessment year under any other head. 

(2)  Where  in  respect  of  any  assessment  year,  the  net  result  of  the  computation  under  any  head  of 
income,  other  than  “Capital  gains”,  is  a  loss  and  the  assessee  has  income  assessable  under  the  head 
“Capital gains”, such loss may, subject to the provisions of this Chapter, be set off against his income, if 
any,  assessable  for  that  assessment  year  under  any  head  of  income  including  the  head  “Capital  gains” 
(whether relating to short-term capital assets or any other capital assets). 

2[(2A) Notwithstanding anything contained in sub-section (1) or sub-section (2), where in respect of 
any assessment year, the net result of the computation under the head “Profits and gains of business or 
profession” is a loss and the assessee has income assessable under the head “Salaries”, the assessee shall 
not be entitled to have such loss set off against such income.] 

(3) Where in respect of any assessment year, the net result of the computation under the head “Capital 
gains” is a loss and the assessee has income assessable under any other head of income, the assessee shall 
not be entitled to have such loss set off against income under the other head.] 

3[(3A)  Notwithstanding  anything contained in sub-section  (1) or sub-section (2), where  in respect of 
any assessment year, the net result of the computation under the head “Income from house property” is a 
loss  and  the  assessee  has  income  assessable  under  any  other  head  of  income,  the  assessee  shall  not  be 
entitled to set off such loss, to the extent the amount of the loss exceeds two lakh rupees, against income 
under the other head.] 

4[(4) Where the net result of the computation under the head “Income from house property” is a loss, 
in respect of the assessment years commencing on the 1st day of April, 1995 and the 1st day of April, 
1996,  such  loss  shall  be  first  set  off  under  sub-sections  (1)  and  (2)  and  thereafter  the  loss  referred  to 
in section 71A shall be set off in the relevant assessment year in accordance with the provisions of that 
section.] 

5[71A.Transitional  provisions  for  set  off  of  loss  under  the  head  “Income  from  house 

property”.—Where  in  respect  of  the  assessment  year  commencing  on  the  1st  day  of  April,  1993                 
or  the  1st  day  of  April,  1994,  the  net  result  of  the  computation  under  the  head  “Income  from                      
house  property”  is  a  loss,  such  loss  in  so  far  as  it  relates  to  interest  on  borrowed  capital  referred  to                                                  

1. Subs. by Act 49 of 1991, s. 23, for section 71 (w.e.f. 1-4-1992). 
2. Ins. by Act 23 of 2004, s. 14 (w.e.f. 1-4-2005). 
3. Ins.by Act 7 of 2017, s. 31 (w.e.f. 1-4-2018). 
4. Subs. by Act 32 of 1994, s. 21, for sub-section (4) (w.e.f. 1-4-1995). 
5. Subs. by s. 22, ibid., for section 71A (w.e.f. 1-4-1995). 

318 

                                                           
in  clause  (vi)  of  sub-section  (1)  of   section  24  and  to  the  extent  it  has  not  been  set  off  shall  be carried 
forward and set off in the assessment year commencing on the 1st day of April, 1995, and the balance, if 
any,  in  the  assessment  year  commencing  on  the  1st  day  of  April,  1996,  against  the  income  under  any 
head.] 

1[71B.Carry forward and set off of loss from house property.—Where for any assessment year the 
net result of computation under the head “Income from house property” is a loss to the assessee and such 
loss cannot be or is not wholly set off against income from any other head of income in accordance with 
the provisions of  section 71, so much of the loss as has not been so set-off or where he has no income 
under  any  other  head,  the  whole  loss  shall,  subject  to  the  other  provisions  of  this  Chapter,  be  carried 
forward to the following assessment year and— 

(i) be set off against the income from house property assessable for that assessment year; and 

(ii) the loss, if any, which has not been set off wholly, the amount of loss not so set off, 

shall  be  carried  forward  to  the  following  assessment  year,  not  being  more  than  eight  assessment  years 
immediately succeeding the assessment year for which the loss was first computed.] 

72.Carry  forward  and  set  off  of  business  losses.—2[(1)  Where  for  any  assessment  year,  the  net 
result  of  the  computation  under  the  head  “Profits  and  gains  of  business  or  profession”  is  a  loss  to  the 
assessee, not being a loss sustained in a speculation business, and such loss cannot be or is not wholly set 
off against income under any head of income in accordance with the provisions of  section 71, so much of 
the loss as has not been so set off or, 3*** where he has no income under any other head, the whole loss 
shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, 
and— 

(i) it shall be set off against the profits and gains, if any, of any business or profession carried on 

by him and assessable for that assessment year; 

4* 

* 

* 

* 

* 

(ii)  if  the  loss  cannot  be  wholly  so  set  off,  the  amount  of  loss  not  so  set  off  shall  be  carried 

forward to the following assessment year and so on:] 

5[Provided that  where  the  whole  or  any  part  of  such  loss  is  sustained  in  any  such  business  as  is 
referred  to  in   section  33B  which  is  discontinued  in  the  circumstances  specified  in  that  section,  and, 
thereafter,  at  any  time  before  the  expiry  of  the  period  of  three  years  referred  to  in  that  section,  such 
business is re-established, reconstructed or revived by the assessee, so much of the loss as is attributable 
to such business shall be carried forward to the assessment year relevant to the previous year in which the 
business is so re-established, reconstructed or revived, and— 

(a) it shall be set off against the profits and gains, if any, of that business or any other business 

carried on by him and assessable for that assessment year; and 

1. Ins. by Act 21 of 1998, s. 26 (w.e.f. 1-4-1999). 
2. Subs. by Act 20 of 1962, s. 6, for sub-section (1) (w.e.f. 1-4-1962). 
3. The words, brackets and figure ‘where the assesse has income only under the head “capital gains” relating to capital assets 
other than short-term capital assets and has exercised the option under sub-section (2) of that section or’ omitted by Act 
11 of 1987, s. 30 (w.e.f. 1-4-1988). 

4. The proviso omitted by Act 27 of 1999, s. 37 (w.e.f. 1-4-2000). 
5. Added by Act 20 of 1967, s. 22 (w.e.f. 1-4-1967). 

319 

 
 
 
 
 
 
 
                                                           
(b)  if  the  loss  cannot  be  wholly  so  set  off,  the  amount  of  loss  not  so  set  off  shall,  in  case  the 
business  so  re-established,  reconstructed  or  revived  continues  to  be  carried  on  by  the  assessee,  be 
carried forward to the following assessment year and so on for seven assessment years immediately 
succeeding.] 

(2)  Where  any  allowance  or  part  thereof  is,  under  sub-section  (2)  of  section  32  or  sub-section  (4) 

of section 35, to be carried forward, effect shall first be given to the provisions of this section. 

(3) No loss 1[(other than the loss referred to in the proviso to sub-section (1) of this section)] shall be 
carried  forward  under  this  section  for  more  than  eight  assessment  years  immediately  succeeding  the 
assessment year for which the loss was first computed. 

2[72A. Provisions  relating  to  carry  forward  and  set  off  of  accumulated  loss  and  unabsorbed 
depreciation  allowance  in  amalgamation  or  demerger,  etc.—3[(1)  Where  there  has  been  an 
amalgamation of— 

(a) a company owning an industrial undertaking or a ship or a hotel with another company; or 

(b)  a  banking  company  referred  to  in  clause  (c)  of  section  5  of  the  Banking  Regulation                     

Act, 1949 (10 of 1949) with a specified bank; or 

(c)  one  or  more  public  sector  company  or  companies  engaged  in  the  business  of  operation  of 

aircraft with one or more public sector company or companies engaged in similar business, 

then, notwithstanding anything contained in any other provision of this Act, the accumulated loss and 
the unabsorbed depreciation of the amalgamating company shall be deemed to be the loss or, as the 
case  may  be,  allowance for  unabsorbed  depreciation of the  amalgamated  company  for the  previous 
year in which the amalgamation was effected, and other provisions of this Act relating to set off and 
carry forward of loss and allowance for depreciation shall apply accordingly.] 

4[(2) Notwithstanding anything contained in sub-section (1), the accumulated loss shall not be set off 
or  carried  forward  and  the  unabsorbed  depreciation  shall  not  be  allowed  in  the  assessment  of  the 
amalgamated company unless— 

(a) the amalgamating company— 

(i) has been engaged in the business, in which the accumulated loss occurred or depreciation 

remains unabsorbed, for three or more years; 

(ii)  has  held  continuously  as  on  the  date  of  the  amalgamation  at  least  three-fourths  of  the 

book value of fixed assets held by it two years prior to the date of amalgamation; 

(b) the amalgamated company— 

(i) holds continuously for a minimum period of five years from the date of amalgamation at 
least three-fourths of the book value of fixed assets of the amalgamating company acquired in a 
scheme of amalgamation; 

1. Ins. by Act 20 of 1967, s. 22 (w.e.f. 1-4-1967). 
2. Subs. by Act 27 of 1999, s. 38, for section 72A (w.e.f. 1-4-2000). 
3. Subs. by Act 22 of 2007, s. 20, for sub-section (1) (w.e.f. 1-4-2008). 
4. Subs. by Act 32 of 2003, s. 33, for sub-section (2) (w.e.f. 1-4-2004). 

320 

                                                           
(ii) continues the business of the amalgamating company for a minimum period of five years 

from the date of amalgamation; 

(iii) fulfils such other conditions as may be prescribedto ensure the revival of the business of 

the amalgamating company or to ensure that the amalgamation is for genuine business purpose.] 

(3) In a case where any of the conditions laid down in sub-section (2) are not complied with, the set 
off  of  loss  or  allowance  of  depreciation  made  in  any  previous  year  in  the  hands  of  the  amalgamated 
company shall be deemed to be the income of the amalgamated company chargeable to tax for the year in 
which such conditions are not complied with. 

(4) Notwithstanding anything contained in any other provisions of this Act, in the case of a demerger, 

the accumulated loss and the allowance for unabsorbed depreciation of the demerged company shall— 

(a)  where  such  loss  or  unabsorbed  depreciation  is  directly  relatable  to  the  undertakings 
transferred to the resulting company, be allowed to be carried forward and set off in the hands of the 
resulting company; 

(b)  where  such  loss  or  unabsorbed  depreciation  is  not  directly  relatable  to  the  undertakings 
transferred  to  the  resulting  company,  be  apportioned  between  the  demerged  company  and  the 
resulting company in the same proportion in which the assets of the undertakings have been retained 
by  the  demerged  company  and  transferred  to  the  resulting  company,  and  be  allowed  to  be  carried 
forward and set off in the hands of the demerged company or the resulting company, as the case may 
be. 

(5) The Central Government may, for the purposes of this Act, by notification in the Official Gazette, 
specify  such  conditions  as  it  considers  necessary  to  ensure  that  the  demerger  is  for  genuine  business 
purposes. 

(6)  Where  there  has  been  reorganisation  of  business,  whereby,  a  firm  is  succeeded  by  a  company 
fulfilling the conditions laid down in clause (xiii) of  section 47 or a proprietary concern is succeeded by a 
company fulfilling the conditions laid down in clause (xiv) of section 47, then, notwithstanding anything 
contained in any other provision of this Act, the accumulated loss and the unabsorbed depreciation of the 
predecessor  firm  or  the  proprietary  concern,  as  the  case  may  be,  shall  be  deemed  to  be  the  loss  or 
allowance for depreciation of the successor company for the purpose of previous year in which business 
reorganisation was effected and other provisions of this Act relating to set off and carry forward of loss 
and allowance for depreciation shall apply accordingly: 

Provided that  if  any  of  the  conditions  laid  down  in  the  proviso  to  clause  (xiii)  or  the  proviso  to  
clause (xiv)to section 47 are not complied with, the set off of loss or allowance of depreciation made in 
any  previous  year  in  the  hands  of  the  successor  company,  shall  be  deemed  to  be  the  income  of  the 
company chargeable to tax in the year in which such conditions are not complied with. 

1[(6A) Where there has been reorganisation of business whereby a private company or unlisted public 
company is succeeded by a limited liability partnership fulfilling the conditions laid down in the proviso 
to clause (xiiib) of section 47, then, notwithstanding anything contained in any other provision of this Act, 
the accumulated loss and the unabsorbed depreciation of the predecessor company, shall be deemed to be 

1. Ins. by Act 14 of 2010, s. 22 (w.e.f. 1-4-2011). 

321 

                                                           
the loss or allowance for depreciation of the successor limited liability partnership for the purpose of the 
previous year in which business reorganisation was effected and other provisions of this Act relating to 
set off and carry forward of loss and allowance for depreciation shall apply accordingly: 

Provided that if any of the conditions laid down in the proviso to clause (xiiib) of section 47 are not 
complied with, the set off of loss or allowance of depreciation made in any previous year in the hands of 
the  successor  limited  liability  partnership,  shall  be  deemed  to  be  the  income  of  the  limited  liability 
partnership chargeable to tax in the year in which such conditions are not complied with.] 

(7) For the purposes of this section,— 

1[(a)  “accumulated  loss”  means  so  much  of  the  loss  of  the  predecessor  firm  or  the  proprietary 
concern  or the  private company  or  unlisted  public company  before  conversion into limited  liability 
partnership or the amalgamating company or the demerged company, as the case may be, under the 
head  “Profits  and  gains  of  business  or  profession”  (not  being  a  loss  sustained  in  a  speculation 
business) which such predecessor firm or the proprietary concern or the company or amalgamating 
company  or  demerged  company,  would  have  been  entitled  to  carry  forward  and  set  off  under  the 
provisions of  section 72if the reorganisation of business or conversion or amalgamation or demerger 
had not taken place;] 

2[(aa) “industrial undertaking” means any undertaking which is engaged in— 

(i) the manufacture or processing of goods; or 

(ii) the manufacture of computer software; or 

(iii) the business of generation or distribution of electricity or any other form of power; or 

3[(iiia)  the  business  of  providing  telecommunication  services,  whether  basic  or  cellular, 
including  radio  paging,  domestic  satellite  service,  network  of  trunking,  broadband  network  and 
internet services; or] 

(iv) mining; or 

(v) the construction of ships, aircrafts or rail systems;] 

(b)  “unabsorbed  depreciation”  means  so  much  of  the  allowance  for  depreciation  of  the 
predecessor firm or the proprietary concern or the private company or unlisted public company before 
conversion into limited liability partnership or the amalgamating company or the demerged company, 
as  the  case  may  be,  which  remains  to  be  allowed  and  which  would  have  been  allowed  to  the 
predecessor firm or the proprietary concern or the company or amalgamating company or demerged 
company,  as  the  case  may  be,  under the provisions  of  this  Act,  if the  reorganisation  of  business  or 
conversion or amalgamation or demerger had not taken place;] 

4[(c)  “specified  bank”  means  the  State  Bank  of  India constituted  under  the  State  Bank  of  India  
Act, 1955 (23 of 1955) or a subsidiary bank as defined in the State Bank of India (Subsidiary Banks)  
Act,  1959  (38  of  1959)  or  a  corresponding  new  bank  constituted  under  section  3  of  the  Banking 
Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) or under section 3 of 
the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980).] 

1. Subs. by Act 14 of 2010, s. 22, for clauses (a) and (b) (w.e.f. 1-4-2011). 
2. Ins. by Act 14 of 2001, s. 35 (w.e.f. 1-4-2000). 
3. Ins. by Act 20 of 2002, s. 28 (w.e.f. 1-4-2003). 
4. Ins. by Act 32 of 2003, s. 33 (w.e.f. 1-4-2004). 

322 

                                                           
1[72AA.  Provisions  relating  to  carry forward  and  set-off  of  accumulated  loss  and  unabsorbed 
depreciation  allowance  in  scheme  of  amalgamation  of  banking  company  in  certain  cases.—
Notwithstanding anything contained in sub-clauses (i) to (iii) of clause (1B) of section 2 or section 72A 
where there has been an amalgamation of a banking company with any other banking institution under a 
scheme sanctioned and brought into force by the Central Government under sub-section (7) of section 45 
of the Banking Regulation Act, 1949 (10 of 1949), the accumulated loss and the unabsorbed depreciation 
of  such  banking  company  shall  be  deemed  to  be  the  loss  or,  as  the  case  may  be,  allowance  for 
depreciation of such banking institution for the previous year in which the scheme of amalgamation was 
brought  into  force  and  other  provisions  of  this  Act  relating  to  set-off  and  carry  forward  of  loss  and 
allowance for depreciation shall apply accordingly. 

Explanation.—For the purposes of this section,— 

(i) “accumulated loss” means so much of the loss of the amalgamating banking company under 
the  head  “Profits  and  gains  of  business  or  profession”  (not  being  a  loss  sustained  in  a  speculation 
business) which such amalgamating banking company, would have been entitled to carry forward and 
set-off under the provisions of section 72 if the amalgamation had not taken place; 

(ii) “banking company” shall have the same meaning assigned to it in clause (c) of section 5 of 

the Banking Regulation Act, 1949 (10 of 1949); 

(iii)  “banking  institution”  shall  have  the  same  meaning  assigned  to  it  in  sub-section  (15)  of 

section 45 of the Banking Regulation Act, 1949 (10 of 1949); 

(iv)  “unabsorbed  depreciation”  means  so  much  of  the  allowance  for  depreciation  of  the 
amalgamating banking company which remains to be allowed and which would have been allowed to 
such banking company if amalgamation had not taken place.] 

2[72AB. Provisions  relating  to  carry  forward  and  set  off  of  accumulated  loss  and  unabsorbed 
depreciation allowance in business reorganisation of co-operative  banks.—(1) The assessee, being a 
successor co-operative bank, shall, in a case where the amalgamation has taken place during the previous 
year,  be  allowed  to  set  off  the  accumulated  loss  and  the  unabsorbed  depreciation,  if  any,  of  the 
predecessor co-operative bank as if the amalgamation had not taken place, and all the other provisions of 
this  Act  relating  to  set  off  and  carry  forward  of  loss  and  allowance  for  depreciation  shall  apply 
accordingly. 

(2) The provisions of this section shall apply if— 

(a) the predecessor co-operative bank— 

(i) has been engaged in the business of banking for three or more years; and 

(ii)  has  held  at  least  three-fourths  of  the  book  value  of  fixed  assets  as  on  the  date  of  the 

business reorganisation, continuously for two years prior to the date of business reorganisation; 

(b) the successor co-operative bank— 

(i)  holds  at  least  three-fourths  of  the  book  value  of  fixed  assets  of  the  predecessor                 

co-operative bank acquired through business reorganisation, continuously for a minimum period 
of five years immediately succeeding the date of business reorganisation; 

(ii) continues the business of the predecessor co-operative bank for a minimum period of five 

years from the date of business reorganisation; and 

(iii) fulfils such other conditions as may be prescribed to ensure the revival of the business of 
the  predecessor  co-operative  bank  or  to  ensure  that  the  business  reorganisation  is  for  genuine 
business purpose. 

1. Ins. by Act 18 of 2005, s. 19 (w.e.f. 1-4-2005). 
2. Ins. by Act 22 of 2007, s. 21 (w.e.f. 1-4-2008). 

323 

                                                           
(3) The amount of set-off of the accumulated loss and unabsorbed depreciation, if any, allowable to 

the assessee being a resulting co-operative bank shall be,— 

 (i)  the  accumulated  loss  or  unabsorbed  depreciation  of  the  demerged  co-operative  bank  if  the 
whole of the amount of such loss or unabsorbed depreciation is directly relatable to the undertakings 
transferred to the resulting co-operative bank; or 

(ii)  the  amount  which  bears  the  same  proportion  to  the  accumulated  loss  or  unabsorbed 
depreciation  of  the  demerged  co-operative  bank  as  the  assets  of  the  undertaking  transferred  to  the 
resulting co-operative bank bears to the assets of the demerged co-operative bank if such accumulated 
loss or unabsorbed depreciation is not directly relatable to the undertakings transferred to the resulting 
co-operative bank. 

(4)  The  Central  Government  may,  for  the  purposes  of  this  section,  by  notification  in  the  Official 
Gazette, specify such other conditions as it considers necessary, other than those prescribed under sub-
clause  (iii)  of  clause  (b)  of  sub-section  (2),  to  ensure  that  the  business  reorganisation  is  for  genuine 
business purposes. 

(5)  The  period  commencing  from  the  beginning  of  the  previous  year  and  ending  on  the  date 
immediately preceding the date of business reorganisation, and the period commencing from the date of 
such  business  reorganisation  and  ending  with  the  previous  year  shall  be  deemed  to  be  two  different 
previous years for the purposes of set off and carry forward of loss and allowance for depreciation. 

(6) In a case where the conditions specified in sub-section (2) or notified under sub-section (4) are not 
complied with, the set off of accumulated loss or unabsorbed depreciation allowed in any previous year to 
the  successor  co-operative  bank  shall  be  deemed  to  be  the  income  of  the  successor  co-operative  bank 
chargeable to tax for the year in which the conditions are not complied with. 

(7) For the purposes of this section,— 

(a)  “accumulated  loss”  means  so  much  of  loss  of  the  amalgamating  co-operative  bank  or  the 
demerged  co-operative  bank,  as  the  case  may  be,  under  the  head  “Profits  and  gains  of  business  or 
profession”  (not  being  a  loss  sustained  in  a  speculation  business)  which  such  amalgamating  co-
operative bank or the demerged co-operative bank, would have been entitled to carry forward and set-
off under the provisions of section 72 as if the business reorganisation had not taken place; 

(b)  “unabsorbed  depreciation”  means  so  much  of  the  allowance  for  depreciation  of  the 
amalgamating  co-operative  bank  or  the  demerged  co-operative  bank,  as  the  case  may  be,  which 
remains  to  be  allowed  and  which  would  have  been  allowed  to  such  bank  as  if  the  business 
reorganisation had not taken place; 

(c)  the  expressions  “amalgamated  co-operative  bank”,  “amalgamating  co-operative  bank”, 
“amalgamation”,  “business  reorganisation”,  “co-operative  bank”,  “demerged  co-operative  bank”, 
“demerger”,  “predecessor  co-operative  bank”,  “successor  co-operative  bank”  and  “resulting            
co-operative bank” shall have the meanings respectively assigned to them in section 44DB.] 

73.  Losses  in  speculation  business.—(1)  Any  loss,  computed  in  respect  of  a  speculation  business 
carried  on  by  the  assessee,  shall  not  be  set  off  except  against  profits  and  gains,  if  any,  of  another 
speculation business. 

(2)  Where  for  any  assessment  year  any  loss  computed  in  respect  of  a  speculation  business  has  not 
been wholly set off under sub-section (1), so much of the loss as is not so set off or the whole loss where 
the assessee had no income from any other speculation business, shall, subject to the other provisions of 
this Chapter, be carried forward to the following assessment year, and— 

 (i) it shall be set off against the profits and gains, if any, of any speculation business carried on 

by him assessable for that assessment year; and 

324 

(ii)  if  the  loss  cannot  be  wholly  so  set  off,  the  amount  of  loss  not  so  set  off  shall  be  carried 

forward to the following assessment year and soon. 

(3) In respect of allowance on account of depreciation or capital expenditure on scientific  research, 
the provisions of sub-section (2) of section 72 shall apply in relation to speculation business as they apply 
in relation to any other business. 

(4)  No  loss  shall  be  carried  forward  under  this  section  for  more  than  1[four  assessment  years] 

immediately succeeding the assessment year for which the loss was first computed. 

2[Explanation.—Where any part of the business of a company (3[other than a company whose gross 
total  income  consists  mainly  of  income  which  is  chargeable  under  the  heads  “Interest  on  securities”, 
“Income  from  house  property”,  “Capital  gains”  and  “Income  from  other  sources”],  or  a  company 4[the 
principal business of which is the business of trading in shares or banking] or the granting of loans and 
advances)  consists  in  the  purchase  and  sale  of  shares  of  other  companies,  such  company  shall,  for  the 
purposes of this section, be deemed to be carrying on a speculation business to the extent to which the 
business consists of the purchase and sale of such shares.] 

5[73A. Carry  forward  and  set  off  of  losses  by  specified  business.—(1)  Any  loss,  computed  in 
respect of any specified business referred to in section 35AD shall not be set off except against profits and 
gains, if any, of any other specified business. 

(2) Where for any assessment year any loss computed in respect of the specified business referred to 
in sub-section (1) has not been wholly set off under sub-section (1), so much of the loss as is not so set off 
or the whole loss where the assessee has no income from any other specified business, shall, subject to the 
other provisions of this Chapter, be carried forward to the following assessment year, and— 

 (i) it shall be set off against the profits and gains, if any, of any specified business carried on by 

him assessable for that assessment year; and 

(ii)  if  the  loss  cannot  be  wholly  so  set  off,  the  amount  of  loss  not  so  set  off  shall  be  carried 

forward to the following assessment year and so on.] 

6[74. Losses under the head “Capital gains”.—7[(1) Where in respect of any assessment  year, the 
net result of the computation under the head “Capital gains” is a loss to the assessee, the whole loss shall, 
subject to the other provisions of this Chapter, be carried forward to the following assessment year, and— 

(a) in so far as such loss relates to a short-term capital asset, it shall be set off against income, if 
any, under the head “Capital gains” assessable for that assessment year in respect of any other capital 
asset; 

(b) in so far as such loss relates to a long-term capital asset, it shall be set off against income, if 
any, under the head “Capital gains” assessable for that assessment year in respect of any other capital 
asset not being a short-term capital asset; 

(c)  if  the  loss  cannot  be  wholly  so  set  off,  the  amount  of  loss  not  so  set  off  shall  be  carried 

forward to the following assessment year and so on.] 

(2)  No  loss  shall  be  carried  forward  under  this  section  for  more  than  eight  assessment  years 

immediately succeeding the assessment year for which the loss was first computed. 

1. Subs. by Act 18 of 2005, s. 20, for “eight assessment years” (w.e.f. 1-4-2006). 
2. Ins. by Act 41 of 1975, s. 15 (w.e.f. 1-4-1977). 
3.  Subs.  by  Act  11  of  1987,  s.  74,  for  “other  than  an  investment  company,  as  defined  in  clause  (ii)  of  section  109”               

(w.e.f. 1-4-1988). 

4. Subs. by Act 25 of 2014, s. 26, for “the principal business of which is the business of banking” (w.e.f. 1-4-2015). 
5. Ins. by Act 33 of 2009, s. 28 (w.e.f. 1-4-2010). 
6. Subs. by Act 11 of 1987, s. 31, for section 74 (w.e.f. 1-4-1988). 
7. Subs. by Act 20 of 2002, s. 29, for sub-section (1) (w.e.f. 1-4-2003). 

325 

                                                           
1* 

* 

* 

* 

*] 

2[74A. Losses  from  certain  specified  sources  falling  under  the  head  “Income  from  other 

sources”.—3* 

* 

* 

* 

* 

4[(3)  5***  In  the  case  of  an  assessee,  being  the  owner  of  horses  maintained  by  him  for  running  in 
horse races (such  horses  being  hereafter  in this  sub-section  referred  to  as race horses),  6[the  amount  of 
loss incurred by the assessee in the activity of owning and maintaining race horses in any assessment year 
shall not be set   off  against  income,  if  any,  from  any  source  other  than  the  activity  of  owning  and 
maintaining race horses in that year and] shall, subject to the other provisions of this Chapter, be carried 
forward to the following assessment year and— 

(a) it shall be set off against the income, if any,  7[from the activity of owning and maintaining 

race horses,] assessable for that assessment year: 

Provided that  the  activity  of  owning  and  maintaining  race  horses  is  carried  on  by  him  in  the 

previous year relevant for that assessment year; and 

(b)  if  the  loss  cannot  be  wholly  so  set  off,  the  amount  of  loss  not  so  set  off  shall  be  carried 
forward to the following assessment year and so on; so, however, that no portion of the loss shall be 
carried forward for more than four assessment years immediately succeeding the assessment year for 
which the loss was first computed. 

Explanation.—For the purposes of this sub-section— 

(a)  “amount  of  loss  incurred  by  the  assessee  in  the  activity  of  owning  and  maintaining  race 

horses” means— 

(i)  in  a  case  where  the  assessee  has  no  income  by  way  of  stake  money,  the  amount  of 
expenditure (not being in the nature of capital expenditure) laid out or expended by him wholly 
and exclusively for the purposes of maintaining race horses; 

(ii) in a case where the assessee has income by way of stake money, the amount by which 
such  income  falls  short  of  the  amount  of  expenditure  (not  being  in  the  nature  of  capital 
expenditure)  laid  out  or  expended  by  the  assessee  wholly  and  exclusively  for  the  purposes  of 
maintaining race horses; 

(b) “horse race” means a horse race upon which wagering or betting may be lawfully made; 

(c) “income by way of stake money” means the gross amount of prize money received on a race 
horse or race horses by the owner thereof on account of the horse or horses or any one or more of the 
horses winning or being placed second or in any lower position in horse races.] 

8[75. Losses  of  firms.—Where  the  assessee  is  a  firm,  any  loss  in  relation  to  the  assessment  year 
commencing on or before the 1st day of April, 1992, which could not be set off against any other income 
of  the  firm  and  which  had  been  apportioned  to  a  partner  of  the  firm  but  could  not  be  set  off  by  such 
partner prior to the assessment year commencing on the 1st day of April, 1993, then, such loss shall be 
allowed to be set off against the income of the firm subject to the condition that the partner continues in 
the said firm and to be carried forward for set off under sections 70, 71, 72, 73, 74 and 74A.] 

1. Sub-section (3) omitted by Act 20 of 2002, s. 29 (w.e.f. 1-4-2003). 
2. Ins. by Act 16 of 1972, s. 11 (w.e.f. 1-4-1972). 
3. Sub-sections (1) and (2) omitted by Act 23 of 1986, s. 16 (w.e.f. 1-4-1987). 
4. Ins. by Act 20 of 1974, s. 6 (w.e.f. 1-4-1975). 
5. The words “Where for any assessment year” omitted by Act 23 of 1986, s. 16 (w.e.f. 1-4-1987). 
6. Subs. by s. 16, ibid., for certain words (w.e.f. 1-4-1987). 
7. Subs. by s. 16, ibid., for “from the source specified in clause (c) of sub-section (2)” (w.e.f. 1-4-1987). 
8. Subs. by Act 18 of 1992, s. 39, for sections 75, 76 and 77 (w.e.f. 1-4-1993). Earlier amended by Act 20 of 1974, s. 13 
(w.e.f 1-4-1975), Act 11 of 1987, s. 74 (w.e.f. 1-4-1988), omitted by Act 4 of 1988, s. 19 (w.e.f. 1-4-1989) and restored 
by Act 3 of 1989, s. 95 (w.e.f. 1-4-1989). 

326 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
78. Carry  forward  and  set  off  of  losses  in  case  of  change  in  constitution  of  firm  or  on 
succession.—1[(1) Where a change has occurred in the constitution of a firm, nothing in this Chapter shall 
entitle  the  firm  to  have  carried forward  and  set  off  so  much  of  the  loss  proportionate to  the  share  of a 
retired or deceased partner as exceeds his share of profits, if any, in the firm in respect of the previous 
year.] 

(2) Where any person carrying on any business or profession has been succeeded in such capacity by 
another person otherwise than by inheritance, nothing in this Chapter shall entitle any person other than 
the person incurring the loss to have it carried forward and set off against his income. 

2[79. Carry forward and set off of losses in case of certain companies.—Notwithstanding anything 

contained in this Chapter, where a change in shareholding has taken place in a previous year,— 

(a) in the case of a company not being a company in which the public are substantially interested 
and other than a company referred to in clause (b), no loss incurred in any year prior to the previous 
year shall be carried forward and set off against the income of the previous year, unless on the last 
day of the previous year, the shares of the company carrying not less than fifty-one per cent. of the 
voting power were beneficially held by persons who beneficially held shares of the company carrying 
not less than fifty-one per cent. of the voting power on the last day of the year or years in which the 
loss was incurred; 

(b) in the case of a company, not being a company in which the public are substantially interested 
but being an eligible start-up as referred to in section 80-IAC, the loss incurred in any year prior to 
the previous year shall be carried forward and set off against the income of the previous year, if, all 
the shareholders of such company who held shares carrying voting power on the last day of the year 
or years in which the loss was incurred,— 

(i) continue to hold those shares on the last day of such previous year; and 

(ii) such loss has been incurred during the period of seven years beginning from the year in 

which such company is incorporated: 

Provided that  nothing  contained  in this  section shall apply  to  a  case  where  a change  in  the 
said voting power and shareholding takes place in a previous year consequent upon the death of a 
shareholder or on account of transfer of shares by way of gift to any relative of the shareholder 
making such gift: 

Provided  further  that  nothing  contained  in  this  section  shall  apply  to  any  change  in  the 
shareholding  of  an  Indian  company  which  is  a  subsidiary  of  a  foreign  company  as  a  result  of 
amalgamation or demerger of a foreign company subject to the condition that fifty-one per cent. 
shareholders of the amalgamating or demerged foreign company continue to be the shareholders 
of the amalgamated or the resulting foreign company.] 

3[Provided  also  that  nothing  contained  in  this  section  shall  apply  to  a  company  where  a 
change in the shareholding takes place in a previous year pursuant to a resolution plan approved 
under  the  Insolvency  and  Bankruptcy  Code,  2016,  after  affording  a  reasonable  opportunity  of 
being heard to the jurisdictional Principal Commissioner or Commissioner.] 

80. Submission of return for losses.—Notwithstanding anything contained in this Chapter, no loss 

which  has  not  been  determined  in  pursuance  of  a  return  filed  4[in  accordance  with  the  provisions  of               
sub-section (3) of section 139], shall be carried forward and set off under sub-section (1) of section 72 or 
sub-section (2) of section 73 5[or sub-section (2) of section 73A] or 6[sub-section (1) or sub-section (3) of 
section 74] 7[or sub-section (3) of section 74A]. 

1.  Subs.  by  Act  18  of  1992,  s.  40,  for  sub-section  (1)  (w.e.f.  1-4-1993).  Earlier  subs.  by  Act  4  of  1988,  s.  20                             

(w.e.f. 1-4-1989) and restored by Act 3 of 1989, s. 95 (1-4-1989). 

2. Subs. by Act 7 of 2017, s. 32, for section 39 (w.e.f. 1-4-2018). 
3. Ins. by Act 13 of 2018, s. 24 (w.e.f. 1-4-2018). 
4. Subs. by Act 4 of 1988, s. 126, for “within the time allowed under sub-section (1) of section 139 or within such further 

time as may be allowed by the Income-tax Officer” (w.e.f. 1-4-1989).  

5. Ins. by Act 28 of 2016, s. 36 (w.e.f. 1-4-2016). 
6. Subs. by Act 11 of 1987, s. 74, for “sub-section (1) of section 74” (w.e.f. 1-4-1988). 
7. Ins. by Act 20 of 1974, s. 13 (w.e.f. 1-4-1975). 

327 

                                                           
1[CHAPTER VIA 
DEDUCTIONS TO BE MADE IN COMPUTING TOTAL INCOME 
A.—General 

80A. Deductions to be made in computing total income.—(1) In computing the total income of an 
assessee,  there  shall  be  allowed  from  his  gross  total  income,  in  accordance  with  and  subject  to  the 
provisions of this Chapter, the deductions specified in section 80C to 2[80U]. 

(2) The aggregate amount of the deductions under this Chapter shall not, in any case, exceed the gross 

total income of the assessee. 

3[(3)  Where,  in  computing  the  total  income  of  an  association  of  persons  or  a  body  of                        

individuals,  any  deduction  is  admissible  under section  80G or section  80GGA 4[or section  80GGC] or 
section  80HH or section  80HHA or 
section  80HHB or 
section  80-IB] 6[or 
section  80-I or section  80-IA 5[or 
section  80-IE]   8***   9***,  no  deduction  under  the  same  section  shall  be  made  in  computing  the  total 
income of a member of the association of persons or body of individuals in relation to the share of such 
member in the income of the association of persons or body of individuals.] 

section  80HHC or section  80HHD or                      
section  80-IC] 7[or 

section  80-ID or                            

10[(4) Notwithstanding anything to the contrary contained in section 10A or section 10AA or  section 
10B or section 10BA or in any provisions of this Chapter under the heading ”C.—Deductions in respect 
of certain incomes”, where, in the case of an assessee, any amount of profits and gains of an undertaking 
or  unit  or  enterprise  or  eligible  business  is  claimed  and  allowed  as  a  deduction  under  any  of  those 
provisions for any assessment year, deduction in respect of, and to the extent of, such profits and gains 
shall not be allowed under any other provisions of this Act for such assessment year and shall in no case 
exceed the profits and gains of such undertaking or unit or enterprise or eligible business, as the case may 
be. 

(5) Where the assessee fails to make a claim in his return of income for any deduction under section 
10A or section  10AA or section  10B or  section  10BA or  under  any  provision  of  this  Chapter  under  the 
heading ”C.—Deductions  in  respect  of  certain  incomes”, no  deduction  shall  be  allowed  to  him 
thereunder.] 

(6)  Notwithstanding  anything  to  the  contrary  contained  in section  10A or section  10AA or           

section 10B or section 10BA or in any provisions of this Chapter under the heading ”C.—Deductions in 
respect of certain incomes”, where any goods or services held for the purposes of the undertaking or unit 
or enterprise or eligible business are transferred to any other business carried on by the assessee or where 
any  goods  or  services  held  for  the  purposes  of  any  other  business  carried  on  by  the  assessee  are 
transferred to the undertaking or unit or enterprise or eligible business and, the consideration, if any, for 
such transfer as recorded in the accounts of the undertaking or unit or enterprise or eligible business does 
not correspond to the market value of such goods or services as on the date of the transfer, then, for the 
purposes  of  any  deduction  under  this  Chapter,  the  profits  and  gains  of  such  undertaking  or  unit  or 
enterprise or eligible business shall be computed as if the transfer, in either case, had been made at the 
market value of such goods or services as on that date. 

Explanation.—For the purposes of this sub-section, the expression “market value”,— 

(i)  in  relation  to  any  goods  or  services  sold  or  supplied,  means  the  price  that  such  goods  or 
services would fetch if these were sold by the undertaking or unit or enterprise or eligible business in 
the open market, subject to statutory or regulatory restrictions, if any; 

1. Subs. by Act 20 of 1967, s. 33 and the Third Schedule, for Chapter VIA (w.e.f. 1-4-1968).  
2. Subs. by Act 32 of 1985, s. 36, for “80VV” (w.e.f. 1-4-1986). 
3.  Subs.  by  Act  18  of  1992,  s.  41,  for  sub-section  (3)  (w.e.f.  1-4-1993).  Earlier  substituted  by  Act  4  of  1988,  s.  21                    

(w.e.f. 1-4-1989) and then restored by Act 3 of 1989, s. 95 (w.e.f. 1-4-1989). 

4. Subs. by Act 46 of 2003, s. 9, for “section 80GGA” (w.e.f. 11-9-2003). 
5. Ins. by Act 27 of 1999, s. 90 (w.e.f. 1-4-2000). 
6. Ins. by Act 22 of 2007, s. 22 (w.r.e.f. 1-4-2004). 
7. Ins. by s. 22, ibid. (w.e.f. 1-4-2008).  
8. Section 80J omitted by Act 33 of 1996, s. 29 (w.e.f. 1-4-1989). 
9. Section 80JJ omitted by Act 26 of 1997, s. 26 (w.e.f. 1-4-1988). 
10. Ins. by Act 33 of 2009, s. 29 (w.e.f. 1-4-2003). 

328 

                                                           
(ii)  in  relation  to  any  goods  or  services  acquired,  means  the  price  that  such  goods  or  services 
would cost if these were acquired by the undertaking or unit or enterprise or eligible business from 
the open market, subject to statutory or regulatory restrictions, if any;] 

1[(iii) in relation to any goods or services sold, supplied or acquired means the arm’s length price 
as  defined  in  clause  (ii)  of section  92F of  such  goods  or  services,  if  it  is  a  specified  domestic 
transaction referred to in section 92BA.] 
2[(7) Where a deduction under any provision of this Chapter under the heading ”C.—Deductions in 
respect of certain incomes” is claimed and allowed in respect of profits of any of the specified business 
referred to in clause (c) of sub-section (8) of section 35D for any assessment year, no deduction shall be 
allowed under the provisions of section 35AD in relation to such specified business for the same or any 
other assessment year.] 

80AA. [Computation of deduction under section 80M].—Omitted by the Finance Act, 1997 (26 of 

1997), s. 21 (w.e.f. 1-4-1998)]. Earlier inserted by Act 44 of 1980, s. 12 (w.e.f. 1-4-1968). 

3[80AB.  Deductions  to  be  made  with  reference  to  the  income  included  in  the  gross  total 
income.Where any deduction is required to be made or allowed under any section  4*** included in this 
Chapter under the heading ”C.—Deductions in respect of certain incomes” in respect of any income of the 
nature  specified  in  that  section  which  is  included  in  the  gross  total  income  of  the  assessee,  then, 
notwithstanding anything contained in that section, for the purpose of computing the deduction under that 
section, the amount of income of that nature as computed in accordance with the provisions of this Act 
(before making any deduction under this Chapter) shall alone be deemed to be the amount of income of 
that nature which is derived or received by the assessee and which is included in his gross total income.] 

5[80AC. Deduction  not  to  be  allowed  unless  return  furnished.—Where  in  computing  the  total 

income of an assessee of any previous year relevant to the assessment year commencing on or after— 

(i) the 1st day of April, 2006 but before the 1st day of April, 2018, any deduction is admissible 

under  section  80-IA  or  section  80-IAB  or  section  80-IB  or  section  80-IC  or  section  80-ID  or               
section 80-IE; 

(ii) the 1st day of April, 2018, any deduction is admissible under any provision of this Chapter 

under the heading “C.—Deductions in respect of certain incomes”, 

no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment 
year on or before the due date specified under sub-section (1) of section 139.] 

80B. Definitions.—In this Chapter— 

6* 
7* 
8*  
9* 

* 

*  

* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

(5) “gross total income” means the total income computed in accordance with the provisions of 

this Act, before making any deduction under this Chapter 10*** 11***; 

12*  

* 

* 

* 

* 

1. Ins. by Act 23 of 2012, s. 23 (w.e.f. 1-4-2013). 
2. Ins. by Act 14 of 2010, s. 23 (w.e.f. 1-4-2011). 
3. Ins. by Act 44 of 1980, s. 12 (w.e.f. 1-4-1968). 
4. The brackets, words, figures and letters “(except section 80M)” omitted by Act 26 of 1997, s. 22 (w.e.f. 1-4-1998). 
5.  Subs.  by  Act  13  of  2009,  s.  25,  for  section  80AC  (w.e.f.  1-4-2018)  which  was  earlier  inserted  by  Act  21  of  2006,                                   

s. 15 (w.e.f. 1-4-2006). 

6. Clause (1) omitted by Act 41 of 1975, s. 17 (w.e.f. 1-4-1976). 
7. Clause (2) omitted by Act 4 of 1988, s. 22 (w.e.f. 1-4-1989). 
8. Clause (3) omitted by Act 19 of 1968, s. 30 and the Third Schedule (w.e.f. 1-4-1969). 
9. Clause (4) omitted by Act 4 of 1988, s. 22 (w.e.f. 1-4-1989). 
10. The words, figures and letter “or under section 280-O” omitted by Act 26 of 1988, s. 54 (w.e.f. 1-4-1988). 
11. The words and figures “and without applying the provisions of section 64” omitted by Act 42 of 1970, s. 18 (w.e.f. 1-4-1968). 
12. Clause (6) omitted by Act 4 of 1988, s. 22 (w.e.f. 1-4-1989). 

329 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
1* 
2* 
3* 

*  

* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

* 

4[80C. Deduction  in  respect  of  life  insurance  premia,  deferred  annuity,  contributions  to 
provident fund, subscription to certain equity shares or debentures, etc.—(1) In computing the total 
income  of  an  assessee,  being  an  individual  or  a  Hindu  undivided  family,  there  shall  be  deducted,  in 
accordance with and subject to the provisions of this section, the whole of the amount paid or deposited in 
the previous year, being the aggregate of the sums referred to in sub-section (2), as does not exceed 5[one 
hundred and fifty thousand rupees]. 

(2) The sums referred to in sub-section (1) shall be any sums paid or deposited in the previous year by 

the assessee— 

 (i) to effect or to keep in force an insurance on the life of persons specified in sub-section (4); 

(ii)  to  effect  or  to  keep  in  force  a  contract  for  a  deferred  annuity,  not  being  an  annuity  plan 

referred to in clause (xii), on the life of persons specified in sub-section (4): 

Provided that  such  contract  does  not  contain  a  provision  for  the  exercise  by  the  insured  of  an 

option to receive a cash payment in lieu of the payment of the annuity; 

(iii)  by  way  of  deduction  from  the  salary  payable  by  or  on  behalf  of  the  Government  to  any 
individual being a sum deducted in accordance with the conditions of his service, for the purpose of 
securing to him a deferred annuity or making provision for his spouse or children, in so far as the sum 
so deducted does not exceed one-fifth of the salary; 

(iv)  as  a  contribution  by  an  individual  to  any  provident  fund  to  which  the  Provident                

Funds Act, 1925 (19 of 1925) applies; 

(v) as a contribution to any provident fund set up by the Central Government and notified by it in 
this behalf in the Official Gazette, where such contribution is to an account standing in the name of 
any person specified in sub-section (4); 

(vi) as a contribution by an employee to a recognised provident fund; 

(vii) as a contribution by an employee to an approved superannuation fund; 
(viii) 6[as  subscription,  in  the  name  of  any  person  specified  in  sub-section  (4),  to]  any  such 
security  of  the  Central  Government  or  any  such  deposit  scheme  as  that  Government  may,  by 
notification in the Official Gazette, specify in this behalf; 

(ix)  as  subscription  to  any  such  savings  certificate  as  defined  in  clause  (c)  of  section  2  of  the 
Government  Savings  Certificates  Act,  1959  (46  of  1959),  as  the  Central  Government  may,  by 
notification in the Official Gazette, specify in this behalf; 

(x) as a contribution, in the name of any person specified in sub-section (4), for participation in 
the Unit-linked Insurance Plan, 1971 (hereafter in this section referred to as the Unit-linked Insurance 
Plan)  specified  in  Schedule  II  of  the  Unit  Trust  of  India  (Transfer  of  Undertaking  and  Repeal)        
Act, 2002 (58 of 2002); 

(xi) as a contribution in the name of any person specified in sub-section (4) for participation in 
any such unit-linked insurance plan of the LIC Mutual Fund 7[referred to in clause (23D)] of section 
10, as the Central Government may, by notification in the Official Gazette, specify in this behalf; 

(xii)  to  effect  or  to  keep  in  force  a  contract  for  such  annuity  plan  of  the  Life  Insurance 
Corporation  or  any  other  insurer  as  the  Central  Government  may,  by  notification  in  the  Official 
Gazette, specify; 

1. Clause (7) omitted by Act 16 of 1972, s. 15 (w.e.f. 1-4-1973). 
2. Clause (8) omitted by Act 4 of 1988, s. 22 (w.e.f. 1-4-1989). 
3. Clause (9) omitted by Act 41 of 1975, s. 17 (w.e.f. 1-4-1976). 
4. Ins. by Act 18 of 2005, s. 21 (w.e.f. 1-4-2006). Earlier omitted by Act 12 of 1990, s. 50 (w.e.f. 1-4-1991). 
5. Subs. by Act 25 of 2014, s. 27, for “one lakh rupees” (w.e.f. 1-4-2015). 
6. Subs. by Act 20 of 2015, s. 16, for “as subscription to” (w.e.f. 1-4-2015). 
7. Subs. by Act 21 of 2006, s. 16, for “notified under clause (23D)” (w.e.f. 1-4-2007). 

330 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
(xiii)  as  subscription  to  any  units  of  any  Mutual  Fund  1[referred  to  in  clause  (23D)]  of               

section  10 or  from  the  Administrator  or  the  specified  company  under  any  plan  formulated  in 
accordance with such scheme as the Central Government may, by notification in the Official Gazette, 
specify in this behalf; 

(xiv) as a contribution by an individual to any pension fund set up by any Mutual Fund 1[referred 
to  in  clause  (23D)]  of  section  10 or  by  the  Administrator  or  the  specified  company,  as  the  Central 
Government may, by notification in the Official Gazette, specify in this behalf; 

(xv) as subscription to any such deposit scheme of, or as a contribution to any such pension fund 
set  up  by,  the  National  Housing  Bank  established  under  section  3  of  the  National  Housing  Bank           
Act,  1987  (53  of  1987) (hereafter  in  this  section  referred to  as  the  National  Housing  Bank),  as  the 
Central Government may, by notification in the Official Gazette, specify in this behalf; 

(xvi) as subscription to any such deposit scheme of— 

(a) a public sector company which is engaged in providing long-term finance for construction 

or purchase of houses in India for residential purposes; or 

(b) any authority constituted in India by or under any law enacted either for the purpose of 
dealing with and satisfying the need for housing accommodation or for the purpose of planning, 
development or improvement of cities, towns and villages, or for both, 

as the Central Government may, by notification in the Official Gazette, specify in this behalf; 

(xvii)  as  tuition  fees  (excluding  any  payment  towards  any  development  fees  or  donation  or 

payment of similar nature), whether at the time of admission or thereafter,— 

(a) to any university, college, school or other educational institution situated within India; 

(b) for the purpose of full-time education of any of the persons specified in sub-section (4); 

(xviii)  for  the  purposes  of  purchase  or  construction  of  a  residential  house  property  the  income 
from which is chargeable to tax under the head “Income from house property” (or which would, if it 
had  not  been  used  for  the  assessee's  own  residence,  have  been  chargeable  to  tax  under  that  head), 
where such payments are made towards or by way of— 

(a)  any  instalment  or  part  payment  of  the  amount  due  under  any  self-financing  or  other 
scheme  of  any  development  authority,  housing  board  or  other  authority  engaged  in  the 
construction and sale of house property on ownership basis; or 

(b) any instalment or part payment of the amount due to any company or co-operative society 
of which the assessee is a shareholder or member towards the cost of the house property allotted 
to him; or 

(c) repayment of the amount borrowed by the assessee from— 

(1) the Central Government or any State Government, or 

(2) any bank, including a co-operative bank, or 

(3) the Life Insurance Corporation, or 

(4) the National Housing Bank, or 

(5) any public company formed and registered in India with the main object of carrying 
on the business of providing long-term finance for construction or purchase of houses in India 
for residential purposes which is eligible for deduction under clause (viii) of sub-section (1) 
of section 36, or 

1. Subs. by Act 21 of 2006, s. 16, for “notified under clause (23D)” (w.e.f. 1-4-2007). 

331 

                                                           
(6)  any  company  in  which  the  public  are  substantially  interested  or  any  co-operative 
society, where such company or co-operative society is engaged in the business of financing 
the construction of houses, or 

(7)  the  assessee’s  employer  where  such  employer  is  an  authority  or  a  board  or  a 

corporation or any other body established or constituted under a Central or State Act, or 

(8) the assessee’s employer where such employer is a public company or a public sector 
company or a university established by law or a college affiliated to such university or a local 
authority or a co-operative society; or 

(d) stamp duty, registration fee and other expenses for the purpose of transfer of such house 

property to the assessee, 

but shall not include any payment towards or by way of— 

(A) the admission fee, cost of share and initial deposit which a shareholder of a company or a member 

of a co-operative society has to pay for becoming such shareholder or member; or 

(B) the cost of any addition or alteration to, or renovation or repair of, the house property which is 
carried out after the issue of the completion certificate in respect of the house property by the authority 
competent to issue such certificate or after the house property or any part thereof has either been occupied 
by the assessee or any other person on his behalf or been let out; or 

(C) any expenditure in respect of which deduction is allowable under the provisions of section 24; 

(xix) as subscription to equity shares or debentures forming part of any eligible issue of capital 
approved by the Board on an application made by a public company or as subscription to any eligible 
issue of capital by any public financial institution in the prescribed form. 

Explanation.—For the purposes of this clause,— 

(i) “eligible issue of capital” means an issue made by a public company formed and registered 
in India or a public financial institution and the entire proceeds of the issue are utilised wholly 
and exclusively for the purposes of any business referred to in sub-section (4) of section 80-IA; 

(ii)  “public  company”  shall  have  the  meaning  assigned  to  it  in  section  3  of  the  Companies 

Act, 1956 (1 of 1956); 

(iii) “public financial institution” shall have the meaning assigned to it in section 4A of the 

Companies Act, 1956 (1 of 1956); 

(xx) as subscription to any units of any mutual fund referred to in clause (23D) of section 10 and 

approved by the Board on an application made by such mutual fund in the prescribed form: 

Provided that this clause shall apply if the amount of subscription to such units is subscribed only 

in the eligible issue of capital of any company. 

Explanation.—For the purposes of this clause “eligible issue of capital” means an issue referred 

to in clause (i) of the Explanation to clause (xix) of sub-section (2); 

1[(xxi) as term deposit— 

(a) for a fixed period of not less than five years with a scheduled bank; and 

(b) which is in accordance with a scheme framed and notified, by the Central Government, in 

the Official Gazette for the purposes of this clause. 

1. Ins. by Act 21 of 2006, s. 16 (w.e.f. 1-4-2007). 

332 

                                                           
Explanation.—For the purposes of this clause, “scheduled bank” means the State Bank of India 
constituted under the State Bank of India Act, 1955 (23 of 1955), or a subsidiary bank as defined in 
the  State  Bank  of  India  (Subsidiary  Banks)  Act,  1959  (38  of  1959),  or  a  corresponding  new  bank 
constituted  under  section  3  of  the  Banking  Companies  (Acquisition  and  Transfer  of  Undertakings) 
Act,  1970  (5  of  1970),  or  under  section  3  of  the  Banking  Companies  (Acquisition  and  Transfer  of 
Undertakings)  Act,  1980  (40  of  1980),  or  any  other  bank,  being  a  bank  included  in  the  Second 
Schedule to the Reserve Bank of India Act, 1934 (2 of 1934);] 

1[(xxii)  as  subscription  to  such  bonds  issued  by  the  National  Bank  for  Agriculture  and  Rural 
Development, as the Central Government may, by notification in the Official Gazette, specify in this 
behalf;] 

2[(xxiii) in an account under the Senior Citizens Savings Scheme Rules, 2004; 

(xxiv) as five year time deposit in an account under the Post Office Time Deposit Rules, 1981.] 

(3) The provisions of sub-section (2) shall apply only to so much of any premium or other payment 
made on an  3[insurance policy, other than a contract for a deferred annuity, issued on or before the 31st 
day of March, 2012,] as is not in excess of twenty per cent of the actual capital sum assured. 

Explanation.—In calculating any such actual capital sum assured, no account shall be taken— 

(i) of the value of any premiums agreed to be returned, or 

(ii) of any benefit by way of bonus or otherwise over and above the sum actually assured, which 

is to be or may be received under the policy by any person. 

4[(3A)  The  provisions  of  sub-section  (2)  shall  apply  only  to  so  much  of  any  premium  or  other 
payment made on an insurance policy, other than a contract for a deferred annuity, issued on or after the 
1st day of April, 2012 as is not in excess of ten per cent of the actual capital sum assured: 

5[Provided that where the policy, issued on or after the 1st day of April, 2013, is for insurance on life 

of any person, who is— 

(a) a person with disability or a person with severe disability as referred to in section 80U, or 

(b) suffering from disease or ailment as specified in the rules made under section 80DDB, 

the provisions of this sub-section shall have effect as if for the words “ten per cent.”, the words “fifteen 
per cent.” had been substituted.] 

Explanation.—For the purposes of this sub-section, “actual capital sum assured” in relation to a life 
insurance policy shall mean the minimum amount assured under the policy on happening of the insured 
event at any time during the term of the policy, not taking into account— 

(i) the value of any premium agreed to be returned; or 

(ii) any benefit by way of bonus or otherwise over and above the sum actually assured, which is 

to be or may be received under the policy by any person.] 

(4) The persons referred to in sub-section (2) shall be the following, namely:— 

(a) for the purposes of clauses (i), (v), (x) and (xi) of that sub-section,— 

(i)  in  the  case  of  an  individual,  the  individual,  the  wife  or  husband  and  any  child  of  such 

individual, and 

1. Ins. by Act 22 of 2007, s. 24 (w.e.f. 1-4-2008). 
2. Ins. by Act 18 of 2008, s. 16 (w.e.f. 1-4-2008). 
3. Subs. by Act 23 of 2012, s. 24, for “insurance policy other than a contract for a deferred annuity” (w.e.f. 1-4-2013). 
4. Ins. by s. 24, ibid. (w.e.f. 1-4-2013). 
5. Ins. by Act 17 of 2013, s. 12 (w.e.f. 1-4-2014). 

333 

                                                           
(ii) in the case of a Hindu undivided family, any member thereof; 

(b) for the purposes of clause (ii) of that sub-section, in the case of an individual, the individual, 

the wife or husband and any child of such individual; 

1[(ba)  for  the  purposes  of  clause  (viii)  of  that  sub-section,  in  the  case  of  an  individual,  the 
individual  or  any  girl  child  of  that  individual,  or  any  girl  child  for  whom  such  person  is  the  legal 
guardian, if the scheme so specifies;] 

(c)  for  the  purposes  of  clause  (xvii)  of  that  sub-section,  in  the  case  of  an  individual,  any  two 

children of such individual. 

(5) Where, in any previous year, an assessee— 

(i) terminates his contract of insurance referred to in clause (i) of sub-section (2), by notice to that 
effect  or  where  the  contract  ceases  to  be  in  force  by  reason  of  failure  to  pay  any  premium,  by  not 
reviving contract of insurance,— 

(a) in case of any single premium policy, within two years after the date of commencement of 

insurance; or 

(b) in any other case, before premiums have been paid for two years; or 

(ii)  terminates  his  participation  in  any  unit-linked  insurance  plan  referred  to  in  clause  (x)  or   

clause (xi) of sub-section (2), by notice to that effect or where he ceases to participate by reason of 
failure  to  pay  any  contribution,  by  not  reviving  his  participation,  before  contributions  in  respect  of 
such participation have been paid for five years; or 

(iii) transfers the house property referred to in clause (xviii) of sub-section (2) before the expiry of 
five years from the end of the financial year in which possession of such property is obtained by him, 
or receives back, whether by way of refund or otherwise, any sum specified in that clause, 

then,— 

(a) no deduction shall be allowed to the assessee under sub-section (1) with reference to any of 
the sums, referred to in clauses (i), (x), (xi) and (xviii) of sub-section (2), paid in such previous year; 
and 

(b) the aggregate amount of the deductions of income so allowed in respect of the previous year 
or  years  preceding  such  previous  year,  shall  be  deemed  to  be  the  income  of  the  assessee  of  such 
previous year and shall be liable to tax in the assessment year relevant to such previous year. 

(6)  If  any  equity  shares  or  debentures,  with  reference  to  the  cost  of  which  a  deduction  is  allowed 
under sub-section (1), are sold or otherwise transferred by the assessee to any person at any time within a 
period of three years from the date of their acquisition, the aggregate amount of the deductions of income 
so  allowed  in  respect  of  such  equity  shares  or  debentures  in  the  previous  year  or  years  preceding  the 
previous  year  in  which  such  sale  or  transfer  has  taken  place  shall  be  deemed  to  be  the  income  of  the 
assessee of such previous year and shall be liable to tax in the assessment year relevant to such previous 
year. 

Explanation.—A person shall be treated as having acquired any shares or debentures on the date on 
which  his  name  is  entered  in  relation  to  those  shares  or  debentures  in  the  register  of  members  or  of 
debenture-holders, as the case may be, of the public company. 

2[(6A)  If  any  amount,  including  interest  accrued  thereon,  is  withdrawn  by  the  assessee  from  his 
account referred to in clause (xxiii) or clause (xxiv) of sub-section (2), before the expiry of the period of 
five years from the date of its deposit, the amount so withdrawn shall be deemed to be the income of the 

1. Ins. by Act 20 of 2015, s. 16 (w.e.f. 1-4-2015). 
2. Ins. by Act 18 of 2008, s. 16 (w.e.f. 1-4-2008). 

334 

                                                           
assessee  of  the  previous  year  in  which  the  amount  is  withdrawn  and  shall  be  liable  to  tax  in  the 
assessment year relevant to such previous year: 

Provided that the amount liable to tax shall not include the following amounts, namely:— 

(i)  any  amount  of  interest,  relating  to  deposits  referred  to  in  clause  (xxiii)  or  clause  (xxiv)  of            

sub-section (2), which has been included in the total income of the assessee of the previous year or 
years preceding such previous year; and 

(ii)  any  amount  received  by  the  nominee  or  legal  heir  of  the  assessee,  on  the  death  of  such 
assessee, other than interest, if any, accrued thereon, which was not included in the total income of 
the assessee for the previous year or years preceding such previous year.] 

(7) For the purposes of this section,— 

(a)  the  insurance,  deferred  annuity,  provident  fund  and  superannuation  fund  referred  to  in                

clauses (i) to (vii); 

(b) unit-linked insurance plan and annuity plan referred to in clauses (xii) to (xiiia); 

(c) pension fund and subscription to deposit scheme referred to in clauses (xiiic) to (xiva); 

(d) amount borrowed for purchase or construction of a residential house referred to in clause (xv), 

of sub-section (2) of section 88 shall be eligible for deduction under the corresponding provisions of this 
section and the deduction shall be allowed in accordance with the provisions of this section. 

(8) In this section,— 

(i) “Administrator” means the Administrator as referred to in clause (a) of section 2 of the Unit 

Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002); 

(ii) “contribution” to any fund shall not include any sums in repayment of loan; 

(iii) “insurance” shall include— 

(a)  a  policy  of  insurance  on  the  life  of  an  individual  or  the  spouse  or  the  child  of  such 
individual or a member of a Hindu undivided family securing the payment of specified sum on 
the stipulated date of maturity, if such person is alive on such date notwithstanding that the policy 
of insurance provides only for the return of premiums paid (with or without any interest thereon) 
in the event of such person dying before the said stipulated date; 

(b) a policy of insurance effected by an individual or a member of a Hindu undivided family 
for the benefit of a minor with the object of enabling the minor, after he has attained majority to 
secure insurance  on his  own  life  by  adopting  the  policy  and  on  his being  alive  on a  date  (after 
such adoption) specified in the policy in this behalf; 

(iv)  “Life  Insurance  Corporation”  means  the  Life  Insurance  Corporation  of  India  established 

under the Life Insurance Corporation Act, 1956 (31 of 1956); 

(v)  “public  company”  shall  have  the  same  meaning  as  in  section  3  of  the  Companies                           

Act, 1956 (1 of 1956); 

(vi) “security” means a Government security as defined in clause (2) of section 2 of the Public 

Debt Act, 1944 (18 of 1944); 

(vii) “specified company” means a company as referred to in clause (h) of section 2 of the Unit 

Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002); 

(viii)  “transfer”  shall  be  deemed  to  include  also  the  transactions  referred  to  in  clause  (f)  of            

section 269UA.] 

335 

80CC. [Deduction 

in  respect  of 

investment 

in  certain  new  shares].—Omitted  by 

the                           

Finance (No. 2) Act, 1996 (33 of 1996), s. 22 (w.e.f. 1-4-1993). 

1[80CCA. Deduction  in  respect  of  deposits  under  National  Savings  Scheme  or  payment  to  a 

deferred annuity plan.—(1) Where an assessee, being— 

(a) an individual, or 

(b) a Hindu undivided family, 2*** 

3* 

* 

* 

* 

* 

has in the previous year— 

 (i) deposited any amount in accordance with such scheme as the Central Government  may, by 

notification in the Official Gazette, specify in this behalf 4***; or 

 (ii)  paid  any  amount  to  effect  or  to  keep  in  force  a  contract  for  such  annuity  plan  of  the  Life 
Insurance  Corporation  as  the  Central  Government  may,  by  notification  in  the  Official  Gazette, 
specify, 

out of his income chargeable to tax, he shall, in accordance with, and subject to, the provisions of this 
section,  be  allowed  a  deduction  in  the  computation  of  his  total  income  of  the  whole  of  the  amount 
deposited  or  paid  (excluding  interest  or  bonus  accrued  or  credited  to  the  assessee’s  account,  if  any)  as 
does not exceed the amount of twenty thousand rupees in the previous year: 

5[Provided that in relation to— 

(a)  the  assessment  years  commencing  on  the  1st  day  of  April,  1989  and  the  1st  day  of  April, 
1990,  this  sub-section  shall  have  effect  as  if  for  the  words  “twenty  thousand  rupees”,  the  words 
“thirty thousand rupees” had been substituted; 

(b)  the  assessment  year  commencing  on  the  1st  day  of  April,  1991  and  subsequent  assessment 
years, this sub-section shall have effect as if for the words “twenty thousand rupees”, the words “forty 
thousand rupees” had been substituted:] 

6[Provided  further that  no  deduction  under  this  sub-section  shall  be  allowed  in  relation  to  any 

amount deposited or paid under clauses (i) and (ii) on or after the 1st day of April, 1992.] 

(2) Where any amount— 

(a)  standing  to  the  credit  of  the  assessee  7[under  the  scheme  referred  to  in  clause  (i)  of               

sub-section (1)] in respect of which a deduction has been allowed under sub-section (1) together with 
the interest accrued on such amount is withdrawn in whole or in part in any previous year, or 

(b) is received on account of the surrender of the policy or as annuity or bonus in accordance with 

the annuity plan of the Life Insurance Corporation in any previous year, 

1. Subs. by Act 26 of 1988, s. 23, for section 80CCA (w.e.f. 1-4-1988). 
2. The words “or” omitted by Act 32 of 1994, s. 50 (w.e.f. 1-4-1988.) 
3. Clause (c) omitted by s. 50, ibid. (w.e.f. 1-4-1988). 
4.  The  brackets  and  words  “(hereafter  in  this  section  referred  to  as  the  National  Savings  Scheme)”  omitted  by                             

Act 49 of 1991, s. 25 (w.e.f. 1-10-1991). 

5. Subs. by Act 12 of 1990, s. 16, for the proviso (w.e.f. 1-4-1991). 
6. Ins. by Act 18 of 1992, s. 42 (w.e.f. 1-4-1993). 
7. Subs. by Act 49 of 1991, s. 25, for “under the National Savings Scheme” (w.e.f. 1-10-1991). 

336 

 
 
 
 
 
 
 
                                                           
an amount equal to the whole of the amount referred to in clause (a) or clause (b) shall be deemed to be 
the income of the assessee of that previous year in which such withdrawal is made or, as the case may be, 
amount is received, and shall, accordingly, be chargeable to tax as the income of that previous year: 

1[Provided that  nothing  contained  in  this  sub-section  shall  apply  to  any  amount  received  by  the 
assessee on account of the surrender of the policy in accordance with the terms of the annuity plan of the 
Life Insurance Corporation where the assessee elects to surrender before the 1st day of October, 1992, the 
said annuity plan in respect of which he had paid any amount under clause (ii) of sub-section (1) before 
the 1st day of April, 1992.] 

2[(3)  Notwithstanding  anything  contained  in  any  other  provision  of  this  Act,  where  a  partition  has 
taken place among the members of a Hindu undivided family or where an association of persons has been 
dissolved after a deduction has been allowed under sub-section (1), the provisions of sub-section (2) shall 
apply as if the person in receipt of income referred to therein is the assessee.] 

Explanation  I.—For  the removal  of  doubts,  it is hereby  declared that interest  on  the  deposits  made 
3[under the scheme referred to in clause (i) of sub-section (1)] shall not be chargeable to tax except in the 
manner and to the extent specified in sub-section (2). 

Explanation II.—For the purposes of this section, “Life Insurance Corporation” shall have the same 

meaning as in clause (a) of sub-section (8) of section 80C. 

4[80CCB. Deduction in respect of investment made under Equity Linked Savings Scheme.—(1) 

Where an assessee, being— 

 (a) an individual, or 

 (b) a Hindu undivided family,5*** 

6* 

* 

* 

* 

* 

has acquired in the previous year, out of his income chargeable to tax, units of any Mutual Fund specified 
under clause (23D) of section 10 or of the Unit Trust of India established under the Unit Trust of India 
Act,  1963  (52  of  1963),  under  any  plan  formulated  in  accordance  with  such  scheme  as  the  Central 
Government may, by notification in the Official Gazette, specify in this behalf (hereafter in this section 
referred  to  as  the  Equity  Linked  Savings  Scheme),  he  shall,  in  accordance  with,  and  subject  to,  the 
provisions of this section, be allowed a deduction in the computation of his total income of so much of the 
amount invested as does not exceed the amount of ten thousand rupees in the previous year: 

7[Provided that  no  deduction  shall  be  allowed  in  relation  to  any  amount  invested  under  this              

sub-section on or after the 1st day of April, 1992.] 

(2) Where any amount invested by the assessee in the units issued under a plan formulated under the 
Equity Linked Savings Scheme in respect of which a deduction has been allowed under sub-section (1) is 
returned to him in whole or in part either by way of repurchase of such units or on the termination of the 
plan,  by  the  Fund  or  the  Trust,  as  the  case  may  be,  in  any  previous  year,  it  shall  be  deemed  to  be  the 
income of the assessee of that previous year and chargeable to tax accordingly. 

1. Ins. by Act 18 of 1992, s. 42 (w.e.f. 1-4-1993). 
2. Ins. by Act 12 of 1990, s. 16 (w.e.f. 1-4-1991). 
3. Subs. by Act 49 of 1991, s. 25, for “under the National Savings Scheme” (w.e.f. 1-4-1991) 
4. Ins. by Act 12 of 1990, s. 17 (w.e.f. 1-4-1991). 
5. The word “or” omitted by Act 32 of 1994, s. 50 (w.e.f. 1-4-1991.) 
6. Clause (c) omitted by s. 50, ibid. (w.e.f. 1-4-1991). 
7. Ins. by Act 18 of 1992, s. 43 (w.e.f. 1-4-1993). 

337 

 
 
 
 
 
 
 
                                                           
(3) Notwithstanding anything contained in any other provision of this Act, where a partition has taken 
place  among  the  members  of  a  Hindu  undivided  family  or  where  an  association  of  persons  has  been 
dissolved after a deduction has been allowed under sub-section (1), the provisions of sub-section (2) shall 
apply as if the person in receipt of income referred to therein is the assessee.] 

1[80CCC. Deduction in respect of contribution to certain pension funds.—(1) Where an assessee 
being an individual has in the previous year paid or deposited any amount out of his income chargeable to 
tax to effect or keep in force a contract for any annuity plan of Life Insurance Corporation of India  2[or 
any  other  insurer]  for  receiving  pension  from  the  fund  referred  to  in  clause  (23AAB)  of section  10,  he 
shall,  in  accordance  with,  and  subject  to,  the  provisions  of  this  section,  be  allowed  a  deduction  in  the 
computation  of  his  total  income,  of  the  whole  of  the  amount  paid  or  deposited  (excluding  interest  or 
bonus  accrued  or  credited  to  the  assessee’s  account,  if  any)  as  does  not  exceed  the  amount  of 3[one 
hundred and fifty thousand rupees] in the previous year. 

(2) Where any amount standing to the credit of the assessee in a fund, referred to in sub-section (1) in 
respect of which a deduction has been allowed under sub-section (1), together with the interest or bonus 
accrued or credited to the assessee’s account, if any, is received by the assessee or his nominee— 

(a) on account of the surrender of the annuity plan whether in whole or in part, in any previous 

year, or 

(b) as pension received from the annuity plan, 

an amount equal to the whole of the amount referred to in clause (a) or clause (b) shall be deemed to be 
the  income  of  the  assessee  or  his  nominee,  as  the  case  may  be,  in  that  previous  year  in  which  such 
withdrawal is made or, as the case may be, pension is received, and shall accordingly be chargeable to tax 
as income of that previous year. 

4[(3)  Where  any  amount  paid  or  deposited  by  the  assessee  has  been  taken  into  account  for  the 

purposes of this section,— 

(a)  a  rebate  with  reference  to  such  amount  shall  not  be  allowed  under  section  88 for  any 

assessment year ending before the 1st day of April, 2006; 

(b)  a  deduction  with  reference  to  such  amount  shall  not  be  allowed  under section  80C for  any 

assessment year beginning on or after the 1st day of April, 2006.]] 

5[80CCD. Deduction in respect of contribution to pension scheme of Central Government.—(1) 
6[Where an assessee, being an individual employed by the Central Government on or after the 1st day of 
January, 2004 or, being an individual employed by any other employer], 7[or any other assessee, being an 
individual] has in the previous year paid or deposited any amount in his account under a pension scheme 
notified or as may be notified by the Central Government, he shall, in accordance with, and subject to, the 
provisions of this section, be allowed a deduction in the computation of his total income, of the whole of 
the amount so paid or deposited 8[as does not exceed,— 

 (a) in the case of an employee, ten per cent of his salary in the previous year; and 

1. Ins. by Act 33 of 1996, s. 23 (w.e..f 1-4-1997). 
2. Ins. by Act 14 of 2001, s. 36 (w.e.f. 1-4-2002). 
3. Subs. by Act 20 of 2015, s. 17, for “one lakh rupees” (w.e.f. 1-4-2016). 
4. Subs. by Act 18 of 2005, s. 22, for sub-section (3) (w.e.f. 1-4-2006). 
5. Ins. by Act 23 of 2004, s. 15 (w.e.f. 1-4-2004). 
6. Subs. by Act 25 of 2014, s. 28, for “Where an assessee, being an individual employed by the Central Government or any 

other employer on or after the 1st day of January, 2004” (w.e.f. 1-4-2015). 

7.  Ins. by Act 33 of 2009, s. 30 (w.e.f. 1-4-2009). 
8. Subs. by s. 30, ibid., for “as does not exceed ten per cent. of his salary in the previous year” (w.e.f. 1-4-2009). 

338 

                                                           
(b) in any other case, 1[twenty per cent.] of his gross total income in the previous year.] 

2* 

* 

* 

* 

* 

3[(1B) An assessee referred to in sub-section (1), shall be allowed a deduction in computation of his 
total income, whether or not any deductions is allowed under sub-section (1), of the whole of the amount 
paid  or  deposited  in  the  previous  year  in  his  account  under  a  pension  scheme  notified  or  as  may  be 
notified by the Central Government, which shall not exceed fifty thousand rupees: 

Provided that no deduction under this sub-section shall be allowed in respect of the amount on which 

a deduction has been claimed and allowed under sub-section (1).] 

(2) Where, in the case of an assessee referred to in sub-section (1), the 4[Central Government or any 
other employer] makes any contribution to his account referred to in that sub-section, the assessee shall be 
allowed a deduction in the computation of his total income, of the whole of the amount contributed by the 
4[Central Government or any other employer] as does not exceed ten per cent of his salary in the previous 
year. 

(3)  Where  any  amount  standing  to  the  credit  of  the  assessee  in  his  account  referred  to  in                       

5[sub-section  (1)  or  sub-section  (1B)],  in  respect  of  which  a  deduction  has  been  allowed 6[under  those 
sub-sections]  or  sub-section  (2),  together  with  the  amount  accrued  thereon,  if  any,  is  received  by  the 
assessee or his nominee, in whole or in part, in any previous year,— 

(a)  on  account  of  closure  or  his  opting  out  of  the  pension  scheme  referred  to  in                                

5[sub-section (1)  or sub-section (1B)]; or 

(b) as pension received from the annuity plan purchased or taken on such closure or opting out, 

the whole of the amount referred to in clause (a) or clause (b) shall be deemed to be the income of the 
assessee or his nominee, as the case may be, in the previous year in which such amount is received, and 
shall accordingly be charged to tax as income of that previous year. 

7[Provided that  the  amount  received  by  the  nominee,  on  the  death  of  the  assessee,  under  the 

circumstances referred to in clause (a), shall not be deemed to be the income of the nominee.] 

8[(4)  Where  any  amount  paid  or  deposited  by  the  assessee  has  been  allowed  as  a  deduction  under      

5[sub-section (1) or sub-section (1B)],— 

(a) no rebate with reference to such amount shall be allowed under section 88 for any assessment 

year ending before the 1st day of April, 2006; 

(b)  no  deduction  with  reference  to  such  amount  shall  be  allowed  under section  80C for  any 

assessment year beginning on or after the 1st day of April, 2006.] 

9[(5) For the purposes of this section, the assessee shall be deemed not to have received any amount in 

the previous year if such amount is used for purchasing an annuity plan in the same previous year.] 

Explanation.—For the purposes of this section, “salary” includes dearness allowance, if the terms of 

employment so provide, but excludes all other allowances and perquisites.] 

1. Subs. by Act 7 of 2017, s. 33 for “ten per cent.” (w.e.f. 1-4-2018). 
2. Sub-section (1A) omitted by Act 20 of 2015, s. 18 (w.e.f. 1-4-2016). 
3. Ins. by s. 18, ibid. (w.e.f. 1-4-2016). 
4. Subs. by Act 22 of 2007, s. 25, for “Central Government” (w.e.f. 1-4-2004). 
5. Subs. by Act 20 of 2015, s. 18, for “sub-section (1)” (w.e.f. 1-4-2016). 
6. Subs. by s. 18, ibid., for “ under that sub-section” (w.e.f. 1-4-2016). 
7. Ins. by Act 28 of 2016, s. 37 (w.e.f. 1-4-2017). 
8. Subs. by Act 18 of 2005, s. 23, for sub-section (4) (w.e.f. 1-4-2006). 
9. Ins. by Act 33 of 2009, s. 30 (w.e.f. 1-4-2009). 

339 

 
 
 
 
 
 
 
                                                           
1[80CCE. Limit on deductions under section 80C, section 80CCC and 80CCD.—The aggregate 
amount of deductions under section 80C, section 80CCC and  2[sub-section (1) of section 80CCD] shall 
not, in any case, exceed 3[one hundred and fifty thousand rupees].] 

4[80CCF. Deduction in respect of subscription to long-term infrastructure bonds.—In computing 
the total income of an assessee, being an individual or a Hindu undivided family, there shall be deducted, 
the  whole  of  the  amount,  to  the  extent  such  amount  does  not  exceed  twenty  thousand  rupees,  paid  or 
deposited,  during  the  previous  year  relevant  to  the  assessment  year  beginning  on  the  1st  day                    
of  April,  2011  5[or  to  the  assessment  year  beginning  on  the  1st  day  of  April,  2012],  as  subscription  to 
long-term  infrastructure  bonds  as  may,  for  the  purposes  of  this  section,  be  notified  by  the  Central 
Government.] 

6[80CCG. Deduction in respect of investment made under an equity savings scheme.—(1) Where 
an assessee, being a resident individual, has, in a previous year, acquired listed equity shares  7[or listed 
units  of  an  equity  oriented  fund]  in  accordance  with  a  scheme,  as  may  be  notified  by  the  Central 
Government in this behalf, he shall, subject to the provisions of sub-section (3), be allowed a deduction, 
in the computation of his total income of the assessment year relevant to such previous year, of fifty per 
cent of the amount invested in such equity shares 7[or units] to the extent such deduction does not exceed 
twenty-five thousand rupees. 

8[(2)  The  deduction  under  sub-section  (1)  shall  be  allowed  in  accordance  with,  and  subject  to,  the 
provisions  of  this  section  for  three  consecutive  assessment  years,  beginning  with  the  assessment  year 
relevant to the previous year in which the listed equity shares or listed units of equity oriented fund were 
first acquired.] 

(3) The deduction under sub-section (1) shall be subject to the following conditions, namely:— 

(i)  the  gross  total  income  of  the  assessee  for  the  relevant  assessment  year  shall  not  exceed 

9[twelve lakh rupees]; 

(ii)  the  assessee  is  a  new  retail  investor  as  may  be  specified  under  the  scheme  referred  to  in            

sub-section (1); 

(iii) the investment is made in such listed equity shares 7[or listed units of equity oriented fund] as 

may be specified under the scheme referred to in sub-section (1); 

(iv)  the  investment  is  locked-in  for  a  period  of  three  years  from  the  date  of  acquisition  in 

accordance with the scheme referred to in sub-section (1); and 

(v) such other condition as may be prescribed. 

(4)  If  the  assessee,  in  any  previous  year,  fails  to  comply  with  any  condition  specified  in                          

sub-section (3), the deduction originally allowed shall be deemed to be the income of the assessee of such 
previous year and shall be liable to tax for the assessment year relevant to such previous year.] 

1. Ins. by Act 18 of 2005, s. 24 (w.e.f. 1-4-2006). 
2. Subs. by Act 8 of 2011, s. 9, for “section 80CCD” (w.e.f. 1-4-2012). 
3. Subs. by Act 25 of 2014, s. 29, for “one lakh rupees” (w.e.f. 1-4-2015). 
4. Ins. by Act 14 of 2010, s. 24 (w.e.f. 1-4-2011). 
5. Ins. by Act 8 of 2011, s. 10 (w.e.f. 1-4-2012). 
6. Ins. by Act 23 of 2012, s. 25 (w.e.f. 1-4-2013). 
7. Ins. by Act 17 of 2013, s. 13 (w.e.f. 1-4-2014). 
8. Subs. by s. 13, ibid., for sub-section (2) (w.e.f. 1-4-2014).  
9. Subs. by s. 13, ibid., for “ten lakh rupees” (w.e.f. 1-4-2014). 

340 

                                                           
1[Explanation.—For  the  purposes  of  this  section,  “equity  oriented  fund”  shall  have  the  meaning 

assigned to it in the Explanation to clause (38) of section 10.] 

2[(5) Notwithstanding anything contained in sub-sections (1) to (4), no deduction under this section 

shall be allowed in respect of any assessment year commencing on or after the 1st day of April, 2018: 

Provided that an assessee, who has acquired listed equity shares or listed units of an equity oriented 
fund  in  accordance  with  the  scheme  referred  to  in  sub-section  (1)  and  claimed  deduction  under  this 
section for  any  assessment  year  commencing  on  or  before  the  1st  day  of  April,  2017,  shall  be allowed 
deduction under this section till the assessment year commencing on the 1st day of April, 2019, if he is 
otherwise eligible to claim the deduction in accordance with the other provisions of this section.] 

3[80D. Deduction in respect of health insurance premia.—(1) In computing the total income of an 
assessee, being an individual or a Hindu undivided family, there shall be deducted such sum, as specified 
in sub-section (2) or sub-section (3), payment of which is made by any mode 4[as specified in sub-section 
(2B)], in the previous year out of his income chargeable to tax. 

(2) Where the assessee is an individual, the sum referred to in sub-section (1) shall be the aggregate 

of the following, namely:— 

(a) the whole of the amount paid to effect or to keep in force an insurance on the health of the 
assessee  or  his  family  5[or  any  contribution  made  to  the  Central  Government  Health  Scheme]  6[or 
such  other  scheme  as  may  be  notified  by  the  Central  Government  in  this  behalf]  7[or  any  payment 
made on account of preventive health check-up of the assessee or his family] as does not exceed in 
the aggregate 8[twenty-five thousand rupees]; and 

(b) the whole of the amount paid to effect or to keep in force an insurance on the health of the 
parents or parents of the assessee 7[or any payment made on account of preventive health check-up of 
the  parent  or  parents  of  the  assessee]  as  does  not  exceed  in  the  aggregate 8[twenty-five  thousand 
rupees]; 

9[(c) the whole of the amount paid on account of medical expenditure incurred on the health of 
the  assessee  or  any  member  of  his  family  as  does  not  exceed  in  the  aggregate  10[fifty  thousand 
rupees]; and 

(d) the whole of the amount paid on account of medical expenditure incurred on the health of any 

parent of the assessee, as does not exceed in the aggregate 10[fifty thousand rupees]: 

Provided that the amount referred to in clause (c) or clause (d) is paid in respect of a 11*** senior 
citizen and no amount has been paid to effect or to keep in force an insurance on the health of such 
person: 

Provided  further that  the  aggregate  of  the  sum  specified  under  clause  (a)  and  clause  (c)  or  the 
aggregate  of  the  sum  specified  under  clause  (b)  and  clause  (d)  shall  not  exceed  10[fifty  thousand 
rupees].] 

Explanation.—For the purposes of clause (a), “family” means the spouse and dependant children of 

the assessee. 

7[(2A) Where the amounts referred to in clauses (a) and (b) of sub-section (2) are paid on account of 
preventive  health  check-up,  the  deduction  for  such  amounts  shall  be  allowed  to  the  extent  it  does  not 
exceed in the aggregate five thousand rupees. 

1. Ins. by Act 17 of 2013, s. 13 (w.e.f. 1-4-2014). 
2. Ins. by Act 7 of 2017, s. 34 (w.e.f. 1-4-2018). 
3. Subs. by Act 18 of 2008, s. 17, for section 80D (w.e.f. 1-4-2009). 
4. Subs. by Act 23 of 2012, s. 26, for “, other than cash,” (w.e.f. 1-4-2013). 
5. Ins. by Act 14 of 2010, s. 25 (w.e.f. 1-4-2011). 
6. Ins. by Act 17 of 2013, s. 14 (w.e.f. 1-4-2014). 
7. Ins. by Act 23 of 2012, s. 26 (w.e.f. 1-4-2013). 
8. Subs. by Act 20 of 2015, s. 19, for “fifteen thousand rupees” (w.e.f. 1-4-2016). 
9. Ins. by s. 19, ibid. (w.e.f. 1-4-2016). 
10. Subs. by Act 13 of 2018, s. 26, for “thirty thousand rupees” (w.e.f. 1-4-2019). 
11. The word “very” omitted by s. 26, ibid. (w.e.f. 1-4-2019). 

341 

                                                           
 
(2B) For the purposes of deduction under sub-section (1), the payment shall be made by— 

  (i)  any  mode,  including  cash,  in  respect  of  any  sum  paid  on  account  of  preventive  health             

check-up; 

(ii) any mode other than cash in all other cases not falling under clause (i).] 

1[(3) Where the assessee is a Hindu undivided family, the sum referred to in sub-section (1), shall be 

the aggregate of the following, namely:— 

(a) whole  of  the  amount  paid  to  effect  or  to  keep  in  force  an  insurance  on  the  health  of  any 
member  of  that  Hindu  undivided  family  as  does  not  exceed  in  the  aggregate  twenty-five  thousand 
rupees; and 

(b) the whole of the amount paid on account of medical expenditure incurred on the health of any 

member of the Hindu undivided family as does not exceed in the aggregate 2[fifty thousand rupees]: 

Provided that the amount referred to in clause (b) is paid in respect of a 3*** senior citizen and no 

amount has been paid to effect or to keep in force an insurance on the health of such person: 

Provided further that the aggregate of the sum specified under clause (a) and clause (b) shall not 

exceed 2[fifty thousand rupees].] 
(4)  Where  the  sum  specified  in  clause  (a)  or  clause  (b)  of  sub-section  (2) 4[or  clause  (a)  of                      

sub-section  (3)]  is  paid  to  effect  or  keep  in  force  an  insurance  on  the  health  of  any  person  specified 
therein,  and  who  is  a  senior  citizen, 5***,  the  provisions  of  this  section  shall  have  effect  as  if  for  the 
words 6[twenty-five thousand rupees], the words 7[fifty thousand rupees] had been substituted. 

8* 
* 
9[(4A)  Where  the  amount  specified  in  clause  (a)  or  clause  (b)  of  sub-section  (2)  or  clause  (a)  of       

* 

* 

* 

sub-section (3) is paid in lump sum in the previous year to effect or to keep in force an insurance on the 
health of any person specified therein for more than a year, then, subject to the provisions of this section, 
there shall be allowed for each of the relevant previous year, a deduction equal to the appropriate fraction 
of the amount. 

Explanation.—For the purposes of this sub-section,— 

(i) “appropriate fraction” means the fraction, the numerator of which is one and the denominator 

of which is the total number of relevant previous years; 

(ii) “relevant previous year” means the previous year beginning with the previous year in which 
such amount is paid and the subsequent previous year or years during which the insurance shall have 
effect or be in force.] 

(5) The insurance referred to in this section shall be in accordance with a scheme made in this behalf 

by— 

(a) the General Insurance Corporation of India formed under section 9 of the General Insurance 
Business (Nationalisation) Act, 1972 (57 of 1972) and approved by the Central Government in this 
behalf; or 

(b)  any  other  insurer  and  approved  by  the  Insurance  Regulatory  and  Development  Authority 
established  under  sub-section  (1)  of  section  3  of  the  Insurance  Regulatory  and  Development 
Authority Act, 1999 (41 of 1999).] 

1. Subs. by Act 20 of 2015, s. 19, for sub-section (3) (w.e.f. 1-4-2016). 
2. Subs. by Act 13 of 2018, s. 26, for “thirty thousand rupees” (w.e.f. 1-4-2019). 
3. The word “very” omitted by s. 26 (w.e.f. 1-4-2019). 
4. Subs. by Act 20 of 2015, s. 19, for “or in sub-section (3)” (w.e.f. 1-4-2016). 
5. The words “or a  very  senior citizen” omitted by  Act 13 of 2018, s. 26 (w.e.f. 1-4-2019) which was earlier inserted  by          

Act 20 of 2015, s. 19 (w.e.f. 1-4-2016). 

6. Subs. by Act 20 of 2015, s. 19, ibid., for “fifteen thousand rupees” (w.e.f. 1-4-2016). 
7. Subs. by Act 13 of 2018, s. 26, for “thirty thousand rupees” (w.e.f. 1-4-2019). Earlier it was substituted by s. 19, ibid., for 

“twenty thousand rupees” (w.e.f. 1-4-2016). 

8. Explanation omitted by Act 20 of 2015, s. 19 (w.e.f. 1-4-2016). 
9. Ins. by Act 13 of 2018, s. 26 (w.e.f. 1-4-2019). 

342 

 
 
 
 
 
 
 
 
 
                                                           
1[Explanation.—For the purposes of this section,— 

(i) ”senior citizen” means an individual resident in India who is of the age of sixty years or more 

at any time during the relevant previous year; 

2* 

* 

* 

* 

*] 

3[80DD. Deduction in respect of maintenance including medical treatment of a dependant who 
is a person with disability.—4[(1) Where an assessee, being an individual or a Hindu undivided family, 
who is a resident in India, has, during the previous year,— 

(a) incurred  any  expenditure  for  the  medical  treatment  (including  nursing),  training  and 

rehabilitation of a dependant, being a person with disability; or 

 (b) paid  or  deposited  any  amount  under  a  scheme  framed  in  this  behalf  by  the  Life  Insurance 
Corporation  or  any  other  insurer  or  the  Administrator  or  the  specified  company  subject  to  the 
conditions specified in sub-section (2) and approved by the Board in this behalf for the maintenance 
of a dependant, being a person with disability, 

the assessee shall, in accordance with and subject to the provisions of this section, be allowed a deduction 
of a sum of seventy-five thousand rupees from his gross total income in respect of the previous year: 

Provided that  where  such  dependant  is  a  person  with  severe  disability,  the  provisions  of  this                  

sub-section shall have effect as if for the words “seventy-five thousand rupees”, the words “one hundred 
and twenty-five thousand rupees” had been substituted.] 

(2) The deduction under clause (b) of sub-section (1) shall be allowed only if the following conditions 

are fulfilled, namely:— 

 (a)  the  scheme  referred  to  in  clause  (b)  of  sub-section  (1)  provides  for  payment  of  annuity  or 
lump sum amount for the benefit of a dependant, being a person  with disability, in the event of the 
death of the individual or the member of the Hindu undivided family in whose name subscription to 
the scheme has been made; 

 (b)  the  assessee  nominates  either  the  dependant,  being  a  person  with  disability,  or  any  other 
person or a trust to receive the payment on his behalf, for the benefit of the dependant, being a person 
with disability. 

(3) If the dependant, being a person with disability, predeceases the individual or the member of the 
Hindu undivided family referred to in sub-section (2), an amount equal to the amount paid or deposited 
under clause (b) of sub-section (1) shall be deemed to be the income of the assessee of the previous year 
in which such amount is received by the assessee and shall accordingly be chargeable to tax as the income 
of that previous year. 

(4) The assessee, claiming a deduction under this section, shall furnish a copy of the certificate issued 
by  the  medical  authority  in  the  prescribed  form  and  manner,  along  with  the  return  of  income  under 
section 139, in respect of the assessment year for which the deduction is claimed: 

Provided that  where  the  condition  of  disability  requires  reassessment  of  its  extent  after  a  period 
stipulated in the aforesaid certificate, no deduction under this section shall be allowed for any assessment 
year  relating  to  any  previous  year  beginning  after  the  expiry  of  the  previous  year  during  which  the 
aforesaid  certificate  of  disability  had  expired,  unless  a  new  certificate  is  obtained  from  the  medical 
authority in the form and manner, as may be prescribed, and a copy thereof is furnished along with the 
return of income. 

1. Ins. by Act 20 of 2015, s. 19 (w.e.f. 1-4-2016). 
2. Clause (ii) omitted by Act 13 of 2018, s. 26 (w.e.f. 1-4-2019). 
3. Subs. by Act 32 of 2003, s. 34, for section 80DD (w.e.f. 1-4-2004). 
4. Subs. by Act 20 of 2015, s. 20, for sub-section (1) (w.e.f. 1-4-2016). 

343 

 
 
 
 
 
 
 
                                                           
Explanation.—For the purposes of this section,— 

(a) “Administrator” means the Administrator as referred to in clause (a) of section 2 of the Unit 

Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002); 

(b) “dependant” means— 

(i)  in  the  case  of  an  individual,  the  spouse,  children,  parents,  brothers  and  sisters  of  the 

individual or any of them; 

(ii) in the case of a Hindu undivided family, a member of the Hindu undivided family, 

dependant  wholly  or  mainly  on  such  individual  or  Hindu  undivided  family  for  his  support  and 
maintenance, and who has not claimed any deduction under section 80U in computing his total income 
for the assessment year relating to the previous year; 

 (c) “disability” shall have the meaning assigned to it in clause (i) of section 2 of the Persons with 
Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 (1 of 1996) 
1[and includes “autism”, “cerebral palsy” and “multiple disability” referred to in clauses (a), (c) and 
(h)  of  section  2  of  the  National  Trust  for  Welfare  of  Persons  with  Autism,  Cerebral  Palsy,  Mental 
Retardation and Multiple Disabilities Act, 1999 (44 of 1999)]; 

(d) “Life Insurance Corporation” shall have the same meaning as in clause (iii) of sub-section (8) 

of section 88; 

(e) “medical authority” means the medical authority as referred to in clause (p) of section 2 of the 

Persons  with  Disabilities  (Equal  Opportunities,  Protection  of  Rights  and  Full  Participation)                     
Act, 1995 (1 of 1996)  1[or such other medical authority as may, by notification, be specified by the 
Central  Government  for  certifying  “autism”,  “cerebral  palsy”,  “multiple  disabilities”,  “person  with 
disability”  and  “severe  disability”  referred  to  in  clauses  (a),  (c),  (h),  (j)  and  (o)  of  section  2  of  the 
National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple 
Disabilities Act, 1999 (44 of 1999)]; 

(f)  “person  with  disability”  means  a  person  as  referred  to  in  clause  (t)  of  section  2  of  the                
Persons  with  Disabilities  (Equal  Opportunities,  Protection  of  Rights  and  Full  Participation)                    
Act, 1995 (1 of 1996)  1[or clause (j) of section 2 of the National Trust for Welfare of Persons with 
Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 (44 of 1999)]; 

2[(g) “person with severe disability” means— 

(i)  a  person  with  eighty  per  cent  or  more  of  one  or  more  disabilities,  as  referred  to  in                

sub-section (4) of section 56 of the Persons with Disabilities (Equal Opportunities, Protection of 
Rights and Full Participation) Act, 1995 (1 of 1996); or 

(ii) a person with severe disability referred to in clause (o) of section 2 of the National Trust 
for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities 
Act, 1999 (44 of 1999);] 

(h) “specified company”  means  a  company  as referred  to  in  clause (h)  of  section  2  of the  Unit 

Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002).] 

1. Ins. by Act 23 of 2004, s. 16 (w.e.f. 1-4-2005). 
2. Subs. by s. 16, ibid., for clause (g) (w.e.f. 1-4-2005). 

344 

                                                           
1[80DDB. Deduction in respect of medical treatment, etc.—Where an assessee who is resident in 
India has, during the previous year, actually paid any amount for the medical treatment of such disease or 
ailment as may be specified in the rules made in this behalf by the Board— 

(a) for himself or a dependant, in case the assessee is an individual; or 

(b)  for  any  member  of  a  Hindu  undivided  family,  in  case  the  assessee  is  a  Hindu  undivided 

family, 

the assessee shall be allowed a deduction of the amount actually paid or a sum of forty thousand rupees, 
whichever is less, in respect of that previous year in which such amount was actually paid : 

2[Provided that  no  such  deduction  shall  be  allowed  unless  the  assessee  obtains  the  prescription  for 
such medical treatment from a neurologist, an oncologist, a urologist, a haematologist, an immunologist 
or such other specialist, as may be prescribed:] 

Provided further that the deduction under this section shall be reduced by the amount received, if any, 
under  an  insurance  from  an  insurer,  or  reimbursed  by  an  employer,  for  the  medical  treatment  of  the 
person referred to in clause (a) or clause (b): 

Provided also that where the amount actually paid is in respect of the assessee or his dependant or any 
member of a Hindu undivided family of the assessee and who is a senior citizen, the provisions of this 
section shall have effect as if for the words “forty thousand rupees”, the words “3[one hundred thousand 
rupees]” had been substituted: 

4* 

* 

* 

* 

* 

Explanation.—For the purposes of this section,— 

(i) “dependant” means— 

(a)  in  the  case  of  an  individual,  the  spouse,  children,  parents,  brothers  and  sisters  of  the 

individual or any of them, 

(b) in the case of a Hindu undivided family, a member of the Hindu undivided family, 

dependant  wholly  or  mainly  on  such  individual  or  Hindu  undivided  family  for  his  support  and 
maintenance; 

1. Subs. by Act 32 of 2003, s. 35, for section 80DDB (w.e.f. 1-4-2004). 

2. Subs. by Act 20 of 2015, s. 21, for the proviso (w.e.f. 1-4-2016). 

3. Subs. by Act 13 of 2018, s. 27, for “sixty thousand rupees” (w.e.f. 1-4-2019). 

4.  The  fourth  proviso  omitted  by  s.  27,  ibid.  (w.e.f.  1-4-2019).  Earlier  it  was  inserted  by  Act  20  of  2015,                                         

s. 21 (w.e.f. 1-4-2016). 

345 

 
 
 
 
 
 
 
 
                                                           
1* 

* 

* 

* 

* 

(iii) “insurer” shall have the meaning assigned to it in clause (9) of section 2 of the Insurance Act, 

1938 (4 of 1938); 

(iv) “senior citizen” means an individual resident in India who is of the age of  2[sixty years] or 

more at any time during the relevant previous year;] 

3* 

* 

* 

* 

* 

4[80E. Deduction in respect of interest on loan taken for higher education.—(1) In computing the 
total income of an assessee, being an individual, there shall be deducted, in accordance with and subject 
to  the  provisions  of  this  section,  any  amount  paid  by  him  in  the  previous  year,  out  of  his  income 
chargeable to tax, by way of interest on loan taken by him from any financial institution or any approved 
charitable  institution  for  the  purpose  of  pursuing  his  higher  education  5[or  for  the  purpose  of  higher 
education of his relative]. 

(2)  The  deduction  specified  in  sub-section  (1)  shall  be  allowed  in  computing  the  total  income  in 
respect  of  the  initial  assessment  year  and  seven  assessment  years  immediately  succeeding  the  initial 
assessment year or until the interest referred to in sub-section (1) is paid by the assessee in full, whichever 
is earlier. 

(3) For the purposes of this section,— 

(a) “approved charitable institution” means an institution specified in, or, as the case may be, an 
institution  established  for  charitable  purposes  and  6[approved  by  the  prescribed  authority]  under 
clause (23C) of section 10 or an institution referred to in clause (a) of sub-section (2) of  section 80G; 

(b)  “financial  institution”  means  a  banking  company  to  which  the  Banking  Regulation                      

Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of 
that Act); or any other financial institution which the Central Government may, by notification in the 
Official Gazette, specify in this behalf; 

7[(c) “higher education” means any course of study pursued after passing the Senior Secondary 
Examination  or  its  equivalent  from  any  school,  board  or  university  recognised  by  the  Central 
Government  or  State  Government  or  local  authority  or  by  any  other  authority  authorised  by  the 
Central Government or State Government or local authority to do so;] 

(d) “initial assessment year” means the assessment year relevant to the previous year, in which 

the assessee starts paying the interest on the loan;] 

1. Clause (ii) omitted by Act 20 of 2015, s. 21 (w.e.f. 1-4-2016). 

2. Subs. by Act 23 of 2012, s. 27, for “sixty-five years” (w.e.f. 1-4-2013). 

3. Clause (5) omitted by Act 13 of 2018, s. 27 (w.e.f. 1-4-2019). Earlier inserted  by Act 20 of 2015, s. 21 (w.e.f. 1-4-2016). 

4. Subs. by Act 18 of 2005, s. 25, for section 80E (w.e.f. 1-4-2006). Earlier omitted by Act 4 of 1988, s. 33 (w.e.f. 1-4-1989) 

and later inserted by Act 32 of 1994, s. 23 (w.e.f. 1-4-1995). 

5. Ins. by Act 22 of 2007, s. 27 (w.e.f. 1-4-2008). 

6. Subs. by s. 27, ibid., for “notified by the Central Government” (w.e.f. 1-4-2008). 

7. Subs. by Act 33 of 2009, s. 32, for clause (c) (w.e..f 1-4-2010). 

346 

 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
1[(e) “relative”, in relation to an individual, means the spouse and children of that individual or 

the student for whom the individual is the legal guardian.] 

2[80EE. Deduction  in  respect  of  interest  on  loan  taken  for  residential  house  property.—(1)  In 
computing  the  total  income  of  an  assessee,  being  an  individual,  there  shall  be  deducted,  in  accordance 
with and subject to the provisions of this section, interest payable on loan taken by him from any financial 
institution for the purpose of acquisition of a residential property. 

(2) The deduction under sub-section (1) shall not exceed fifty thousand rupees and shall be allowed in 
computing the total income of the individual for the assessment year beginning on the 1st day of April, 
2017 and subsequent assessment years. 

(3) The deduction under sub-section (1) shall be subject to the following conditions, namely:— 

(i) the loan has been sanctioned by the financial institution during the period beginning on the 1st 

day of April, 2016 and ending on the 31st day of March, 2017; 

(ii) the  amount  of  loan  sanctioned  for  acquisition  of  the  residential  house  property  does  not 

exceed thirty-five lakh rupees; 

(iii) the value of residential house property does not exceed fifty lakh rupees; 

(iv) the assessee does not own any residential house property on the date of sanction of loan. 

(4)  Where  a  deduction  under  this  section  is  allowed  for  any  interest  referred  to  in  sub-section  (1), 
deduction  shall  not  be  allowed  in respect  of  such interest  under  any  other provision  of  this  Act for  the 
same or any other assessment year. 

(5) For the purposes of this section,— 

(a) “financial  institution”  means  a  banking  company  to  which  the  Banking  Regulation                     

Act, 1949 (10 of 1949) applies, or any bank or banking institution referred to in section 51 of that Act 
or a housing finance company; 

(b) “housing finance company” means a public company formed or registered in India with the 
main object of carrying on the business of providing long-term finance for construction or purchase 
of houses in India for residential purposes.] 

80F. [Deduction  in  respect  of  educational  expenses  in  certain  cases].—Omitted  by  the  Finance               

Act, 1985 (32 of 1985), s. 17 (w.e.f. 1-4-1986). Before omission by Act 3 of 1989, s. 95 it was ins. by Act 4 
of 1988, s. 24 (w.e.f. 1-4-1989).  

80FF. [Deduction in respect of expenses on higher education in certain cases].—Omitted by the 
Finance (No. 2) Act, 1980 (44 of 1980), s. 14 (w.e.f. 1-4-1981). Earlier inserted by Act 25 of 1975 s. 11 
(w.e.f. 1-4-1976). 

1. Subs. by Act 33 of 2009, s. 32, for clause (e) (w.e.f. 1-4-2010). Earlier inserted by Act 22 of 2007, s. 27 (w.e.f. 1-4-2008). 
2. Subs. by Act 28 of 2016, s. 38, for section 80EE (w.e.f. 1-4-2017). 

347 

                                                           
80G.  Deduction  in  respect  of  donations  to  certain  funds,  charitable  institutions,  etc.—1[(1)  In 
computing the total income of an assessee, there shall be deducted, in accordance with and subject to the 
provisions of this section,— 

2[(i) in a case where the aggregate of the sums specified in sub-section (2) includes any sum or 
sums of the nature specified 3[in sub-clause (i) or in 4[sub-clause (iiia)] 5[or in sub-clause (iiiaa) 6[or 
in sub-clause (iiiab)] 7[or in sub-clause (iiib)] 8[or in sub-clause (iiie)] 9[or in sub-clause (iiif)] 10[or in 
sub-clause  (iiig)]  11[or  in  sub-clause  (iiiga)]  12[or  sub-clause  (iiih)]  13[or  sub-clause  (iiiha)  or           
sub-clause  (iiihb)  or  sub-clause  (iiihc)]  14[or  sub-clause  (iiihd)]  15[or  sub-clause  (iiihe)]  16[or  sub-
clause  (iiihf)]  17[or  sub-clause (iiihg) or  sub-clause  (iiihh)]  18[or  sub-clause  (iiihi)]  19[or  sub-clause 
(iiihj)] or] 20[sub-clause (iiihk) or sub-clause (iiihl) or] 20[sub-clause (iiihm) or] in] sub-clause (vii) of 
clause (a) 21[or in clause (c)] 11[or in clause (d)] thereof, an amount equal to the whole of the sum or, 
as the case may be, sums of such nature plus fifty per cent of the balance of such aggregate; and] 

(ii) in any other case, an amount equal to fifty per cent of the aggregate of the sums specified in 

sub-section (2).] 

(2) The sums referred to in sub-section (1) shall be the following, namely:— 

(a) any sums paid by the assessee in the previous year as donations to— 

(i) the National Defence Fund set up by the Central Government; or 

(ii)  the  Jawaharlal  Nehru  Memorial  Fund  referred  to  in  the  Deed  of  Declaration  of  Trust 

adopted by the National Committee at its meeting held on the 17th day of August, 1964; or 

(iii) the Prime Minister’s Drought Relief Fund; or 
22[(iiia) the Prime Minister's National Relief Fund; or] 
  5[(iiiaa) the Prime Minister's Armenia Earthquake Relief Fund; or] 
23[(iiiab) the Africa (Public Contributions-India) Fund; or] 
24[(iiib) the National Children's Fund; or] 
25[(iiic)  the  Indira  Gandhi  Memorial  Trust,  the  deed  of  declaration  in  respect  whereof  was 

registered at New Delhi on the 21st day of February, 1985; or] 

1. Subs. by Act 66 of 1976, s. 17, for sub-section (1) (w.e.f. 1-4-1977). 
2. Subs. by Act 32 of 1985, s. 18, for clause (i) (1-4-1986). 
3. Subs. by Act 28 of 1999, s. 2, for “in sub-clause (iiia)” (w.e.f. 1-4-2000). 
4. Restored by Act 3 of 1989 s. 95, Earlier subs. by Act 4 of 1988, s. 25 (w.e.f. 1-1989). 
5. Ins. by Act 11 of 1989, s. 3 (w.e.f. 24-1-1989). 
6. Ins. by Act 49 of 1991, s. 26 (w.e.f. 1-4-1991). 
7. Ins. by Act 17 of 2013, s. 16 (w.e.f. 1-4-2014). 
8. Ins. by Act 38 of 1993, s. 13 (w.e.f. 1-4-1993). 
9. Ins. by s. 13, ibid. (w.e.f. 1-4-1994). 
10. Ins. by Act 32 of 1994, s. 26 (w.e.f. 1-4-1994). 
11. Ins. by Act 4 of 2001, s. 6 (w.e.f. 3-2-2001). 
12. Ins. by Act 22 of 1995, s. 16 (w.e.f. 1-4-1996). 
13. Ins. by Act 33 of 1996, s. 24 (w.e.f. 1-4-1997).  
14. Ins. by Act 35 of 1996, s. 2 (w.e.f. 14-11-1996). 
15. Ins. by Act 14 of 1997, s. 3 (w.e.f. 1-4-1997). 
16. Ins. by Act 26 of 1997, s. 23 (w.e.f. 1-4-1998). 
17. Ins. by Act 21 of 1998, s. 29 (w.e.f. 1-4-1999). 
18. Ins. b y Act 27 of 1999, s. 43 (w.e.f. 1-4-2000). 
19. Ins. by Act 14 of 2001, s. 39 (w.e.f. 1-4-2002). 
20. Ins. by Act 20 of 2015, s. 22 (w.e.f. 1-4-2016). 
21. Ins. by Act 10 of 2000, s. 31 (w.e.f. 1-4-2001). 
22. Ins. by Act 1 of 1976, s. 2 (w.e.f. 9-9-1975). 
23. Ins. by Act 49 of 1991, s. 26 (w.e.f. 1-4-1991). 
24. Ins. by Act 14 of 1982, s. 15 (w.e.f 1-4-1983). 
25. Ins. by Act 32 of 1985, s. 18 (w.e.f. 1-4-1985). 

348 

                                                           
1[(iiid)  the  Rajiv  Gandhi  Foundation,  the  deed  of  declaration  in  respect  whereof  was 

registered at New Delhi on the 21st day of June, 1991; or] 

2[(iiie) the National Foundation for Communal Harmony; or] 

3[(iiif) a University or any educational institution of national eminence as may be approved 

by the prescribed authority in this behalf; or] 

4[(iiig) the Maharashtra Chief Minister’s Relief Fund during the period beginning on the 1st 
day  of  October,  1993  and  ending  on  the  6th  day  of  October,  1993  or  to  the  Chief  Minister’s 
Earthquake Relief Fund, Maharashtra; or] 

5[(iiiga) any fund set up by the State Government of Gujarat exclusively for providing relief 

to the victims of earthquake in Gujarat; or] 

6[(iiih)  any  Zila  Saksharta  Samiti  constituted  in  any  district  under  the  chairmanship  of  the 
Collector  of  that  district  for  the  purposes  of  improvement  of  primary  education  in  villages  and 
towns in such district and for literacy and postliteracy activities. 

Explanation.—For  the  purposes  of  this  sub-clause,  “town”  means  a  town  which  has  a 
population not exceeding one lakh according to the last preceding census of which the relevant 
figures have been published before the first day of the previous year; or] 

7[(iiiha) the National Blood Transfusion Council or to any State Blood Transfusion Council 
which  has  its  sole  object  the  control,  supervision,  regulation  or  encouragement  in  India  of  the 
services related to operation and requirements of blood banks. 

Explanation.—For the purposes of this sub-clause,— 

 (a) “National Blood Transfusion Council” means a society registered under the Societies 
Registration Act, 1860 (21 of 1860) and has an officer not below the rank of an Additional 
Secretary to the Government of India dealing with the AIDS Control Project as its Chairman, 
by whatever name called; 

 (b) “State Blood Transfusion Council” means a society registered, in consultation with 
the  National  Blood  Transfusion  Council,  under  the  Societies  Registration  Act,  1860  (21  of 
1860)  or  under  any  law  corresponding  to  that  Act  in  force  in  any  part  of  India  and  has 
Secretary  to  the  Government  of  that  State  dealing  with  the  Department  of  Health,  as  its 
Chairman, by whatever name called; or 

(iiihb) any fund set up by a State Government to provide medical relief to the poor; or 

(iiihc) the Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force 
Central Welfare Fund established by the armed forces of the Union for the welfare of the past and 
present members of such forces or their dependants; or] 

8[(iiihd) the Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996; or] 

9[(iiihe) the National Illness Assistance Fund; or] 

10[(iiihf) the Chief Minister’s Relief Fund or the Lieutenant Governor’s Relief Fund in respect 

of any State or Union territory, as the case may be: 

1. Ins. by Act 49 of 1991, s. 26 (w.e.f. 1-4-1991). 
2. Ins. by Act 38 of 1993, s. 13 (w.e.f. 1-4-1993). 
3. Ins. s. 13, ibid. (w.e.f. 1-4-1994). 
4. Ins. by Act 32 of 1994, s. 24 (w.e.f. 1-4-1994). 
5. Ins. by Act 4 of 2001, s. 6 (w.e.f. 3-2-2001). 
6. Ins. by Act 22 of 1995, s. 16 (w.e.f. 1-4-1996). 
7. Ins. by Act 33 of 1996, s. 26 (w.e.f. 1-4-1997). 
8. Ins. by Act 35 of 1996, s. 2 (w.e.f. 14-11-1996). 
9. Ins. by Act 14 of 1997, s. 3 (w.e.f. 1-4-1997). 
10. Ins. by Act 26 of 1997, s. 23 (w.e.f. 1-4-1998). 

349 

                                                           
Provided that such Fund is— 

(a) the only Fund of its kind established in the State or the Union territory, as the case 

may be; 

(b) under the overall control of the Chief Secretary or the Department of Finance of the 

State or the Union territory, as the case may be; 

(c)  administered  in  such  manner  as  may  be  specified  by  the  State  Government  or  the 

Lieutenant Governor, as the case may be; or] 
1[(iiihg) the National Sports Fund to be set up by the Central Government; or 

(iiihh) the National Cultural Fund set up by the Central Government; or] 
2[(iiihi)  the  Fund  for  Technology  Development  and  Application  set  up  by  the  Central 

Government; or] 

3[(iiihj)  the  National  Trust  for  Welfare  of  Persons  with  Autism,  Cerebral  Palsy,  Mental 
Retardation  and  Multiple  Disabilities  constituted  under  sub-section  (1)  of  section  3  of  the 
National  Trust  for  Welfare  of  Persons  with  Autism,  Cerebral  Palsy,  Mental  Retardation  and 
Multiple Disabilities Act, 1999 (44 of 1999); or] 

4[(iiihk) the Swachh Bharat Kosh, set up by the Central Government, other than the sum spent 
by the assessee in pursuance of Corporate Social Responsibility under sub-section (5) of section 
135 of the Companies Act, 2013 (18 of 2013); or 

(iiihl)  the  Clean  Ganga  Fund,  set  up  by  the  Central  Government,  where  such  assessee  is  a 
resident  and  such  sum  is  other  than  the  sum  spent  by  the  assessee  in  pursuance  of  Corporate 
Social  Responsibility  under  sub-section  (5)  of  section  135  of  the  Companies  Act,  2013               
(18 of 2013); or] 

5[(iiihm) the  National  Fund  for  Control  of  Drug  Abuse  constituted  under  section  7A  of  the 

Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985); or] 

(iv) any other fund or any institution to which this section applies; or 
(v)  the  Government  or  any  local  authority,  to  be  utilised  6[for  any  charitable  purpose  other 

than the purpose of promoting family planning; or] 

7[8[(vi) an authority constituted in India by or under any law enacted either for the purpose of 
dealing with and satisfying the need for housing accommodation or for the purpose of planning, 
development or improvement of cities, towns and villages, or for both;] 

9[(via) any corporation referred to in clause (26BB) of section 10; or] 

(vii)  the  Government  or  to  any  such  local  authority,  institution  or  association  as  may  be 
approved in this behalf by the Central Government, to be utilised for the purpose of promoting 
family planning;] 

 (b) any sums paid by the assessee in the previous year as donations for the renovation or repair of 
any such temple, mosque, gurdwara, church or other place as is notified by the Central Government 
in the Official Gazette to be of historic, archaeological or artistic importance or to be a place of public 
worship of renown throughout any State or States; 

1. Ins. by Act 21 of 1998, s. 29 w.e.f. 1-4-1999). 
2. Ins. by Act 27 of 1999, s. 43 (w.e.f. 1-4-2000). 
3. Ins. by Act 14 of 2001, s. 39 (w.e.f. 1-4-2002). 
4. Ins. by Act 20 of 2015, s. 22 (w.e.f. 1-4-2015). 
5. Ins. by s. 22, ibid. (w.e.f. 1-4-2016). 
6. Subs. by Act 66 of 1976, s. 17, for “for any charitable purpose;” (w.e.f. 1-4-1977). 
7. Ins. by s. 17, ibid. (w.e.f. 1-4-1977). 
8. Subs. by Act 20 of 2002, s. 30, for sub-clause (vi) (w.e.f. 1-4-2003). 
9. Ins. by Act 22 of 1995, s. 16 (w.e.f. 1-4-1995). 

350 

                                                           
1[(c) any sums paid by the assessee, being a company, in the previous year as donations to the 
Indian  Olympic  Association  or  to  any  other  association  or  institution  2[established  in  India,  as  the 
Central Government may, having regard to the prescribed guidelines, by notification in the Official 
Gazette, specify in this behalf] for— 

(i) the development of infrastructure for sports and games; or 

(ii) the sponsorship of sports and games, 

in India;] 

* 

3[ (d)  any  sums  paid  by  the  assessee,  during  the  period  beginning  on  the  26th  day  of  January, 
2001 and ending on the 30th day of September, 2001, to any trust, institution or fund to which this 
section applies for providing relief to the victims of earthquake in Gujarat.] 
4* 
5[(4)  Where  the  aggregate  of  the  sums  referred  to  in  sub-clauses  (iv),  (v),  6[(vi),  (via)  and  (vii)]  of 
clause (a) and in 7[clauses (b) and (c)] of sub-section (2) exceeds ten per cent of the gross total income (as 
reduced by any portion thereof on which income-tax is not payable under any provision of this Act and by 
any amount in respect of which the assessee is entitled to a deduction under any other provision of this 
Chapter),  then  the  amount  in  excess  of  ten  per  cent  of  the  gross  total  income  shall  be  ignored  for  the 
purpose of computing the aggregate of the sums in respect of which deduction is to be allowed under sub-
section (1).] 

* 

* 

* 

(5)  This  section  applies  to  donations  to  any  institution  or  fund  referred  to  in  sub-clause  (iv)  of       

clause (a) of sub-section (2), only if it is established in India for a charitable purpose and if it fulfils the 
following conditions, namely:— 

8[(i)  where  the  institution  or  fund  derives  any  income,  such  income  would  not  be  liable  to 
inclusion in its total income under the provisions of sections 11 and 12 9*** 10*** 11[or clause (23AA) 
or clause (23C)] of section 10:] 

12[Provided that  where  an  institution  or  fund  derives  any  income,  being  profits  and  gains  of 
business, the condition that such income would not be liable to inclusion in its total income under the 
provisions of section 11 shall not apply in relation to such income, if— 

(a) the institution or fund maintains separate books of account in respect of such business; 

(b) the donations made to the institution or fund are not used by it, directly or indirectly, for 

the purposes of such business; and 

(c) the institution or fund issues to a person making the donation a certificate to the effect that 
it maintains separate books of account in respect of such business and that the donations received 
by it will not be used, directly or indirectly, for the purposes of such business;] 

 (ii)  the  instrument  under  which  the  institution  or  fund  is  constituted  does  not,  or  the  rules 
governing the institution or fund do not, contain any provision for the transfer or application at any 
time of the whole or any part of the income or assets of the institution or fund for any purpose other 
than a charitable purpose; 

1. Ins. by Act 10 of 2000, s. 31 (w.e.f. 1-4-2001). 
2.  Subs.  by  Act  20  of  2002,  s.  30,  for  “as  notified  by  the  Central  Government  under  clause  (23)  of  section  10”                    

(w.e.f. 1-4-2003). 

3. Ins. by Act 4 of 2001, s. 6 (w.e.f. 3-2-2001). 
4. Sub-section (3) omitted by Act 32 of 1994, s. 24 (w.e.f. 1-4-1994). 
5. Subs. by Act 4 of 1988, s. 25, for sub-section (4) (w.e.f. 1-4-1989). 
6. Subs. by Act 22 of 1995, s. 16, for “(vi) and (vii)” (w.e.f. 1-4-1995).  
7. Subs. by Act 10 of 2000, s. 31, for “clause (b)” (w.e.f. 1-4-2001). 
8. Restored by Act 3 of 1989, s. 95 (w.e.f. 1-4-1989). Earlier subs. by Act 4 of 1988, s. 25 (w.e.f. 1-4-1989). 
9. The words, brackets, figures and letter “or clause (22) or clause (22A)” omitted by Act 21 of 1998, s. 29 (w.e.f. 1-4-1999). 
10. The words, brackets and figures “or clause (23)” omitted by Act 20 of 2002, s. 30 (w.e.f. 1-4-2003). 
11. Subs. by Act 11 of 1987, s. 35, for “or clause (23C)” (w.e.f. 1-4-1988). 
12. The proviso added by Act 11 of 1983, s. 39 (w.e.f. 1-4-1984). 

351 

 
 
 
 
 
 
 
 
                                                           
(iii)  the  institution  or  fund  is  not  expressed  to  be  for  the  benefit  of  any  particular  religious 

community or caste; 

(iv) the institution or fund maintains regular accounts of its receipts and expenditure; 1*** 

(v) 

the 

institution  or  fund 

is  either  constituted  as  a  public  charitable 

trust  or 

is                   

registered under the Societies Registration Act, 1860 (21 of 1860), or under any law corresponding to 
that Act in force in any part of India or under section 25 of the Companies Act, 1956 (1 of 1956), or is 
a University established by law, or is any other educational institution recognised by the Government 
or by a University established by law, or affiliated to any University established by law,  2*** or is an 
institution financed wholly or in part by the Government or a local authority; 3*** 

4[(vi) in relation to donations made after the 31st day of March, 1992, the institution or fund is for 
the  time  being  approved  by  the  Commissioner  in  accordance  with  the  rules 5[made  in  this  behalf; 
and]] 
6* 
* 
7[(vii)  where  any  institution  or  fund  had  been  approved  under  clause  (vi)  for  the  previous  year 
beginning on the 1st day of April, 2007 and ending on the 31st day of March, 2008, such institution 
or fund shall, for the purposes of this section and notwithstanding anything contained in the proviso 
to clause (15) of section 2, be deemed to have been,— 

* 

* 

* 

(a) established for charitable purposes for the previous year beginning on the 1st day of April, 

2008 and ending on the 31st day of March, 2009; and 

(b)  approved  under  the  said  clause  (vi)  for  the  previous  year  beginning  on  the  1st  day  of 

April, 2008 and ending on the 31st day of March, 2009.] 

8[(5A) Where a deduction under this section is claimed and allowed for any assessment year in respect 
of  any  sum  specified  in  sub-section  (2),  the  sum  in  respect  of  which  deduction  is  so  allowed  shall  not 
qualify for deduction under any other provision of this Act for the same or any other assessment year.] 

9[(5B)  Notwithstanding  anything  contained  in  clause  (ii)  of  sub-section  (5)  and Explanation  3, an 
institution or fund which incurs expenditure, during any previous year, which is of a religious nature for 
an amount not exceeding five per cent of its total income in that previous year shall be deemed to be an 
institution or fund to which the provisions of this section apply.] 

10[(5C) 11[This section] applies in relation to amounts referred to in clause (d) of sub-section (2) only 
if the trust or institution or fund is established in India for a charitable purpose and it fulfils the following 
conditions, namely :— 

(i) it is approved in terms of clause (vi) of sub-section (5); 

(ii) it maintains separate accounts of income and expenditure for providing relief to the victims of 

earthquake in Gujarat; 

(iii) the donations made to the trust or institution or fund are applied only for providing relief to 

the earthquake victims of Gujarat 12[on or before the 31st day of March, 13[2004]]; 

1. The word “and” omitted by Act 32 of 1994, s. 24 (w.e.f. 1-4-1994). 
2. The words, brackets and figures “or is an institution approved by the Central Government for the purposes of clause (23) 

of section 10”, omitted by Act 20 of 2002, s. 30 (w.e.f. 1-4-2003). 
3. The word “and” omitted by Act 33 of 2009, s. 33 (w.e.f. 1-4-2009). 
4. Ins. by Act 49 of 1991, s. 26 (w.e.f. 1-10-1991). 
5. Subs. by Act 33 of 2009, s. 33, for “made in this behalf:” (w.e.f. 1-4-2009). 
6. The proviso omitted by s. 33, ibid., (w.e.f. 1-10-2009). 
7. Ins. by s. 33, ibid. (w.e.f. 1-10-2009).  
8. Ins. by Act 44 of 1980, s. 15 (w.r.e.f. 1-4-1962). 
9. Ins. by Act 27 of 1999, s. 43 (w.e.f. 1-4-2000). 
10. Ins. by Act 4 of 2001, s. 6 (w.e.f. 3-2-2001). 
11. Subs. by Act 20 of 2002, s. 30, for “This sub-section” (w.e.f. 3-2-2001). 
12. Subs. by s. 30, ibid., for “on or before the 31st day of March, 2002” (w.e.f. 3-2-2001). 
13. Subs. by Act 32 of 2003, s. 36, for “2003” (w.e.f. 3-2-2001). 

352 

 
 
 
 
 
 
 
                                                           
1[(iv)  the  amount  of  donation  remaining  unutilised  on  the  31st  day  of  March,  2[2004]  is 
transferred to the Prime Minister’s National Relief Fund on or before the 31st day of March, 2[2004];] 

(v) it renders accounts of income and expenditure to such authority and in such manner as may be 

prescribed, 3[on or before the 30th day of June, 2[2004]].] 

4[(5D) No deduction shall be allowed under this section in respect of donation of any sum exceeding 

5[two thousand rupees] unless such sum is paid by any mode other than cash.] 

Explanation  1.—An  institution  or  fund  established  for  the  benefit  of  Scheduled  Castes,  backward 
classes,  Scheduled  Tribes  or  of  women  and  children  shall  not  be  deemed  to  be  an  institution  or  fund 
expressed  to  be  for  the  benefit  of  a  religious  community  or  caste  within  the  meaning  of  clause  (iii)  of  
sub-section (5). 

6[Explanation  2.—For  the  removal  of  doubts,  it  is  hereby  declared  that  a  deduction  to  which  the 
assessee  is  entitled  in  respect  of  any  donation  made  to  an  institution  or  fund  to  which  sub-section  (5) 
applies shall not be denied merely on either or both of the following grounds, namely:— 

7[(i) that, subsequent to the donation, any part of the income of the institution or fund has become 
chargeable  to  tax  due  to  non-compliance  with  any  of  the  provisions  of  8[section  11,  section  12  or 
section 12A; 

(ii)  that,  under  clause  (c)  of  sub-section  (1)  of  section  13,  the  exemption  under  9[section  11  or 
section  12] is  denied  to  the  institution  or  fund  in  relation  to  any  income  arising  to  it  from  any 
investment referred to in clause (h) of sub-section (2) of section 13 where the aggregate of the funds 
invested by it in a concern referred to in the said clause (h) does not exceed five per cent of the capital 
of that concern].] 

Explanation  3.—In  this  section,  “charitable  purpose”  does  not  include  any  purpose  the  whole  or 

substantially the whole of which is of a religious nature. 

10[Explanation 4.—For the purposes of this section, an association or institution having as its object 
the  control,  supervision,  regulation  or  encouragement  in  India  of  such  games  or  sports  as  the  Central 
Government may, by notification in the Official Gazette, specify in this behalf, shall be deemed to be an 
institution established in India for a charitable purpose.] 

11[Explanation 5.—For the removal of doubts, it is hereby declared that no deduction shall be allowed 

under this section in respect of any donation unless such donation is of a sum of money.] 

12*   

* 

* 

* 

* 

1.  Subs. by Act 20 of 2002, s. 30, for clause (iv) (w.e.f. 3-2-2001). 
2. Subs. by Act 32 of 2003, s. 36, for “2003” (w.e.f. 3-2-2001). 
3. Subs. by s. 30, ibid., for “on or before the 30th day of June, 2002” (w.e.f. 3-2-2001). 
4. Ins. by Act 23 of 2012, s. 28 (w.e.f. 1-4-2013). 
5. Subs by Act 7 of 2017, s. 35  for “ten thousand rupees” (w.e.f. 1-4-2018). 
6. Subs. by Act 19 of 1970, s. 13, for the Explanation 2 (w.e.f. 1-4-1971) earlier substituted by Act 20 of 1967, s. 33 and the 

Third Schedule (w.e.f. 1-4-1967). 

7. Restored by Act 3 of 1989, s. 95 (h) (w.e.f. 1-4-1989). Earlier subs. by Act 4 of 1988, s. 25 (w.e.f. 1-4-1989). 
8. Subs. by Act 16 of 1972, s. 17, for “section 11” (w.e.f. 1-4-1973). 
9. Subs. by s. 17, for “section 11” (w.e.f. 1-4-1973).  
10. Subs. by Act 20 of 2002, s. 30, for the Explanation 4 (w.e.f. 1-4-2003). 
11. Ins. by Act 66 of 1976, s. 17 (w.e.f. 1-4-1976). 
12. Sub-section (6) omitted by Act 19 of 1968, s. 30 and the Third Schedule (w.e.f. 1-4-1969). 

353 

 
 
 
 
 
 
 
                                                           
1[80GG. Deductions in  respect  of rents  paid.—In  computing  the  total income  of  an  assessee,  not 
being an assessee having any income falling within clause (13A) of  section 10, there shall be deducted 
any expenditure incurred by him in excess of ten per cent of his total income towards payment of rent (by 
whatever name called) in respect of any furnished or unfurnished accommodation occupied by him for the 
purposes  of  his  own  residence,  to  the  extent  to  which  such  excess  expenditure  does  not 
exceed 2[five thousand  rupees]  per  month  or  twenty-five  per  cent  of  his  total  income  for  the  year, 
whichever is less, and subject to such other conditions or limitations as may be prescribed, having regard 
to the area or place in which such accommodation is situated and other relevant considerations: 

Provided that  nothing  in  this  section  shall  apply  to  an  assessee  in  any  case  where  any  residential 

accommodation is— 

  (i) owned by the assessee or by his spouse or minor child or, where such assessee is a member 
of  a  Hindu  undivided  family,  by  such  family  at  the  place  where  he  ordinarily  resides  or  performs 
duties of his office or employment or carries on his business or profession; or 

 (ii)  owned  by  the  assessee  at  any  other  place,  being  accommodation  in  the  occupation  of  the 
assessee, the value of which is to be determined  3[under clause (a) of sub-section (2) or, as the case 
may be, clause (a) of sub-section (4) of section 23]. 

Explanation.—In this section, the expressions “ten per cent of his total income” and “twenty-five per 
cent  of  his  total  income”  shall  mean  ten  per  cent  or  twenty-five  per  cent,  as  the  case  may  be,  of  the 
assessee’s total income before allowing deduction for any expenditure under this section.] 

4[80GGA.  Deduction  in  respect  of  certain  donations  for  scientific  research  or  rural 
development.—(1) In computing the total income of an assessee, there shall be deducted, in accordance 
with and subject to the provisions of this section, the sums specified in sub-section (2). 

(2) The sums referred to in sub-section (1) shall be the following, namely:— 

(a) any sum paid by the assessee in the previous year to a 5[research association] which has as its 
object the undertaking of scientific research or to a University, college or other institution to be used 
for scientific research: 

Provided that  such  association,  University,  college  or  institution  is for the  time  being  approved 

for the purposes of clause (ii) of sub-section (1) of section 35; 

6[(aa) any sum paid by the assessee in the previous year  7[to a research association which has as 
its  object  the  undertaking  of  research  in  social  science  or  statistical  research  or  to  a  University], 
college or other institution to be used for research in social science or statistical research: 

1. Ins. by Act 21 of 1998, s. 30 (w.e.f. 1-4-1998). 
2. Subs. by Act 28 of 2016, s. 39, for “two thousand rupees” w.e.f. 1-4-2017). 
3. Subs. by Act 14 of 2001, s. 40, for “under sub-clause (i) of clause (a) or, as the case may be, clause (b) of sub-section (2) 

of section 23” (w.e.f. 1-4-2002).  

4. Ins. by Act 21 of 1979, s. 11 (w.e.f. 1-4-1980). Restored to its original position by Act 3 of 1989 s. 95 (w.e.f. 1-4-1989). 

Earlier omitted by Act 4 of 1988 s. 26 (w.e.f. 1-4-1989). 

5. Subs. by Act 14 of 2010, s. 26, for “scientific research association” (w.e.f. 1-4-2011). 
6. Ins. by Act 49 of 1991, s. 27 (w.e.f. 1-4-1992). 
7. Subs. by Act 14 of 2010, s. 26, for “to a University” (w.e.f. 1-4-2011). 

354 

                                                           
Provided that 1[such association, University], college or institution is for the time being approved 

for the purposes of clause (iii) of sub-section (1) of section 35.] 

2[Explanation.—The deduction, to which the assessee is entitled in respect of any sum paid to a               

3[research  association],  University,  college  or  other  institution  to  which  clause  (a)  or  clause  (aa) 
applies, shall not be denied merely on the ground that, subsequent to the payment of such sum by the 
assessee,  the  approval  to  such  association,  University,  college  or  other  institution  referred  to  in            
clause (a) or clause (aa), as the case may be, has been withdrawn;] 

(b) any sum paid by the assessee in the previous year— 

(i) to an association or institution, which has as its object the undertaking of any programme 
of rural development, to be used for carrying out any programme of rural development approved 
for the purposes of section 35CCA; or 

   (ii)  to  an  association  or  institution  which  has  as  its  object  the  training  of  persons  for 

implementing programmes of rural development: 

4[Provided that the assessee furnishes the certificate referred to in sub-section (2) or, as the 

case may be, sub-section (2A) of section 35CCA from such association or institution.] 

2[Explanation.—The  deduction,  to  which  the  assessee  is  entitled  in  respect  of  any  sum  paid  to  an 
association  or  institution  for  carrying  out  the  programme  of  rural  development  to  which  this  clause 
applies,  shall  not  be  denied  merely  on  the  ground  that  subsequent  to  the  payment  of  such  sum  by  the 
assessee, the approval granted to such programme, or as the case may be, to the association or institution 
has been withdrawn;] 

5[(bb)  any  sum  paid  by the  assessee in the  previous  year to  a  public  sector  company  or a  local 
authority or to an association or institution approved by the National Committee, for carrying out any 
eligible project or scheme: 

Provided that the assessee furnishes the certificate referred to in clause  (a) of sub-section (2) of 
section 35AC from such public sector company or local authority or, as the case may be, association 
or institution. 

2[Explanation  1.—The  deduction,  to  which  the  assessee  is  entitled  in  respect  of  any  sum  paid  to  a 
public  sector  company,  or  to  a  local  authority  or  to  an  association  or  institution  for  carrying  out  the 
eligible  project  or  scheme  referred  to  in  section  35AC,  shall  not  be  denied  merely  on  the  ground  that 
subsequent to the payment of such sum by the assessee,— 

(a) the approval granted to such association or institution has been withdrawn; or 

1. Subs. by Act 14 of 2010 s. 26, for “such University” (w.e.f. 1-4-2011). 
2. Ins. by Act 29 of 2006, s. 11 (w.e.f. 1-4-2006). 
3. Subs. by Act of 2010, s. 26, for “scientific research association” (w.e.f. 1-4-2011). 
4. Subs. by Act 23 of 1983, s. 23, for the proviso (w.e.f. 1-4-1983). 
5. Ins. by Act 49 of 1991, s. 27 (w.e.f. 1-4-1992). 

355 

                                                           
(b) the notification notifying the eligible project or scheme referred to in section 3535AC carried 
out by the public sector company, or local authority or association or institution has been withdrawn.] 

Explanation  1[2].—For  the  purposes  of  this  clause,  the  expressions  “National  Committee”  and 

“eligible project or scheme” shall have the meanings respectively assigned to them in the Explanation to                   
section 35AC;] 

2[(c)  3[any  sum  paid  by  the  assessee  in  any  previous  year  ending  on  or  before  the  31st  day  of 
March,  2002]  to  an  association  or  institution,  which  has  as  its  object  the  undertaking  of  any 
programme of conservation of natural resources 4[or of afforestation], to be used for carrying out any 
programme  of  conservation  of  natural  resources  4[or  of  afforestation]  approved  for  the  purposes  of 
section 35CCB: 

Provided that the association or institution is for the time being approved for the purposes of sub-

section (2) of section 35CCB;] 

4[(cc)  any  sum  paid  by  the  assessee  in  any  previous  year  ending  on  or  before  the  31st  day  of 
March, 2002 to such fund for afforestation as is notified by the Central Government under clause (b) 
of sub-section (1) of section 35CCB;] 

5[(d) any sum paid by the assessee in the previous year to a rural development fund set up and 
notified  by  the  Central  Government  for  the  purposes  of  clause  (c)  of  sub-section  (1)  of  section 
35CCA;] 

6[(e) any sum paid by the assessee in the previous year to the National Urban Poverty Eradication 
Fund set up and notified by the Central Government for the purposes of clause (d) of sub-section (1) 
of section 35CCA.] 

7[(2A) No deduction shall be allowed under this section in respect of any sum exceeding ten thousand 

rupees unless such sum is paid by any mode other than cash.] 

(3) Notwithstanding anything contained in sub-section (1), no deduction under this section shall be 
allowed in the case of an assessee whose gross total income includes income which is chargeable under 
the head “Profits and gains of business or profession”. 

(4) Where a deduction under this section is claimed and allowed for any assessment year in respect of 
any payments of the nature specified in sub-section (2), deduction shall not be allowed in respect of such 
payments under any other provision of this Act for the same or any other assessment year.] 

8[80GGB. Deduction  in  respect  of  contributions  given  by  companies  to  political  parties.—In 
computing  the  total  income  of  an assessee,  being  an  Indian  company,  there  shall  be  deducted  any  sum 
contributed by it, in the previous year to any political party 9[or an electoral trust]: 

1. Explanation renumbered as Explanation 2 thereof by Act 29 of 2006, s. 11 (w.e.f. 1-4-2006). 
2. Ins. by Act 14 of 1982, s. 17 (w.e.f. 1-6-1982). 
3. Subs. by Act 20 of 2002, s. 31, for “any sum paid by the assessee in the previous year” (w.e.f. 1-4-2003). 
4. Ins. by Act 12 of 1990, s. 19 (w.e.f. 1-4-1991). 
5. Ins. by Act 23 of 1983, s. 23 (w.e.f. 1-4-1983). 
6. Ins. by Act 22 of 1995, s. 17 (w.e.f. 1-4-1996). 
7. Ins. by Act 23 of 2012, s. 29 (w.e.f. 1-4-2013). 
8. Ins. by Act 46 of 2003, s. 10 (w.e.f. 11-9-2003). 
9. Ins. by Act 33 of 2009, s. 34 (w.e.f. 1-4-2010). 

356 

                                                           
1[Provided that no deduction shall be allowed under this section in respect of any sum contributed 

by way of cash.] 

Explanation.—For  the  removal  of  doubts,  it  is  hereby  declared  that  for  the  purposes  of  this 
section, the word “contribute”, with its grammatical variation, has the meaning assigned to it under 
section 293A of the Companies Act, 1956 (1 of 1956).] 

80GGC. Deduction  in  respect  of  contributions  given  by  any  person  to  political  parties.—In 
computing the total income of an assessee, being any person, except local authority and every artificial 
juridical  person  wholly  or  partly  funded  by  the  Government,  there  shall  be  deducted  any  amount  of 
contribution made by him, in the previous year, to a political party or an electoral trust: 

2[Provided that no deduction shall be allowed under this section in respect of any sum contributed 

by way of cash.] 

Explanation.—For 

the  purposes  of  sections  80GGB  and  80GGC,  “political  party”                             

means  a  political  party  registered  under  section  29A  of  the  Representation  of  the  People                         
Act, 1951 (43 of 1951).] 

C.—Deductions in respect of certain incomes 

80H. [Deduction  in  case  of  new  industrial  undertakings  employing  displaced  persons,                    

etc.]—Omitted by the Taxation Laws (Amendment) Act, 1975, s. 20 (w.e.f. 1-4-1976). 

3[80HH.  Deduction  in  respect  of  profits  and  gains  from  newly  established  industrial 
undertakings  or  hotel  business  in  backward  areas.—Where  the  gross  total  income  of  an  assessee 
includes any profits and gains derived from an industrial undertaking, or the business of a hotel, to which 
this  section  applies,  there  shall,  in  accordance  with  and  subject  to  the  provisions  of  this  section,  be 
allowed,  in  computing  the  total  income  of  the  assessee,  a  deduction  from  such  profits  and  gains  of  an 
amount equal to twenty per cent thereof. 

(2)  This  section  applies  to  any  industrial  undertaking  which  fulfils  all  the  following  conditions, 

namely:— 

(i) it has begun or begins to manufacture or produce articles after the 31st day of December, 1970                                                                                                                                                                                                              

4[but before the 1st day of April, 1990], in any backward area; 

 (ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence in 

any backward area : 

Provided that  this  condition  shall  not  apply  in  respect  of  any  industrial  undertaking  which  is 
formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of 
any such industrial undertaking as is referred to in section 33B, in the circumstances and within the 
period specified in that section; 

1. Ins. by Act 17 of 2013, s. 17 (w.e.f. 1-4-2014). 
2. Ins. by s. 18, ibid. (w.e.f. 1-4-2014). 
3. Ins. by Act 26 of 1974, s. 9 (w.e.f. 1-4-1974). 
4. Ins. by Act 12 of 1990, s. 20 (w.e.f. 1-4-1990). 

357 

 
                                                           
(iii) it is not formed by the transfer to a new business of machinery or plant previously used for 

any purpose in any backward area; 

(iv) it employs ten or more workers in a manufacturing process carried on with the aid of power, 

or employs twenty or more workers in a manufacturing process carried on without the aid of power. 

Explanation.—Where any machinery or plant or any part thereof previously used for any purpose in 
any backward area is transferred to a new business in that area or in any other backward area and the total 
value of the machinery or plant or part so transferred does not exceed twenty per cent of the total value of 
the machinery or plant used in the business, then, for the purposes of clause (iii) of this sub-section, the 
condition specified therein shall be deemed to have been fulfilled. 

(3) This section applies to the business of any hotel, where all the following conditions are fulfilled, 

namely:— 

(i) the business of the hotel has started or starts functioning after the 31st day of December, 1970 

1[but before the 1st day of April, 1990], in any backward area; 

(ii) the business of the hotel is not formed by the splitting up, or the reconstruction, of a business 

already in existence; 

(iii) the hotel is for the time being approved for the purposes of this sub-section by the Central 

Government. 

(4)  The  deduction  specified  in  sub-section  (1)  shall  be  allowed  in  computing  the  total  income  in 
respect of each of the ten assessment years beginning with the assessment year relevant to the previous 
year in which the industrial undertaking begins to manufacture or produce articles or the business of the 
hotel starts functioning: 

Provided that,— 

(i) in the case of an industrial undertaking which has begun to manufacture or produce articles, 

and 

(ii) in the case of the business of a hotel which has started functioning, 

after the 31st day of December, 1970, but before the 1st day of April, 1973, this sub-section shall have 
effect as if the reference to ten assessment years were a reference to ten assessment years as reduced by 
the number of assessment years which expired before the 1st day of April, 1974. 

(5)  Where  the  assessee  is  a  person  other  than  a  company  or  a  co-operative  society,  the  deduction 
under  sub-section  (1)  shall  not  be  admissible  unless  the  accounts  of  the  industrial  undertaking  or  the 
business  of  the  hotel  for  the  previous  year  relevant  to  the  assessment  year  for  which  the  deduction  is 
claimed  have  been  audited  by  an  accountant  as  defined  in  the Explanation below  sub-section  (2)  of 
section  288 and  the  assessee  furnishes,  along  with  his  return  of income,  the  report  of  such  audit in  the 
prescribed form duly signed and verified by such accountant. 

1. Ins. by Act 12 of 1990, s. 20 (w.e.f. 1-4-1990). 

358 

                                                           
(6) Where any goods held for the purposes of the business of the industrial undertaking or the hotel 
are transferred to any other business carried on by the assessee, or where any goods held for the purposes 
of  any  other  business  carried  on  by  the  assessee  are  transferred  to  the  business  of  the  industrial 
undertaking or the hotel and, in either case, the consideration, if any, for such transfer as recorded in the 
accounts of the business of the industrial undertaking or the hotel does not correspond to the market value 
of such goods as on the date of the transfer, then, for the purposes of the deduction under this section, the 
profits  and  gains  of  the  industrial  undertaking  or  the  business  of  the  hotel  shall  be  computed  as  if  the 
transfer, in either case, had been made at the market value of such goods as on that date : 

Provided that  where,  in  the  opinion  of  the  1[Assessing  Officer],  the  computation  of  the  profits  and 
gains  of  the  industrial  undertaking  or  the  business  of  the  hotel  in  the  manner  hereinbefore  specified 
presents  exceptional  difficulties,  the  1[Assessing  Officer]  may  compute  such  profits  and  gains  on  such 
reasonable basis as he may deem fit. 

Explanation.—In this sub-section, “market value” in relation to any goods means the price that such 

goods would ordinarily fetch on sale in the open market. 

(7)  Where  it  appears  to  the  1[Assessing  Officer]  that,  owing  to  the  close  connection  between  the 
assessee carrying on the business of the industrial undertaking or the hotel to which this section applies 
and any other person, or for any other reason, the course of business between them is so arranged that the 
business transacted between them produces to the assessee more than the ordinary profits which might be 
expected to arise in the business of the industrial undertaking or the hotel, the  1[Assessing Officer] shall, 
in  computing  the  profits  and  gains  of  the  industrial  undertaking  or  the  hotel  for  the  purposes  of  the 
deduction  under  this  section,  take  the  amount  of  profits  as  may  be  reasonably  deemed  to  have  been 
derived therefrom. 

2* 

* 

* 

* 

* 

(9) In a case where the assessee is entitled also to the deduction 3[under section 80-I or section 80J] in 
relation to the profits and gains of an industrial undertaking or the business of a hotel to which this section 
applies, effect shall first be given to the provisions of this section. 

4[(9A) Where a deduction in relation to the profits and gains of a small-scale industrial undertaking to 
which  section  80HHA applies  is  claimed  and  allowed  under  that  section  for  any  assessment  year, 
deduction in relation to such profits and gains shall not be allowed under this section for the same or any 
other assessment year.] 

(10) Nothing contained in this section shall apply in relation to any undertaking engaged in mining.] 

5[(11) For the purposes of this section, “backward area” means such area as the Central Government 
may,  having  regard  to  the  stage  of  development  of  that  area,  by  notification  in  the  Official  Gazette, 
specify in this behalf: 

Provided that any notification under this sub-section may be issued so as to have retrospective effect 

to a date not earlier than the 1st day of April, 1983.] 

1. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2. Sub-section (8) omitted by Act 41 of 1975, s. 21 (w.e.f. 1-4-1976). 
3. Subs. by Act 44 of 1980, s. 35, for “under section 80J” (w.e.f. 1-4-1981). 
4. Ins. by Act 29 of 1977, s. 17 (w.e.f. 1-4-1978). 
5. Subs. by Act 46 of 1986, s. 10, for the Explanation (w.e.f. 10-9-1986). 

359 

 
 
 
 
 
 
 
 
                                                           
1[80HHA. Deduction  in  respect  of  profits  and  gains  from  newly  established  small-scale 
industrial undertakings in certain areas.—(1) Where the gross total income of an assessee includes any 
profits  and  gains  derived  from  a  small-scale  industrial  undertaking  to  which  this  section  applies,  there 
shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total 
income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent 
thereof. 

(2)  This  section  applies  to  any  small-scale  industrial  undertaking  which  fulfils  all  the  following 

conditions, namely:— 

(i) it begins to manufacture or produce articles after the 30th day of September, 1977 2[but before 

the 1st day of April, 1990], in any rural area; 

(ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence: 

Provided that this condition shall not apply in respect of any small-scale industrial undertaking which 
is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of 
any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period 
specified in that section; 

(iii) it is not formed by the transfer to a new business of machinery or plant previously used for 

any purpose; 

(iv) it employs ten or more workers in a manufacturing process carried on with the aid of power, 

or employs twenty or more workers in a manufacturing process carried on without the aid of power. 

Explanation.—Where in the case of a small-scale industrial undertaking, any machinery or plant or 
any part thereof previously used for any purpose is transferred to a new business and the total value of the 
machinery  or  plant  or  part  so  transferred  does  not  exceed  twenty  per  cent  of  the  total  value  of  the 
machinery  or  plant  used  in  the  business,  then,  for  the  purposes  of  clause  (iii)  of  this  sub-section,  the 
condition specified therein shall be deemed to have been fulfilled. 

(3)  The  deduction  specified  in  sub-section  (1)  shall  be  allowed  in  computing  the  total  income  3[of 
each  of  the  ten  previous  years  beginning  with  the  previous  year  in  which  the  industrial  undertaking] 
begins to manufacture or produce articles: 

4[Provided that such deduction shall not be allowed in computing the total income of any of the ten 
previous  years  aforesaid  in  respect  of  which  the  industrial  undertaking  is  not  a  small-scale  industrial 
undertaking within the meaning of clause (b) of the Explanation below sub-section (8).] 

(4)  Where  the  assessee  is  a  person,  other  than  a  company  or  a  co-operative  society,  the  deduction 
under sub-section (1) shall not be admissible unless the accounts of the small-scale industrial undertaking 
for the previous year relevant to the assessment year for which the deduction is claimed have been audited 
by  an  accountant  as  defined  in  the Explanation below  sub-section  (2)  of section  288 and  the  assessee 
furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and 
verified by such accountant. 

1. Ins. by Act 29 of 1977, s. 18 (w.e.f. 1-4-1978). 
2. Ins. by 12 of 1990, s. 21 (w.e.f. 1-4-1990). 
3. Subs. by Act 16 of 1981, s. 10, for “in respect of each of the ten assessment years beginning with the assessment year 

relevant to the previous year in which the small-scale industrial undertaking” (w.e.f. 1-4-1981). 

4. Ins. by s. 10, ibid. (w.e.f. 1-4-1981). 

360 

                                                           
(5)  The  provisions  of  sub-sections  (6)  and  (7)  of section  80HH shall,  so  far  as  may  be,  apply  in 
relation  to  the  computation  of  the  profits  and  gains  of  a  small-scale  industrial  undertaking  for  the 
purposes of the deduction under this section as they apply in relation to the computation of the profits and 
gains of an industrial undertaking for the purposes of the deduction under that section. 

(6) In a case where the assessee is entitled also to the deduction 1[under section 80-I or section 80J] in 
relation to the profits and gains of a small-scale industrial undertaking to which this section applies, effect 
shall first be given to the provisions of this section. 

(7) Where a deduction in relation to the profits and gains of a small-scale industrial undertaking to 
which section 80HH applies is claimed and allowed under that section for any assessment year, deduction 
in  relation  to  such  profits  and  gains  shall  not  be  allowed  under  this  section  for  the  same  or  any  other 
assessment year. 

(8) Nothing contained in this section shall apply in relation to any small-scale industrial undertaking 

engaged in mining. 

Explanation.—For the purposes of this section,— 

2[(a) “rural area” means any area other than— 

(i) an area which is comprised within the jurisdiction of a municipality (whether known as a 
municipality,  municipal  corporation,  notified  area  committee,  town  area  committee,  town 
committee or by any other name) or a cantonment board and which has a population of not less 
than ten thousand according to the last preceding census of which the relevant figures have been 
published before the first day of the previous year; or 

(ii) an area within such distance, not being more than fifteen kilometres from the local limits 
of any municipality or cantonment board referred to in sub-clause (i), as the Central Government 
may, having regard to the stage of development of such area (including the extent of, and scope 
for,  urbanisation  of  such  area)  and  other  relevant  considerations  specify  in  this  behalf  by 
notification in the Official Gazette;] 

3[(b) an industrial undertaking shall be deemed to be a small-scale industrial undertaking which 
is, on the last day of the previous year, regarded as a small-scale industrial undertaking under section 
11B of the Industries (Development and Regulation) Act, 1951 (65 of 1951).] 

4[80HHB. Deduction in respect of profits and gains from projects outside India.—(1) Where the 
gross total income of an assessee being an Indian company or a person (other than a company) who is 
resident in India includes any profits and gains derived from the business of— 

 (a)  the  execution  of  a  foreign  project  undertaken  by  the  assessee  in  pursuance  of  a  contract 

entered into by him, or 

1. Subs. by Act 44 of 1980, s. 35, for “under section 80J” (w.e.f. 1-4-1981). 

2. Subs. by Act 4 of 1988, s. 126, for clause (a) (w.e.f. 1-4-1989). 

3. Subs. by Act 27 of 1999, s. 44, for clause (b) (w.e.f. 1-4-1978). 

4. Ins. by Act 14 of 1982, s. 18 (w.e.f. 1-4-1983). 

361 

                                                           
 (b)  the  execution  of  any  work  undertaken  by  him  and  forming  part  of  a  foreign  project 

undertaken by any other person in pursuance of a contract entered into by such other person, 

with the Government of a foreign State or any statutory or other public authority or agency in a foreign 
State, or a foreign enterprise, there shall, in accordance with and subject to the provisions of this section, 
be allowed, in computing the total income of the assessee, 1[a deduction from such profits and gains of an 
amount equal to— 

(i) forty per cent. thereof for an assessment year beginning on the 1st day of April, 2001; 

(ii) thirty per cent. thereof for an assessment year beginning on the 1st day of April, 2002; 

(iii) twenty per cent. thereof for an assessment year beginning on the 1st day of April, 2003; 

(iv) ten per cent. thereof for an assessment year beginning on the 1st day of April, 2004, 

and no deduction shall be allowed in respect of the assessment year beginning on the 1st day of April, 
2005 and any subsequent assessment year:] 

Provided that the consideration for the execution of such project or, as the case may be, of such work 

is payable in convertible foreign exchange. 

(2) For the purposes of this section,— 

 (a) “convertible foreign exchange” means foreign exchange which is for the time being treated 
by  the  Reserve  Bank  of  India  as  convertible  foreign  exchange  for  the  purposes  of  2[the  Foreign 
Exchange Management Act, 1999 (42 of 1999)], and any rules made thereunder; 

 (b) “foreign project” means a project for— 

   (i) the construction of any building, road, dam, bridge or other structure outside India ; 

  (ii) the assembly or installation of any machinery or plant outside India ; 

 (iii) the execution of such other work (of whatever nature) as may be prescribed. 

(3) The deduction under this section  shall be allowed  only  if the  following  conditions  are fulfilled, 

namely:— 

  (i) the assessee maintains separate accounts in respect of the profits and gains derived from the 
business of the execution of the foreign project, or, as the case may be, of the work forming part of 
the  foreign  project  undertaken  by  him  and,  where  the  assessee  is  a  person  other  than  an  Indian 
company or a co-operative society, such accounts have been audited by an accountant as defined in 
the Explanation below sub-section (2) of section 288 and the assessee furnishes, along with his return 
of  income,  the  report  of  such  audit  in  the  prescribed  form duly  signed  and  verified  by  such 
accountant; 

1. Subs. by Act 10 of 2000, s. 32, for “a deduction from such profits and gains of an amount equal to fifty per cent. thereof” 

(w.e.f. 1-4-2001). 

2. Subs. by Act 17 of 2013, s. 4, for “the Foreign Exchange Regulation Act, 1973 (46 of 1973)” (w.e.f. 1-4-2013). 

362 

                                                           
1[(ia)  the  assessee  furnishes,  along  with  his  return  of  income,  a  certificate  in  the  prescribed 
form from  an  accountant  as  defined  in  the Explanation below  sub-section  (2)  of section  288,  duly 
signed  and  verified  by  such  accountant,  certifying  that  the  deduction  has  been correctly  claimed  in 
accordance with the provisions of this section;] 

(ii)  an  amount  equal  to  2[such  percentage  of  the  profits  and  gains  as  is  referred  to  in                        

sub-section (1) in relation to the relevant assessment year] is debited to the profit and loss account of 
the previous year in respect of which the deduction under this section is to be allowed and credited to 
a reserve account (to be called the “Foreign Projects Reserve Account”) to be utilised by the assessee 
during a period of five years next following for the purposes of his business other than for distribution 
by way of dividends or profits; 

(iii)  an  amount  equal  to  2[such  percentage  of  the  profits  and  gains  as  is  referred  to  in                       

sub-section (1) in relation to the relevant assessment year] is brought by the  assessee in convertible 
foreign exchange into India, in accordance with the provisions of the Foreign Exchange Management 
Act, 1999 (42 of 1999), and any rules made thereunder, within a period of six months from the end of 
the previous year referred to in clause (ii) or, 3[within such further period as the competent authority 
may allow in this behalf:] 

Provided that where the amount credited by the assessee to the Foreign Projects Reserve Account 
in pursuance of clause (ii) or the amount brought into India by the assessee in pursuance of clause (iii) 
or each of the said amounts is less than  2[such percentage of the profits and gains as is referred to in 
sub-section (1) in relation to the relevant assessment year], the deduction under that sub-section shall 
be limited to the amount so credited in pursuance of clause (ii) or the amount so brought into India in 
pursuance of clause (iii), whichever is less. 

1[Explanation.—For  the  purposes  of  clause  (iii),  the  expression  “competent  authority”  means  the 
Reserve Bank of India or such other authority as is authorised under any law for the time being in force 
for regulating payments and dealings in foreign exchange.] 

(4)  If  at  any  time  before  the  expiry  of  five  years  from  the  end  of  the  previous  year  in  which  the 
deduction  under  sub-section  (1)  is  allowed,  the  assesseeutilises  the  amount  credited  to  the  Foreign 
Projects Reserve Account for distribution by way of dividends or profits or for any other purpose which is 
not a purpose of the business of the assessee, the deduction originally allowed under sub-section (1) shall 
be  deemed  to  have  been  wrongly  allowed,  and the  4[Assessing  Officer]  may,  notwithstanding  anything 
contained in this Act, recompute the total income of the assessee for the relevant previous year and make 
the  necessary  amendment;  and  the  provisions  of section  154 shall,  so  far  as  may  be,  apply  thereto,  the 
period  of  four  years  specified  in  sub-section  (7)  of  that  section  being  reckoned  from  the  end  of  the 
previous year in which the money was so utilised. 

(5)  Notwithstanding  anything  contained  in  any  other  provision  of  this  Chapter  under  the  heading” 
C.—Deductions in respect of certain incomes”, no part of the consideration or of the income comprised in 
the consideration payable to the assessee for the execution of a foreign project referred to in clause (a) of 
sub-section (1) or of any work referred to in clause (b) of that sub-section shall qualify for deduction for 
any assessment year under any such other provision.] 

1. Ins. by Act 27 of 1999, s. 45 (w.e.f. 1-6-1999). 

2. Subs. by Act 10 of 2000, s. 33, for “fifty per cent. of the profits and gains referred to in sub-section (1)” (w.e.f. 1-4-2001). 

3. Subs. by Act 27 of 1999, s. 45, for certain words (w.e.f. 1-6-1999). 

4. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 

363 

                                                           
1[80HHBA. Deduction  in  respect  of  profits  and  gains  from  housing  projects  in  certain                

cases.—(1) Where the gross total income of an assessee being an Indian company or a person (other than 
a  company)  who  is  a  resident  in  India  includes  any  profits  and  gains  derived  from  the  execution  of  a 
housing  project  awarded  to  the  assessee  on  the  basis  of  global  tender  and  such  project  is  aided  by  the 
World Bank, there shall, in accordance with and subject to the provisions of this section, be allowed, in 
computing the total income of the assessee, 2[a deduction from such profits and gains of an amount equal 
to–– 

(i) forty per cent. thereof for an assessment year beginning on the 1st day of April, 2001; 

(ii) thirty per cent. thereof for an assessment year beginning on the 1st day of April, 2002; 

(iii) twenty per cent. thereof for an assessment year beginning on the 1st day of April, 2003; 

(iv) ten per cent. thereof for an assessment year beginning on the 1st day of April, 2004, 

and no deduction shall be allowed in respect of the assessment year beginning on the 1st day of April, 
2005 and any subsequent assessment year.] 

(2) The deductions under this section shall be allowed only if the following conditions are fulfilled, 

namely:— 

(i) the assessee maintains separate accounts in respect of the profits and gains derived from the 
business  of  the  execution  of  the  housing  project  undertaken  by  him  and,  where  the  assessee  is  a 
person other than an Indian company or a co-operative society, such accounts have been audited by 
an  accountant  as  defined  in  the Explanation below  sub-section  (2)  of  section  288 and  the  assessee 
furnishes along with his return of income the report of such audit in the prescribed form duly signed 
and verified by such accountant; 

(ii)  an  amount  equal  to  3[such  percentage  of  the  profits  and  gains  as  is  referred  to  in                   

sub-section (1) in relation to the relevant assessment year] is debited to the profit and loss account of 
the previous year in respect of which the deduction under this section is to be allowed and credited to 
a reserve account (to be called the Housing Projects Reserve Account) to be utilised by the assessee 
during a period of five years next following for the purposes of his business other than for distribution 
by way of dividends or profit: 

Provided that where the amount credited by the assessee to the Housing Projects Reserve Account in 

pursuance  of  clause  (ii)  is  less  than  3[such  percentage  of  the  profits  and  gains  as  is  referred  to  in               
sub-section  (1)  in  relation  to  the  relevant  assessment  year],  the  deduction  under  this  section  shall  be 
limited to the amount so credited in pursuance of clause (ii). 

(3)  If  at  any  time  before  the  expiry  of  five  years  from  the  end  of  the  previous  year  in  which  the 
deduction  under  sub-section  (1)  is  allowed,  the  assesseeutilises  the  amount  credited  to  the  Housing 
Projects Reserve Account for distribution by way of dividends or profit or for any other purpose which is 
not a purpose of the business of the assessee, the deduction originally allowed under sub-section (1) shall 
be  deemed  to  have  been  wrongly  allowed  and  the  Assessing  Officer  may,  notwithstanding  anything 
contained in this Act, recompute the total income of the assessee for the relevant previous year and make 
necessary amendment and the provision of section 154 shall, so far as may be, apply thereto, the period of 
four years specified in sub-section (7) of that section being reckoned from the end of the previous year in 
which the money was so utilised. 

1. Ins. by Act 21 of 1998, s. 31 (w.e.f. 1-4-1999). 
2. Subs. by Act 10 of 2000, s. 33, for “a deduction from such profits and gains of an amount equal to fifty per cent.thereof” 

(w.e.f. 1-4-2001). 

3. Subs. by Act 10 of 2000, s. 33, for “fifty per cent. of the profits and gains referred to in sub-section (1)” (w.e.f. 1-4-2001). 

364 

                                                           
(4) Notwithstanding anything contained in any other provision of this Chapter under heading “C.—
Deduction in respect of certain incomes”, no part of the income payable to the assessee for the execution 
of a housing project under sub-section (1) shall qualify for deduction for any assessment year under any 
other provision. 

Explanation.—For the purposes of this section,— 

(a) “housing project” means a project for— 

(i) the construction of any building, road, bridge or other structure in any part of India; 

(ii) the execution of such other work (of whatever nature) as may be prescribed; 

(b)  “World  Bank”  means  the  International  Bank  for  Reconstruction  and  Development  Bank 

referred to in the International Monetary Fund and Bank Act, 1945.] 

1[80HHC.Deduction in respect of profits retained for export business.—2[(1) Where an assessee, 
being an Indian company or a person (other than a company) resident in India, is engaged in the business 
of  export  out  of  India  of  any  goods  or  merchandise  to  which  this  section  applies,  there  shall,  in 
accordance with and subject to the provisions of this section, be allowed, in computing the total income of 
the assessee, 3[a deduction to the extent of profits, referred to in sub-section (1B)], derived by the assessee 
from the export of such goods or merchandise: 

Provided that  if  the  assessee,  being  a  holder  of  an  Export  House  Certificate  or  a  Trading  House 
Certificate (hereafter in this section referred to as an Export House or a Trading House, as the case may 
be,) issues a certificate referred to in clause (b) of sub-section (4A), that in respect of the amount of the 
export  turnover  specified  therein,  the  deduction  under  this  sub-section  is  to  be  allowed  to  a  supporting 
manufacturer, then the amount of deduction in the case of the assessee shall be reduced by such amount 
which  bears  to  the  4[total  profits  derived  by  the  assessee  from  the  export  of  trading  goods,  the  same 
proportion  as  the  amount  of  export  turnover  specified  in  the  said  certificate  bears  to  the  total  export 
turnover of the assessee in respect of such trading goods]. 

(1A) Where the assessee, being a supporting manufacturer, has during the previous year, sold goods 
or merchandise to any Export House or Trading House in respect of which the Export House or Trading 
House  has  issued  a  certificate  under  the  proviso  to  sub-section  (1),  there  shall,  in  accordance  with  and 
subject  to  the  provisions  of  this  section,  be  allowed  in  computing  the  total  income  of  the  assessee,  3[a 
deduction to the extent of profits, referred to in sub-section (1B)], derived by the assessee from the sale of 
goods or merchandise to the Export House or Trading House in respect of which the certificate has been 
issued by the Export House or Trading House.] 

5[(1B) For the purposes of sub-sections (1) and (1A), the extent of deduction of the profits shall be an 

amount equal to— 

(i) eighty per cent. thereof for an assessment year beginning on the 1st day of April, 2001; 

1. Subs. by Act 32 of 1985, s. 19, for section HHC (w.e.f. 1-4-1986). 
2. Subs. by Act 26 of 1988, s. 24, for sub-section (1) (w.e.f. 1-4-1989). 
3. Subs. by Act 10 of 2000, s. 34, for “a deduction of the profits” (w.e.f. 1-4-2001). 
4. Subs. by Act 18 of 1992, s.46, for “total profits of the export business of the assessee the same proportion as the amount 

of export turnover specified in the said certificate bears to the total export turnover of the assessee" (w.e.f. 1-4-1992). 

5. Ins. by Act 10 of 2000, s. 34 (w.e.f. 1-4-2001). 

365 

                                                           
1[(ii) seventy per cent. thereof for an assessment year beginning on the 1st day of April, 2002; 

(iii) fifty per cent. thereof for an assessment year beginning on the 1st day of April, 2003; 

(iv) thirty per cent. thereof for an assessment year beginning on the 1st day of April, 2004,] 

and no deduction shall be allowed in respect of the assessment year beginning on the 1st day of April, 
2005 and any subsequent assessment year.] 

(2) (a) This section applies to all goods or merchandise, other than those specified in clause (b), if the 
sale proceeds of such goods or merchandise exported out of India are 2[received in, or brought into, India] 
by the  assessee  3[(other than the supporting manufacturer)] in convertible foreign exchange  4[, within a 
period of six months from the end of the previous year or,  5[within such further period as the competent 
authority may allow in this behalf].] 

6[Explanation.—For  the  purposes  of  this  clause,  the  expression  “competent  authority”  means  the 
Reserve Bank of India or such other authority as is authorised under any law for the time being in force 
for regulating payments and dealings in foreign exchange.] 

(b) This section does not apply to the following goods or merchandise, namely:— 

(i) mineral oil ; and 

(ii)  minerals  and  ores  7[(other  than  processed  minerals  and  ores  specified  in  the  Twelfth 

Schedule)]. 

8[Explanation 1.—The sale proceeds referred to in clause (a) shall be deemed to have been received 
in  India  where such  sale  proceeds are  credited to  a  separate  account  maintained  for  the  purpose  by  the 
assessee with any bank outside India with the approval of the Reserve Bank of India. 

Explanation  2.—For  the  removal  of  doubts,  it  is  hereby  declared  that  where  any  goods  or 
merchandise are transferred by an assessee to a branch, office, warehouse or any other establishment of 
the  assessee  situate  outside  India  and  such  goods  or  merchandise  are  sold  from  such  branch,  office, 
warehouse or establishment, then, such transfer shall be deemed to be export out of India of such goods 
and merchandise and the value of such goods or merchandise declared in the shipping bill or bill of export 
as  referred  to  in  sub-section  (1)  of  section  50  of  the  Customs  Act,  1962  (52  of  1962),  shall,  for  the 
purposes of this section, be deemed to be the sale proceeds thereof.] 

1. Subs. by Act 14 of 2001, s. 41, for   sub-clauses (ii), (iii) and (iv)(w.e.f. 1-4-2002). 

2. Subs. by Act 12 of 1990, s. 22, for “receivable” (w.e.f. 1-4-1991). 

3. Ins. by s. 22, ibid. (w.e.f. 1-4-1989). 

4. Ins. by s. 22, ibid. (w.e.f. 1-4-1991). 

5. Subs. by Act 27 of 1999, s. 46, for certain words (w.e.f. 1-6-1999). 

6. Ins. by s. 46, ibid. (w.e.f. 1-6-1999). 

7. Ins. by Act 49 of 1991, s. 28 (w.e.f. 1-4-1991). 

8. Ins. by s. 28, ibid. (w.e.f. 1-4-1992). 

366 

                                                           
1[(3) For the purposes of sub-section (1),— 

(a) where the export out of India is of goods or merchandise  2[manufactured or processed by the 
assessee], the profits derived from such export shall be the amount which bears to the profits of the 
business,  the  same  proportion  as  the  export  turnover  in  respect  of  such  goods  bears  to  the  total 
turnover of the business carried on by the assessee; 

(b) where the export out of India is of trading goods, the profits derived from such export shall be 
the export turnover in respect of such trading goods as reduced by the direct costs and indirect costs 
attributable to such export; 

(c) where the export out of India is of goods or merchandise  2[manufactured or processed by the 

assessee] and of trading goods, the profits derived from such export shall,— 

(i) in respect of the goods or merchandise  2[manufactured or processed by the assessee], be 
the  amount  which  bears  to  the  adjusted  profits  of  the  business,  the  same  proportion  as  the 
adjusted  export  turnover  in  respect  of  such  goods  bears  to  the  adjusted  total  turnover  of  the 
business carried on by the assessee; and 

(ii) in respect  of trading goods, be the export turnover in respect of such trading  goods as 

reduced by the direct and indirect costs attributable to export of such trading goods : 

Provided that the profits computed under clause (a) or clause (b) or clause (c) of this sub-section shall 
be further increased by the amount which bears to ninety per cent of any sum referred to in clause (iiia) 
(not  being  profits  on  sale  of  a  licence  acquired  from  any  other  person),  and  clauses  (iiib)  and  (iiic) 
of section 28, the same proportion as the export turnover bears to the total turnover of the business carried 
on by the assessee: 

3[Provided  further that  in  the  case  of  an  assessee  having  export  turnover  not  exceeding  rupees  ten 
crores during the previous year, the profits computed under clause (a) or clause (b) or clause (c) of this 
sub-section or after giving effect to the first proviso, as the case may be, shall be further increased by the 
amount which bears to ninety per cent of any sum referred to in clause (iiid) or clause (iiie), as the case 
may  be,  of section  28,  the  same  proportion  as  the  export  turnover  bears  to  the  total  turnover  of  the 
business carried on by the assessee : 

Provided  also that  in  the  case  of  an  assessee  having  export  turnover  exceeding  rupees  ten  crores 
during  the  previous  year,  the  profits  computed  under  clause  (a)  or  clause  (b)  or  clause  (c)  of  this  sub-
section  or  after  giving  effect  to  the  first  proviso,  as  the  case  may  be,  shall  be  further  increased  by  the 
amount  which  bears  to  ninety  per  cent.  of  any  sum  referred  to  in  clause  (iiid)  of  section  28,  the  same 
proportion as the export turnover bears to the total turnover of the business carried on by the assessee, if 
the assessee has necessary and sufficient evidence to prove that,— 

(a)  he  had  an  option  to  choose  either  the  duty  drawback  or  the  Duty  Entitlement  Pass  Book 

Scheme, being the Duty Remission Scheme; and 

(b) the rate of drawback credit attributable to the customs duty was higher than the rate of credit 

allowable under the Duty Entitlement Pass Book Scheme, being the Duty Remission Scheme: 

1. Subs. by Act 49 of 1991, s. 28, for sub-section (3) (w.e.f. 1-4-1992). 
2. Subs. by Act 18 of 1992, s.46, for “manufactured by the assessee” (w.e.f. 1-4-1992). 
3. Ins. by Act 55 of 2005, s. 4 (w.e.f. 1-4-1998). 

367 

                                                           
Provided  also that  in  the  case  of  an  assessee  having  export  turnover  exceeding  rupees  ten  crores 
during  the  previous  year,  the  profits  computed  under  clause  (a)  or  clause  (b)  or  clause  (c)  of  this  sub-
section  or  after  giving  effect  to  the  first  proviso,  as  the  case  may  be,  shall  be  further  increased  by  the 
amount  which  bears  to  ninety  per  cent  of  any  sum  referred  to  in  clause  (iiie)  of  section  28,  the  same 
proportion as the export turnover bears to the total turnover of the business carried on by the assessee, if 
the assessee has necessary and sufficient evidence to prove that,— 

(a)  he  had  an  option  to  choose  either  the  duty  drawback  or  the  Duty  Free  Replenishment 

Certificate, being the Duty Remission Scheme; and 

(b) the rate of drawback credit attributable to the customs duty was higher than the rate of credit 

allowable under the Duty Free Replenishment Certificate, being the Duty Remission Scheme. 

Explanation.—For  the  purposes  of  this  clause,  “rate  of  credit  allowable”  means  the  rate  of  credit 
allowable under the Duty Free Replenishment Certificate, being the Duty Remission Scheme calculated 
in the manner as may be notified by the Central Government:] 

1[Provided  also that  in  case  the  computation  under  clause  (a)  or  clause  (b)  or  clause  (c)  of  this         

sub-section is a loss, such loss shall be set off against the amount which bears to ninety per cent of— 

(a) any sum referred to in clause (iiia) or clause (iiib) or clause (iiic), as the case may be, or 

(b)  any  sum  referred  to  in  clause  (iiid)  or  clause  (iiie),  as  the  case  may  be,  of section  28,  as 
applicable in the case of an assessee referred to in the second or the third or the fourth proviso, as the 
case may be, 

the same proportion as the export turnover bears to the total turnover of the business carried on by the 
assessee.] 

Explanation.—For the purposes of this sub-section,— 

(a)  “adjusted  export  turnover”  means  the  export  turnover  as  reduced  by  the  export  turnover  in 

respect of trading goods; 

(b) “adjusted profits of the business” means the profits of the business as reduced by the profits 
derived from the business of export out of India of trading goods as computed in the manner provided 
in clause (b) of sub-section (3); 

(c)  “adjusted  total  turnover”  means  the  total  turnover  of  the  business  as  reduced  by  the  export 

turnover in respect of trading goods; 

(d)  “direct  costs”  means  costs  directly  attributable  to  the  trading  goods  exported  out  of  India 

including the purchase price of such goods; 

(e)  “indirect  costs”  means  costs,  not  being  direct  costs,  allocated  in  the  ratio  of  the  export 

turnover in respect of trading goods to the total turnover; 

(f) “trading goods” means goods which are not 2[manufactured or processed by the assessee]. 

1. Ins. by Act 55 of 2005, s. 4 (w.e.f. 1-4-1992). 
2. Subs. by Act 18 of 1992, s.46, for “manufactured by the assessee” (w.e.f. 1-4-1992). 

368 

                                                           
1[(3A)  For  the  purposes  of sub-section (1A),  profits  derived  by  a  supporting  manufacturer from  the 

sale of goods or merchandise shall be,— 

 (a) in a case where the business carried on by the supporting manufacturer consists exclusively 
of sale of goods or merchandise to one or more Export Houses or Trading Houses, the profits of the 
business 2***; 

 (b)  in  a  case  where  the  business  carried  on  by  the  supporting  manufacturer  does  not  consist 
exclusively of sale of goods or merchandise to one or more Export Houses or Trading Houses, the 
amount which bears to the profits of the business2*** the same proportion as the turnover in respect 
of sale to the respective Export House or Trading House bears to the total turnover of the business 
carried on by the assessee.] 

3[(4) The deduction under sub-section (1) shall not be admissible unless the assessee furnishes in the 
prescribed  form,  along  with  the  return  of  income,  the  report  of  an  accountant,  as  defined  in 
the Explanation below  sub-section  (2)  of section  288,  certifying  that  the  deduction  has  been  correctly 
claimed 4[in accordance with the provisions of this section:]] 

5[Provided that in the case of an  undertaking referred to in sub-section (4C), the assessee shall also 
furnish along with the return of income, a certificate from the undertaking in the special economic zone 
containing such particulars as may be prescribed, duly certified by the auditor auditing the accounts of the 
undertaking in the special economic zone under the provisions of this Act or under any other law for the 
time being in force.] 

1[(4A)  The  deduction  under  sub-section  (1A)  shall  not  be  admissible  unless  the  supporting 

manufacturer furnishes in the prescribed form along with his return of income,— 

 (a)  the  report  of  an  accountant,  as  defined  in  the Explanation below  sub-section  (2)                 

of section 288, certifying that the deduction has been correctly claimed on the basis of the 6[profits] of 
the supporting  manufacturer in respect  of  his  sale of  goods  or  merchandise to the  Export  House  or 
Trading House; and 

 (b) a certificate from the Export House or Trading House containing such particulars as may be 
prescribed and verified in the manner prescribed that in respect of the export turnover mentioned in 
the certificate, the Export House or Trading House has not claimed the deduction under this section: 

Provided that the certificate specified in clause (b) shall be duly certified by the auditor auditing 
the  accounts  of  the  Export  House  or  Trading  House  under  the  provisions  of  this  Act  or  under  any 
other law.] 

7[(4B) For the purposes of computing the total income under sub-section (1) or sub-section (1A), any 

income not charged to tax under this Act shall be excluded.] 

5[(4C) The provisions of this section shall apply to an assessee,— 

 (a) for an assessment year beginning after the 31st day of March, 2004 and ending before the 1st 

day of April, 2005; 

1. Ins. by Act 26 of 1988, s. 24 (w.e.f. 1-4-1989). 
2. The words “as computed under the head “Profits and gains of business or profession” omitted by Act 49 of 1991, s. 28 

(w.e.f. 1-4-1992). 

3. Ins. by Act 46 of 1986, s. 11 (w.e.f. 1-4-1987). 
4. Subs. by Act 49 of 1991, s. 28, for “on the basic of the amount of export turnover” (w.e.f. 1-4-1992).earlier the words 

“export turnover” were substituted for certain words by Act 46 of 1986, s. 11 (w.e.f. 1-4-1989). 

5. Ins. by Act 32 of 2003, s. 37 (w.e.f 1-4-2004). 
6. Subs. by Act 3 of 1989, s. 15 (w.e.f. 1-4-1989). Earlier subs-section (4A) inserted by 26 of 1988, s. 24 (w.e.f. 1-4-1989). 
7. Ins. by Act 27 of 1999,s. 46 (w.e.f. 1-4-1992). 

369 

                                                           
 (b) who owns any undertaking which manufactures or produces goods or merchandise anywhere 
in  India  (outside  any  special  economic  zone)  and  sells  the  same  to  any  undertaking  situated  in  a 
special  economic  zone  which  is  eligible  for  deduction  under  section  10A and  such  sale  shall  be 
deemed to be export out of India for the purposes of this section.] 

Explanation.—For the purposes of this section,— 

 (a) “convertible foreign exchange” means foreign exchange which is for the time being treated 
by  the  Reserve  Bank  of  India  as  convertible  foreign  exchange  for  the  purposes  of  1[the  Foreign 
Exchange Management Act, 1999 (42 of 1999)], and any rules made thereunder; 

2[(aa)  “export  out  of  India”  shall  not include any  transaction  by  way  of  sale  or otherwise,  in  a 
shop, emporium or any other establishment situate in India, not involving clearance at any customs 
station as defined in the Customs Act, 1962 (52 of 1962);] 

 (b)  “export  turnover”  means  the  sale  proceeds  3[received  in,  or  brought  into,  India]  by  the 
assessee  in  convertible  foreign  exchange  4[in  accordance  with  clause  (a)  of  sub-section  (2)]  of  any 
goods or merchandise to which this section applies and which are exported out of India, but does not 
include  freight  or  insurance  attributable  to  the  transport  of  the  goods  or  merchandise  beyond  the 
customs station as defined in the Customs Act, 1962 (52 of 1962);] 

5[(ba)  “total  turnover”  shall  not  include  freight  or  insurance  attributable  to  the  transport  of  the 

goods or merchandise beyond the customs station as defined in the Customs Act, 1962 (52 of 1962): 

Provided that  in  relation  to  any  assessment  year  commencing  on  or  after  the  1st  day  of           

April, 1991, the expression “total turnover” shall have effect as if it also excluded any sum referred to 
in clauses (iiia), (iiib) 6[, (iiic), (iiid) and (iiie)] of section 28;] 

7[(baa)  “profits  of  the  business”  means  the  profits  of  the  business  as  computed  under  the  head 

“Profits and gains of business or profession” as reduced by— 

  (1) ninety per cent. of any sum referred to in clauses (iiia), (iiib)5[, (iiic), (iiid) and (iiie)] 
of section 28 or of any receipts by way of brokerage, commission, interest, rent, charges or any 
other receipt of a similar nature included in such profits; and 

   (2)  the  profits  of  any  branch,  office,  warehouse  or any  other  establishment  of  theassessee 

situate outside India; 
8* 
* 
9[10[(c)] “Export House Certificate” or “Trading House Certificate” means a valid Export House 
Certificate  or  Trading  House  Certificate,  as  the  case  may  be,  issued  by  the  Chief  Controller  of 
Imports and Exports, Government of India; 

* 

* 

* 

11[(d)]  “supporting  manufacturer”  means  a  person  being  an  Indian  company  or  a  person  (other 
than  a  company)  resident  in  India,  12[manufacturing  (including  processing)  goods]  or  merchandise 
and selling such goods or merchandise to an Export House or a Trading House for the purposes of 
export; 

13[(e)  “special  economic  zone”  shall  have  the  meaning  assigned  to  it  in  clause  (viii)  of 

the Explanation 2 to section 10A.] 

1. Subs. by Act 17 of 2013, s. 4, for “the Foreign Exchange Regulation Act, 1973 (46 of 1973)” (w.e.f. 1-4-2013). 
2. Ins. by Act 49 of 1991, s. 28 (w.e.f. 1-4-1986). 
3. Subs. by Act 12 of 1990, s. 22, for “receivable” (w.e.f. 1-4-1991). 
4. Ins. by s. 22, ibid. (w.e.f. 1-4-1991). 
5. Ins. by Act 49 of 1991, s. 28 (w.e.f. 1-4-1987). 
6. Subs. by Act 55 of 2005, s. 4, for “and (iiic)” (w.e.f. 1-4-1998). 
7. Ins. by Act 49 of 1991, s. 28 (w.e.f. 1-4-1992). 
8. Clause (bb) omitted s. 28, ibid. (w.e.f. 1-4-1991). 
9. Ins. by Act 26 of 1988, s. 24 (w.e.f. 1-4-1989). 
10. Clause (d) relettered as clause (c) thereof by Act 3 of 1989, s. 15 (w.e.f. 1-4-1989). 
11. Clause (e) relettered as clause (d) thereof by s. 15, ibid. (w.e.f. 1-4-1989). 
12. Subs. by 12 of 1990, s. 22, for “manufacturing goods” (w.e.f. 1-4-1991). 
13. Ins. by Act 32 of 2003, s. 37 (w.e.f. 1-4-2004). 

370 

 
 
 
 
 
 
 
                                                           
1[80HHD. Deduction  in  respect  of  earnings  in  convertible  foreign  exchange.—(1)  Where  an 
assessee, being an Indian company or a person (other than a company) resident in India, is engaged in the 
business of a hotel or of a tour operator, approved by the prescribed authorityin this behalf or of a travel 
agent,  there  shall,  in  accordance  with  and  subject  to  the  provisions  of  this  section,  be  allowed,  2[in 
computing the total income of the assessee— 

(a) for an assessment year beginning on the 1st day of April, 2001, a deduction of a sum equal to 

the aggregate of— 

(i) forty per cent. of the profits derived by him from services provided to foreign tourists; and 

(ii)  so  much  of  the  amount  not  exceeding  forty  per  cent  of  the  profits  referred  to  in                   

sub-clause (i) as is debited to the profit and loss account of the previous year in respect of which 
the deduction is to be allowed and credited to a reserve account to be utilised for the purposes of 
the business of the assessee in the manner laid down in sub-section (4); 

(b) for an assessment year beginning on the 1st day of April, 2002, a deduction of a sum equal to 

the aggregate of— 

(i) thirty per cent of the profits derived by him from services provided to foreign tourists; and 

(ii)  so  much  of  the  amount  not  exceeding  thirty  per  cent  of  the  profits  referred  to  in  sub-
clause (i) as is debited to the profit and loss account of the previous year in respect of which the 
deduction is to be allowed and credited to a reserve account to be utilised for the purposes of the 
business of the assessee in the manner laid down in sub-section (4); 

(c) for an assessment year beginning on the 1st day of April, 2003, a deduction of a sum equal to 

the aggregate of— 

(i)  3[twenty-five  per  cent.]  of  the  profits  derived  by  him  from  services  provided  to  foreign 

tourists; and 

(ii) so much of the amount not exceeding 3[twenty-five per cent.] of the profits referred to in 
sub-clause (i) as is debited to the profit and loss account of the previous year in respect of which 
the deduction is to be allowed and credited to a reserve account to be utilised for the purposes of 
the business of the assessee in the manner laid down in sub-section (4); 

(d) for an assessment year beginning on the 1st day of April, 2004, a deduction of a sum equal to 

the aggregate of— 

(i) 4[fifteen per cent.] of the profits derived by him from services provided to foreign tourists; 

and 

1. Ins. by Act 3 of 1989, s. 16 (w.e.f. 1-4-1989).  

2. Subs. by Act 10 of 2000, s. 35, for certain words, brackets, letters and figures (w.e.f. 1-4-2001). 

3. Subs. by Act 20 of 2002, s. 32, for “twenty per cent.” (w.e.f. 1-4-2003). 

4. Subs. by s. 32, ibid., for “ten per cent.” (w.e.f. 1-4-2003). 

371 

 
                                                           
(ii)  so  much  of  the  amount  not  exceeding  1[fifteen  per  cent.]  of  the  profits  referred  to  in            

sub-clause (i) as is debited to the profit and loss account of the previous year in respect of which 
the deduction is to be allowed and credited to a reserve account to be utilised for the purposes of 
the business of the assessee in the manner laid down in sub-section (4), 

and  no  deduction  shall  be  allowed  in  respect  of  the  assessment  year  beginning  on  the  1st  day  of          
April, 2005 and any subsequent assessment year]: 

2[Provided that a hotel or, as the case may be, a tour operator approved by the prescribed authority on 
or after the 30th day of November, 1989 and before the 1st day of October, 1991, shall be deemed to have 
been approved by the prescribed authority for the purposes of this section in relation to the assessment 
year commencing on the 1st day of April, 1989 or the 1st day of April, 1990 or, as the case may be, the 
1st day of April, 1991 if the assessee was engaged in the business of such hotel or as such tour operator 
during the previous year relevant to any of the said assessment years.] 

(2) This section applies only to services provided to foreign tourists the receipts in relation to which 
are received 3[in, or brought into, India by the assessee in convertible foreign exchange within a period of 
six months from the end of the previous year or, 4[within such further period as the competent authority 
may allow in this behalf]]. 

5[Explanation6[1].—For  the  purposes  of  this  sub-section,  any  payment  received  by  an  assessee, 
engaged in the business of a hotel or of a tour operator or of a travel agent, in Indian currency obtained by 
conversion of foreign exchange brought into India through an authorised dealer,  7[from another hotelier, 
tour  operator  or  travel  agent,  as  the  case  may  be,]  on  behalf  of  a  foreign  tourist  or  group  of  foreign 
tourists,  shall  be  deemed  to  have  been  received  by  the  assessee  in  convertible  foreign  exchange  if  the 
person making the payment furnishes to the assessee a certificate specified in sub-section (2A).] 

8[Explanation 2.—For the purposes of this sub-section, the expression “competent authority” means 
the  Reserve  Bank  of  India  or such  other  authority  as  is  authorised  under  any  law  for  the  time  being in 
force for regulating payments and dealings in foreign exchange.] 

9[(2A) Every person making payment to an assessee referred to in the 10[Explanation 1] to sub-section 
(2) out of Indian currency obtained by conversion of foreign exchange received from or on behalf of a 
foreign tourist or a group of foreign tourists shall furnish to that assessee a certificate in the prescribed 
form indicating  the  amount  received  in  foreign  exchange,  its  conversion  into  Indian  currency  and  such 
other particulars as may be prescribed.] 

11[(3) For the purposes of sub-section (1), profits derived from services provided to foreign tourists 
shall be the amount which bears to the profits of the business (as computed under the head “Profits and 
gains  of  business  or  profession”)  the  same  proportion  as  the  receipts  specified  in  sub-section  (2)  12[as 
reduced by any payment, referred to in sub-section (2A), made by the assessee] bear to the total receipts 
of the business carried on by the assessee.] 

1. Subs. by Act 20 of 2002, s. 32, for “ten per cent.” (w.e.f. 1-4-2003). 
2. Ins. by Act 49 of 1991, s. 29 (w.e.f. 1-10-1991). 
3. Subs. by Act 12 of 1990, s. 23, for “by the assessee in convertible foreign exchange” (w.e.f. 1-4-1991). 
4. Subs. by Act 27 of 1999, s. 47, for certain words and brackets (w.e.f. 1-6-1999). 
5. Ins. by Act 49 of 1991, s. 29 (w.e.f. 1-4-1992). 
6. Explanation renumbered as Explanation 1 thereof by Act 27 of 1999, s. 47 (w.e.f. 1-6-1999). 
7. Subs. by Act 32 of 1994, s. 25, for “from a tour operator or, as the case may be, a travel agent” (w.e.f. 1-4-1995). 
8. Ins. by Act 27 of 1999, s. 47 (w.e.f. 1-6-1999). 
9. Ins. by Act 49 of 1991, s. 29 (w.e.f. 1-4-1992). 
10. Subs. by Act 27 of 1999, s. 47, for “Explanation” (w.e.f. 1-6-1999). 
11. Subs. by Act 12 of 1990, s. 23, for sub-section (3) (w.e.f. 1-4-1991). 
12. Ins. by Act 32 of 1994, s. 25 (w.e.f. 1-4-1995).   

372 

                                                           
(4) The amount credited to the reserve account under clause (b) of sub-section (1), shall be utilised by 
the  assessee  before  the  expiry  of  a  period  of  five  years  next  following  the  previous  year  in  which  the 
amount was credited for the following purposes, namely:— 

(a) construction of new hotels approved by the prescribed authority in this behalf or expansion of 

facilities in existing hotels already so approved; 

(b)  purchase  of  new  cars  and  new  coaches  by  tour  operators  already  so  approved  or  by  travel 

agents; 

(c)  purchase  of  sports’  equipment  for  mountaineering,  trekking,  golf,  river-rafting  and  other 

sports in or on water; 

(d) construction of conference or convention centres; 

(e) provision of such new facilities for the growth of Indian tourism as the Central Government 

may, by notification in the Official Gazette, specify in this behalf; 

1[(f) subscription to equity shares forming part of any eligible issue of capital made by a public 

company:] 

Provided that where any of the activities referred to in 2[clauses (a) to (f)] would result in creation 
of any asset owned by the assessee outside India, such asset should be created only after obtaining 
prior approval of the prescribed authority. 

(5) Where any amount credited to the reserve account under clause (b) of sub-section (1),— 

(a) has been utilised for any purpose other than those referred to in sub-section (4), the amount so 

utilised; or 

(b) has not been utilised in the manner specified in sub-section (4), the amount not so utilised, 

shall be deemed to be the profits,— 

(i) in a case referred to in clause (a), in the year in which the amount was so utilised; or 

(ii) in a case referred to in clause (b), in the year immediately following the period of five years 

specified in sub-section (4), 

and shall be charged to tax accordingly. 

3[(5A) Where any amount credited to the reserve account under clause (b) of sub-section (1) has been 
utilised for subscription to any equity shares referred to in clause (f) of sub-section (4) and either whole or 
any part of such equity shares are transferred or converted into money by the assessee at any time within a 
period of three years from the date of their acquisition, the aggregate amount so utilised in respect of such 
equity  shares  shall  be  deemed  to  be  the  profits  of  the  previous  year  in  which  the  equity  shares  are 
transferred or converted into money. 

1. Ins. by Act 27 of 1999, s. 47 (w.e.f. 1-4-2000). 
2. Subs. by s. 47, ibid., for “clauses (a) to (e)” (w.e.f. 1-4-2000). 
3. Ins. by Act 27 of 1999, s. 47 (w.e.f. 1-4-2000). 

373 

                                                           
Explanation.—A person shall be treated as having acquired any shares on the date on which his name 

is entered in relation to those shares in the register of members of the public company.] 

(6) The deduction under sub-section (1) shall not be admissible unless the assessee furnishes in the 
prescribed  form,  along  with  the  return  of  income,  the  report  of  an  accountant,  as  defined  in 
the Explanation below  sub-section  (2)  of  section  288,  certifying  that  the  deduction  has  been  correctly 
claimed on the basis of the  1[2*** amount of convertible foreign exchange received by the assessee for 
services provided by him to foreign tourists 3[, payments made by him to any assessee referred to in sub-
section (2A)] and the payments received by him in Indian currency as referred to in the 4[Explanation 1 to 
sub-section (2)].] 

5[(7)  Where  a  deduction  under  sub-section  (1)  is  claimed  and  allowed  in  respect  of  profits  derived 
from  the  business  of  a  hotel,  such  part  of  profits  shall  not  qualify  to  that  extent  for  deduction  for  any 
assessment year under any other provisions of this Chapter under the heading “C.—Deductions in respect 
of certain incomes”, and shall in no case exceed the profits and gains of such hotel.] 

Explanation.—For the purposes of this section,— 

(a)  “travel  agent”  means  a  travel  agent  or  other  person  (not  being  an  airline  or  a  shipping 
company) who holds a valid licence granted by the Reserve Bank of India under section 32 of  6[the 
Foreign Exchange Management Act, 1999 (42 of 1999)]; 

(b)  “convertible  foreign  exchange”  shall  have  the  meaning  assigned  to  it  in  clause  (a)  of 

the Explanation to section 80HHC; 

(c) “services provided to foreign tourists” shall not include services by way of sale in any shop 
owned or managed by the person who carries on the business of a hotel or of a tour operator or of a 
travel agent; 

7[d)  “authorised  dealer”,  “foreign  exchange”  and  “Indian  currency”  shall  have  the  meanings 
respectively  assigned  to  them  in  clauses  (b),  (h)  and  (k)  of  section  2  of  the  7[Foreign  Exchange 
Management Act, 1999 (42 of 1999)];] 

8[(e) “eligible issue of capital” means an issue made by a public company formed and registered 
in  India  and  the  entire  proceeds  of  the  issue  is  utilised  wholly  and  exclusively  for  the  purpose  of 
carrying on the business of— 

(i) setting up and running of new hotels approved by the prescribed authority; or 

(ii) providing such new facility for the growth of tourism in India, as the Central Government 

may, by notification in the Official Gazette, specify.] 

1.  Subs.  by  Act  49  of  1991,  s.  29,  for  “amount  of  convertible  foreign  exchange  received  by  the  assessee  for  services 

provided by him to the foreign tourist” (w.e.f. 1-4-1992). 

2. The words “aggregate of the” omitted by Act 32 of 1994, s. 25 (w.e.f. 1-4-1995). 
3. Ins. by Act 32 of 1994, s. 25 (w.e.f. 1-4-1995). 
4. Subs. by Act 27 of 1999, s. 47, for “Explanation to sub-section (2)” (w.e.f. 1-6-1999). 
5. Ins. by Act 21 of 1998, s. 32 (w.e.f. 1-4-1999). 
6. Subs. by Act 17 of 2013, s. 4, for “the Foreign Exchange Regulation Act, 1973” (w.e.f. 1-4-2013). 
7. Ins. by Act 49 of 1991, s. 29 (w.e.f. 1-4-1992). 
8. Ins. by Act 27 of 1999, s. 47 (w.e.f. 1-4-2000). 

374 

                                                           
1[80HHE.Deduction in respect of profits form export of computer software, etc.—(1) Where an 
assessee, being an Indian company or a person (other than a company) resident in India, is engaged in the 
business of,— 

(i) export out of India of computer software or its transmission from India to a place outside India 

by any means; 

(ii) providing technical services outside India in connection with the development or production 

of computer software, 

there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the 
total  income  of  the assessee,  2[a  deduction to  the  extent  of the  profits,  referred to  in  sub-section  (1B),] 
derived by the assessee from such business: 

3* 

* 

* 

* 

* 

4[Provided that  if  the  assessee,  being  a  company,  engaged  in  the  export  out  of  India  of  computer 
software, issues a certificate referred to in clause (b) of sub-section (4A), that in respect of the amount of 
the export specified therein, the deduction under this sub-section is to be allowed to a supporting software 
developer, then the amount of deduction in the case of an assessee shall be reduced by such amount which 
bears to the total profits derived by the assessee from the export, the same proportion as the amount of the 
export turnover specified in such certificate bears to the total export turnover of the assessee. 

5[Explanation.—For  the  removal  of  doubts,  it  is  hereby  declared  that  the  profits  and  gains  derived 
from on site development of computer software (including services for development of software) outside 
India shall be deemed to be the profits and gains derived from the export of computer software outside 
India.] 

(1A)  Where  the  assessee,  being  a  supporting  software  developer,  has  during  the  previous  year, 
developed and sold computer software to an exporting company in respect of which the said company has 
issued a certificate under the proviso to sub-section (1), there shall, in accordance with and subject to the 
provisions  of this  section, be  allowed  in  computing  the  total income  of the  assessee  a deduction  of the 
profits  derived  by  the  assessee  from  the  developing  and  selling  of  computer  software  to  the  exporting 
company in respect of which the certificate has been issued by the said company  6[to such extent and for 
such years as specified in sub-section (1B)].] 

6[(1B)  For  the  purposes  of  sub-sections  (1)  and  (1A),  the  extent  of  deduction  of  profits  shall  be  an 

amount equal to— 

(i) eighty per cent. of such profits for an assessment year beginning on the 1st day of April, 2001; 

7[(ii) seventy per cent. thereof for an assessment year beginning on the 1st day of April, 2002; 

(iii) fifty per cent. thereof for an assessment year beginning on the 1st day of April, 2003; 

(iv) thirty per cent. thereof for an assessment year beginning on the 1st day of April, 2004,] 

1. Ins. by Act 49 of 1991, s. 30 (w.e.f. 1-4-1991). 
2. Subs. by Act 10 of 2000, s. 36, for “a deduction of the profits” (w.e.f. 1-4-2001). 
3. The proviso omitted by 22 of 1995, s. 18 (w.e.f. 1-4-1996). 
4. Ins. by Act 21 of 1998, s.33 (w.e.f. 1-4-1999). 
5. Ins. by Act 14 of 2001, s. 42 (w.e.f. 1-4-2001). 
6. Ins. by Act 10 of 2000, s. 36 (w.e.f. 1-4-2001). 
7. Subs. by Act 14 of 2001, s. 42, for sub-clauses (ii), (iii) and (iv) (w.e.f. 1-4-2002). 

375 

 
 
 
 
 
 
 
 
                                                           
and no deduction shall be allowed in respect of the assessment year beginning on the 1st day of April, 
2005 and any subsequent assessment year.] 

(2) The deduction specified in sub-section (1) shall be allowed only if the consideration in respect of 
the computer software referred to in that sub-section is received in, or brought into, India by the assessee 
in  convertible  foreign  exchange,  within  a  period  of  six  months  from  the  end  of  the  previous  year  or, 
1[within such further period as the competent authority may allow in this behalf.] 

Explanation2[1].—The said consideration shall be deemed to have been received in India where it is 
credited to a separate account maintained for the purpose by the assessee with any bank outside India with 
the approval of the Reserve Bank of India. 

3[Explanation 2.—For the purposes of this sub-section, the expression “competent authority” means 
the  Reserve  Bank  of  India  or such  other  authority  as  is  authorised  under  any  law  for  the  time  being in 
force for regulating payments and dealings in foreign exchange.] 

(3)  For  the  purposes  of  sub-section  (1),  profits  derived  from  the  business  referred  to  in  that  sub-
section shall be the amount which bears to the profits of the business, the same proportion as the export 
turnover bears to the total turnover of the business carried on by the assessee. 

4[(3A) For the purposes of sub-section (1A), profits derived by a supporting software developer shall 

be,— 

(i)  in  a  case  where  the  business  carried  on  by  the  supporting  software  developer  consists 
exclusively  of  developing  and  selling  of  computer  software  to  one  or  more  exporting  companies 
solely engaged in exports, the profits of such business; 

(ii) in a case where the business carried on by a supporting software developer does not consist 
exclusively of developing and selling of computer software to one or more exporting companies, the 
amount which bears to the profits of the business, the same proportion as the turnover in respect of 
sale to the respective exporting company bears to the total turnover of the business carried on by the 
assessee.] 

(4) The deduction under sub-section (1) shall not be admissible unless the assessee furnishes in the 
prescribed  form,  along  with  the  return  of  income,  the  report  of  an  accountant,  as  defined  in 
the Explanation below  sub-section  (2)  of section  288,  certifying  that  the  deduction  has  been  correctly 
claimed in accordance with the provisions of this section. 

4[(4A) The deduction under sub-section (1A) shall not be admissible unless the supporting software 

developer furnishes in the prescribed form along with his return of income,— 

(i) the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, 
certifying that the deduction has been correctly claimed on the basis of the profits of the supporting 
software developer in respect of sale of computer software to the exporting company; and 

(ii) a certificate from the exporting company containing such particulars as may be prescribed and 
verified in the manner prescribed that in respect of the export turnover mentioned in the certificate, 
the exporting company has not claimed deduction under this section: 

1. Subs. by Act 27 of 1999, s.48, for certain words (w.e.f. 1-6-1999). 
2. Explanation relettered as Explanation 1 thereof by s. 48, ibid. (w.e.f. 1-6-1999) 
3. Ins. by s. 48, ibid. (w.e.f. 1-6-1999). 
4. Ins. by Act 21 of 1998, s.33 (w.e.f. 1-4-1999). 

376 

                                                           
Provided that the certificate specified in clause (b) shall be duly certified by the auditor auditing the 

accounts of the exporting assessee under the provisions of this Act or under any other law.] 

(5) Where a deduction under this section is claimed and allowed in respect of profits of the business 
referred to in sub-section (1) for any assessment year, no deduction shall be allowed in relation to such 
profits under any other provision of this Act for the same or any other assessment year. 

Explanation.—For the purposes of this section,— 

(a)  “convertible  foreign  exchange”  shall  have  the  meaning  assigned  to  it  in  clause  (a)  of 

the Explanation to section 80HHC; 

1[(b) “computer software” means,— 

(i)  any  computer  programme  recorded  on  any  disc,  tape,  perforated  media  or  other 

information storage device; or 

(ii)  anycustomised  electronic  data  or  any  product  or  service  of  similar  nature  as  may  be 

notified by the Board, 

which is transmitted or exported from India to a place outside India by any means;] 

(c)  “export  turnover”  means  the  consideration  in  respect  of  computer  software  received  in,  or 
brought  into,  India  by  the  assessee  in  convertible  foreign  exchange  in  accordance  with  sub-section 
(2), but does not include freight, telecommunication charges or insurance attributable to the delivery 
of the computer software outside India or expenses, if any, incurred in foreign exchange in providing 
the technical services outside India; 

1[(ca) “exporting company” means a company referred to in sub-section (1) making actual export 

of computer software;] 

(d) “profits of the business” means the profits of the business as computed under the head “Profits 

and gains of business or profession” as reduced by— 

(1) ninety per cent of any receipts by way of brokerage, commission, interest, rent, charges or 

any other receipt of a similar nature included in such profits; and 

 (2) the  profits  of  any  branch,  office,  warehouse  or  any  other  establishment  of the  assessee 

situate outside India;] 

 (e) “total turnover” shall not include— 

(i) any sum referred to in clauses (iiia), (iiib) and (iiic) of section 28; 

(ii)  any  freight,  telecommunication  charges  or  insurance  attributable  to  the  delivery  of  the 

computer software outside India; and 

(iii)  expenses,  if  any,  incurred  in  foreign  exchange  in  providing  the  technical  services 

outside India;] 

2[(ea)  “supporting  software  developer”  means  an  Indian  company  or  a  person  (other  than  a 
company) resident in India, developing and selling computer software to an exporting company for 
the purposes of export.] 

1. Subs. by Act 10 of 2000, s. 36, for sub-clause (b) (w.e.f. 1-4-2001). 
2. Ins. by Act 21 of 1998, s. 33 (w.e.f. 1-4-1999). 

377 

                                                           
1[80HHF. Deduction  in  respect  of  profits  and  gains  from  export  or  transfer  of  film  software, 
etc.—(1) Where an assessee, being an Indian company  2[or a person (other than a company) resident in 
India], is engaged in the business of export or transfer by any means out of India, of any film software, 
television software, music software, television news software, including telecast rights (hereafter in this 
section referred to as the software or software rights), there shall, in accordance with and subject to the 
provisions of this section, be allowed, in computing the total income of the assessee,  3[a deduction to the 
extent of profits, referred to in sub-section (1A),] derived by the assessee from such business. 

4[(1A) For the purposes of sub-section (1), the extent of deduction of profits shall be an amount equal 

to— 

(i) eighty per cent. of such profits for an assessment year beginning on the 1st day of April, 2001; 

5[(ii) seventy per cent. thereof for an assessment year beginning on the 1st day of April, 2002; 

(iii) fifty per cent. thereof for an assessment year beginning on the 1st day of April, 2003; 

(iv) thirty per cent. thereof for an assessment year beginning on the 1st day of April, 2004,] 

and no deduction shall be allowed in respect of the assessment year beginning on the 1st day of April, 
2005 and any subsequent assessment year. 

(2) The deduction specified in sub-section (1) shall be allowed only if the consideration in respect of 
the software or software rights referred to in that sub-section is received in, or brought into, India by the 
assessee in convertible foreign exchange, within a period of six months from the end of the previous year 
or within such further period as the competent authority may allow in this behalf. 

(3)  For  the  purposes  of  sub-section  (1),  profits  derived  from  the  business  referred  to  in  that  sub-
section shall be the amount which bears to the profits of the business, the same proportion as the export 
turnover bears to the total turnover of the business carried on by the assessee. 

(4) The deduction under sub-section (1) shall not be admissible unless the assessee furnishes in the 
prescribed  form,  along  with  the  return  of  income,  the  report  of  an  accountant,  as  defined  in 
the Explanation below  sub-section  (2)  of setion  288,  certifying  that  the  deduction  has  been  correctly 
claimed in accordance with the provisions of this section. 

(5) Where a deduction under this section is claimed and allowed in respect of profits of the business 
referred to in sub-section (1) for any assessment year, no deduction shall be allowed in relation to such 
profits under any other provision of this Act for the same or any other assessment year. 

(6) Notwithstanding anything contained in this section, no deduction shall be allowed in respect of the 
software or software rights referred to in sub-section (1), if such business is prohibited by any law for the 
time being in force. 

Explanation.—For the purposes of this section,— 

(a)  “competent  authority”  means  the  Reserve  Bank  of  India  or  such  other  authority  as  is 
authorised under any law for the time being in force for regulating payments and dealings in foreign 
exchange; 

1. Ins. by Act 27 of 1999, s.49 (w.e.f. 1-4-2000). 
2. Ins. by Act 10 of 2000, s. 37 (w.e.f. 1-4-2000). 
3. Subs. by s. 37, ibid., for “a deduction of the profits” (w.e.f. 1-4-2001). 
4. Ins. by s. 37, ibid. (w.e.f. 1-4-2001). 
5. Subs. by Act 14 of 2001, s. 43, for clauses (ii), (iii) and (iv) (w.e.f. 1-4-2002). 

378 

                                                           
(b)  “convertible  foreign  exchange”  shall  have  the  meaning  assigned  to  it  in  clause  (a)  of 

the Explanation to section 80HHC; 

(c)  “export  turnover”  means  the  consideration  in  respect  of  the  software  or  software  rights 
specified  in  clauses  (d),  (e),  (g),  (h)  and  (i),  received  in,  or  brought  into,  India  by  the  assessee  in 
convertible  foreign  exchange  in  accordance  with  sub-section  (2),  but  does  not  include  freight, 
telecommunication charges or insurance attributable to the delivery of such software outside India or 
expenses, if any, incurred in foreign exchange in providing the technical services outside India; 

(d)  “film  software”  means  a  copy  of  a  cinematograph  film  made  by  any  process  analogous  to 
cinematography on acetate polyester or celluloid film positive, magnetic tape, digital media or other 
optical or magnetic devices and certified by the Board of film certification constituted by the Central 
Government under section 3 of the Cinematograph Act, 1952 (37 of 1952); 

(e)  “music  software”includes  series  of  sounds  or  music  recorded  on  magnetic  tape,  cassette, 

compact discs and digital media which can be played or reproduced on any appropriate apparatus; 

(f) “profits of the business” means the profits of the business as computed under the head “Profits 

and gains of business or profession” as reduced by— 

(A) ninety per cent of any receipts by way of brokerage, commission, interest, rent, charges or 

any other receipt of a similar nature included in such profits; and 

(B)  the  profits  of  any  branch,  office,  warehouse  or  any  other  establishment  of  the  assessee 

situated outside India; 

(g)  “telecast  rights”  means  a  licence  or  contract  to  exhibit  motion  pictures  or  television 
programmes  over  a  television  network  either  through  terrestrial  transmission  or  through  a  satellite 
broadcast in a specified territory; 

(h)  “television  news  software”  means  a  collection  of  sounds  and  images,  reportage,  data  and 

voice  of  actualities  broadcast  either  through  terrestrial  transmission,  wire  or  satellite,  live  or                   
pre-recorded on video cassettes or digital media; 

(i) “television software” means any programme or series of sounds and images recorded on film 
or  tape  or  digital  media  or  broadcast  through  terrestrial  transmitter,  satellite  or  any  other  means  of 
diffusion; 

(j) “total turnover” shall not include— 

(A) any sum referred to in clauses (iiia), (iiib) and (iiic) of section 28; 

(B)  any  freight,  telecommunication  charges  or  insurance  attributable  to  the  delivery  of  the 
film software, music software, telecast rights, television news software, or television software as 
defined in clause (d), (e), (g), (h) or (i), as the case may be, outside India; 

(C) expenses, if any, incurred in foreign exchange in providing the technical services outside 

India.] 

379 

1[80-I. Deduction  in  respect  of  profits  and  gains  from  industrial  undertakings  after  a  certain 
date, etc.—(1) Where the gross total income of an assessee includes any profits and gains derived from 
an industrial undertaking or a ship or the business of a hotel  2[or the business of repairs to ocean-going 
vessels or other powered craft], to which this section applies, there shall, in accordance with and subject 
to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction 
from such profits and gains of an amount equal to twenty per cent. thereof: 

Provided that in the case of an assessee, being a company, the provisions of this sub-section  3[shall 
have effect in relation to profits and gains derived from an industrial undertaking or a ship or the business 
of a hotel] as if for the words “twenty per cent.”, the words “twenty-five per cent.” had been substituted. 

4[(1A)  Notwithstanding  anything  contained  in  sub-section  (1),  in  relation  to  any  profits  and  gains 

derived by an assessee from— 

(i)  an  industrial  undertaking  which  begins  to  manufacture  or  produce  articles  or  things  or  to 

operate its cold storage plant or plants; or 

(ii) a ship which is first brought into use; or 

(iii) the business of a hotel which starts functioning, 

on or after the 1st day of April, 1990, 5[but before the 1st day of April, 1991], there shall, in accordance 
with  and  subject  to  the  provisions  of  this  section,  be  allowed  in  computing  the  total  income  of  the 
assessee, a deduction from such profits and gains of an amount equal to twenty-five per cent. thereof: 

Provided that  in  the  case  of  an  assessee,  being  a  company,  the  provisions  of  this  sub-section  shall 
have effect in relation to profits and gains derived from an industrial undertaking or a ship or the business 
of a hotel as if for the words “twenty-five per cent.”, the words “thirty per cent.” had been substituted.] 

(2)  This  section  applies  to  any  industrial  undertaking  which  fulfils  all  the  following  conditions, 

namely:— 

(i) it is not formed by the splitting up, or the reconstruction, of a business already in existence; 

(ii) it is not formed by the transfer to a new business of machinery or plant previously used for 

any purpose; 

(iii) it manufactures or produces any article or thing, not being any article or thing specified in the 
list  in  the  Eleventh  Schedule,  or  operates  one  or  more  cold  storage  plant  or  plants,  in  any  part  of 
India, and begins to manufacture or produce articles or things or to operate such plant or plants, at any 
time  within  the  period  of  6[ten  years]  next  following  the  31st  day  of  March,  1981,  or  such  further 
period as the Central Government may, by notification in the Official Gazette, specify with reference 
to any particular industrial undertaking; 

(iv)  in  a  case  where  the  industrial  undertaking  manufactures  or  produces  articles  or  things,  the 
undertaking  employs  ten  or  more  workers  in  a  manufacturing  process  carried  on  with  the  aid  of 
power, or employs twenty or more workers in a manufacturing process carried on without the aid of 
power: 

Provided that the condition in clause (i) shall not apply in respect of any industrial undertaking 
which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the 
business of any such industrial undertaking as is referred to in section 33B, in the circumstances and 
within the period specified in that section: 

1. Ins. by Act 44 of 1980, s. 16 (w.e.f. 1-4-1981). 
2. Ins. by Act 11 of 1983, s. 25 (w.e.f. 1-4-1984). 
3. Subs. by s. 25, ibid., for “shall have effect” (w.e.f. 1-4-1984). 
4. Ins. by Act 12 of 1990, s. 24 (w.e.f. 1-4-1990). 
5. Ins. by Act 49 of 1991, s. 31 (w.e.f. 1-4-1991). 
6.  Subs.  by,  s.  31,  ibid.,  for  “fourteen  years”  (w.e.f.  1-4-1991).  Earlier  “fourteen  years”  was  subs.  for  “nine  years”  by                  

Act 12 of 1990 s. 24 (w.e.f. 1-4-1990) which was earlier subs. for “four years” by Act 32 of 1985, s. 20  (w.e.f. 1-4-1985). 

380 

                                                           
Provided  further that  the  condition  in  clause  (iii)  shall,  in  relation  to  a  small-scale  industrial 
undertaking, apply as if the words “not being any article or thing specified in the list in the Eleventh 
Schedule” had been omitted.   

Explanation 1.—For the purposes of clause (ii) of this sub-section, any machinery or plant which was 
used  outside  India  by  any  person  other  than  the  assessee  shall  not  be  regarded  as  machinery  or  plant 
previously used for any purpose, if the following conditions are fulfilled, namely:— 

(a) such machinery or plant was not, at any time previous to the date of the installation by the 

assessee, used in India; 

(b) such machinery or plant is imported into India from any country outside India; and 

(c)  no  deduction  on  account  of  depreciation  in  respect  of  such  machinery  or  plant  has  been 
allowed or is allowable under the provisions of this Act in computing the total income of any person 
for any period prior to the date of the installation of the machinery or plant by the assessee. 

Explanation 2.—Where in the case of an industrial undertaking, any machinery or plant or any part 
thereof  previously  used  for  any  purpose  is  transferred  to  a  new  business  and  the  total  value  of  the 
machinery  or  plant  or  part  so  transferred  does  not  exceed  twenty  per  cent  of  the  total  value  of  the 
machinery  or  plant  used  in  the  business,  then,  for  the  purposes  of  clause  (ii)  of  this  sub-section,  the 
condition specified therein shall be deemed to have been complied with. 

Explanation 3.—For the purposes of this sub-section, “small-scale industrial undertaking” shall have 

the same meaning as in clause (b) of the Explanation below sub-section (8) of section 80HHA. 

(3) This section applies to any ship, where all the following conditions are fulfilled, namely:— 

(i) it is owned by an Indian company and is wholly used for the purposes of the business carried 

on by it; 

(ii) it was not, previous to the date of its acquisition by the  Indian company, owned or used in 

Indian territorial waters by a person resident in India; and 

(iii) it is brought into use by the Indian company at any time within the period of 1[ten years] next 

following the 1st day of April, 1981. 

(4) This section applies to the business of any hotel, where all the following conditions are fulfilled, 

namely:— 

(i) the business of the hotel is not formed by the splitting up, or the reconstruction, of a business 
already in existence or by the transfer to a new business of a building previously used as a hotel or of 
any machinery or plant previously used for any purpose; 

(ii)  the  business  of  the  hotel  is  owned  and  carried  on  by  a  company  registered  in  India  with  a 

paid-up capital of not less than five hundred thousand rupees; 

(iii) the hotel is for the time being approved for the purposes of this sub-section by the Central 

Government; 

(iv) the business of the hotel starts functioning after the 31st day of March, 1981, but 2[before the 

1st day of April, 3[1991]]. 

1. Subs. by 49 of 1991, s. 31, for “fourteen years” (w.e.f. 1-4-1991). Earlier “fourteen years” was subs. for “nine years” by                              

Act  12  of  1990  s.  24  (w.e.f.  1-4-1990)  which  was  earlier  substituted  for  “four  years”  by  Act  32  of  1985,                                  
s. 20  (w.e.f. 1-4-1985). 

2. Subs. by Act 12 of 1990, s. 24, for “before the first day of April, 1990” (w.e.f. 1-4-1990). Earlier “1990” was substituted 

for “1985” by 32 of 1985, s. 20 (w.e.f. 1-4-1985). 

3. Subs. by Act 49 of 1991, s. 31, for “1995” (w.e.f. 1-4-1991). 

381 

                                                           
1[(4A) This  section applies to  the  business  of repairs to  ocean-going  vessels  or  other  powered craft 

which fulfils all the following conditions, namely:— 

(i) the business is not formed by the splitting up, or the reconstruction, of a business already in 

existence; 

(ii) it is not formed by the transfer to a new business of machinery or plant previously used for 

any purpose; 

(iii) it is carried on by an Indian company and the work by way of repairs to ocean-going vessels 
or other powered craft has been commenced by such company after the 31st day of March, 1983, but 
before the 1st day of April, 1988; and 

(iv)  it  is  for  the  time  being  approved  for  the  purposes  of  this  sub-section  by  the  Central 

Government.] 

(5)  The  deduction  specified  in  sub-section  (1)  shall  be  allowed  in  computing  the  total  income  in 
respect of the assessment year relevant to the previous year in which the industrial undertaking begins to 
manufacture or produce articles or things, or to operate its cold storage plant or plants or the ship is first 
brought into use or the business of the hotel starts functioning 1[or the company commences work by way 
of  repairs  to  ocean-going  vessels  or  other  powered  craft]  (such  assessment  year  being  hereafter  in  this 
section  referred  to  as  the  initial  assessment  year)  and  each  of  the  seven  assessment  years  immediately 
succeeding the initial assessment year: 

Provided that  in  the  case  of  an  assessee,  being  a  co-operative  society,  the  provisions  of  this             

sub-section shall  have  effect  as if for the  words  “seven  assessment  years”,  the words  “nine assessment 
years” had been substituted: 

1[Provided further that in the case of an assessee carrying on the business of repairs to ocean-going 
vessels  or  other  powered  craft,  the  provisions  of  this  sub-section  shall  have  effect  as  if  for  the  words 
“seven assessment years”, the words “four assessment years” had been substituted]: 

2[Provided also that in the case of— 

(i)  an  industrial  undertaking  which  begins  to  manufacture  or  produce  articles  or  things  or  to 

operate its cold storage plant or plants; or 

(ii) a ship which is first brought into use; or 

(iii) the business of a hotel which starts functioning, 

on  or  after  the  1st  day  of  April,  1990  3[but  before  the  1st  day  of  April,  1991],  provisions  of  this             
sub-section shall  have  effect  as if for the  words  “seven  assessment  years”,  the words  “nine assessment 
years” had been substituted: 

Provided also that in the case of an assessee, being a co-operative society, deriving profits and gains 
from an industrial undertaking or a ship or a hotel referred to in the third proviso, the provisions of that 
proviso shall have effect as if for the words “nine assessment years”, the words “eleven assessment years” 
had been substituted.] 

(6) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an 
industrial  undertaking  or  a  ship  or  the  business  of  a  hotel  1[or  the  business  of  repairs  to  ocean-going 
vessels or other powered craft] to which the provisions of sub-section (1) apply shall, for the purposes of 
determining  the  quantum  of  deduction  under  sub-section  (1)  for  the  assessment  year  immediately 
succeeding  the  initial  assessment  year  or  any  subsequent  assessment  year,  be  computed  as  if  such 
industrial  undertaking  or  ship  or  the  business  of  the  hotel  1[or  the  business  of  repairs  to  ocean-going 

1. Ins. by Act 11 of 1983, s. 25 (w.e.f. 1-4-1984). 
2. Ins. by Act 12 of 1990, s. 24 (w.e.f. 1-4-1990). 
3. Ins. by Act 49 of 1991, s. 31 (w.e.f. 1-4-1991). 

382 

                                                           
vessels or other powered craft] were the only source of income of the assessee during the previous years 
relevant to the initial assessment year and to every subsequent assessment year up to and including the 
assessment year for which the determination is to be made. 

(7)  Where  the  assessee  is  a  person  other  than  a  company  or  a  co-operative  society,  the  deduction 
under  sub-section  (1)  from  profits  and  gains  derived  from  an  industrial  undertaking  shall  not  be 
admissible  unless  the  accounts  of  the  industrial  undertaking  for  the  previous  year  relevant  to  the 
assessment  year  for  which  the  deduction  is  claimed  have  been  audited  by  an  accountant,  as  defined  in 
the Explanation below sub-section (2) of section 288, and the assessee furnishes, along with his return of 
income, the report of such audit in the prescribed form duly signed and verified by such accountant. 

(8) Where any goods held for the purposes of the business of the industrial undertaking or the hotel or 
the operation of the ship  1[or the business of repairs to ocean-going vessels or other powered craft] are 
transferred to any other business carried on by the assessee, or where any goods held for the purposes of 
any other business carried on by the assessee are transferred to the business of the industrial undertaking 
or  the  hotel  or  the  operation  of  the  ship  1[or  the  business  of  repairs  to  ocean-going  vessels  or  other 
powered craft] and, in either case, the consideration, if any, for such transfer as recorded in the accounts 
of the business of the industrial undertaking or the hotel or the operation of the ship  1[or the business of 
repairs to ocean-going  vessels or other powered craft] does not correspond to the market value of such 
goods as on the date of the transfer, then, for the purposes of the deduction under this section, the profits 
and gains of the industrial undertaking or the business of the hotel or the operation of the ship  1[or the 
business of repairs to ocean-going vessels or other powered craft shall be computed as if the transfer, in 
either case, had been made at the market value of such goods as on that date: 

Provided that  where,  in  the  opinion  of  the  2[Assessing  Officer],  the  computation  of  the  profits  and 
gains  of  the  industrial  undertaking  or  the  business  of  the  hotel  or  the  operation  of  the  ship  1[or  the 
business of repairs to ocean-going  vessels or other powered craft] in the manner hereinbefore specified 
presents  exceptional  difficulties,  the  2[Assessing  Officer]  may  compute  such  profits  and  gains  on  such 
reasonable basis as he may deem fit. 

Explanation.—In this sub-section, “market value”, in relation to any goods, means the price that such 

goods would ordinarily fetch on sale in the open market. 

(9)  Where  it  appears  to  the  2[Assessing  Officer]  that,  owing  to  the  close  connection  between  the 
assessee carrying on the business of the industrial undertaking or the hotel or the operation of the ship 1[or 
the business of repairs to ocean-going  vessels or other powered craft] to which this section applies and 
any  other  person,  or  for  any  other  reason,  the  course  of  business  between  them  is  so  arranged  that  the 
business transacted between them produces to the assessee more than the ordinary profits which might be 
expected to arise in the business of the industrial undertaking or the hotel or the operation of the ship  1[or 
the business of repairs to ocean-going vessels or other powered craft], the  2[Assessing Officer] shall, in 
computing the profits and gains of the industrial undertaking or the hotel or the ship  1[or the business of 
repairs to ocean-going vessels or other powered craft] for the purposes of the deduction under this section, 
take the amount of profits as may be reasonably deemed to have been derived therefrom. 

(10)  The  Central  Government  may,  after  making  such  inquiry  as  it  may  think  fit,  direct,  by 
notification  in  the  Official  Gazette,  that  the  exemption  conferred  by  this  section  shall  not  apply  to  any 
class of industrial undertakings with effect from such date as it may specify in the notification.] 

1. Ins. by Act 11 of 1983, s. 25 (w.e.f. 1-4-1984). 
2. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 

383 

                                                           
1[80-IA. Deductions in respect of profits and gains from industrial undertakings or enterprises 
engaged  in  infrastructure  development,  etc.—2[(1)  Where  the  gross  total  income  of  an  assessee 
includes any profits and gains derived by an undertaking or an enterprise from any business referred to in                         
sub-section  (4)  (such  business  being  hereinafter  referred  to  as  the  eligible  business),  there  shall,  in 
accordance with and subject to the provisions of this section, be allowed, in computing the total income of 
the assessee, a deduction of an amount equal to hundred per cent. of the profits and gains derived from 
such business for ten consecutive assessment years.] 

(2) The deduction specified in sub-section (1) may, at the option of the assessee, be claimed by him 
for  any  ten  consecutive  assessment  years  out  of  fifteen  years  beginning  from  the  year  in  which  the 
undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing 
telecommunication  service  or  develops  an  industrial  park  3[  4[or  develops  a  special  economic  zone 
referred  to  in  clause  (iii)  of  sub-section  (4)]]  or  generates  power  or  commences  transmission  or 
distribution  of  power  5[or  undertakes  substantial  renovation  and  modernisation  of  the  existing 
transmission or distribution lines 6***]: 

7[Provided that  where  the  assessee  develops  or  operates  and  maintains  or  develops,  operates  and 
maintains  any  infrastructure  facility  referred  to  in  clause  (a)  or  clause  (b)  or  clause  (c)  of 
the Explanation to clause (i) of sub-section (4), the provisions of this sub-section shall have effect as if for 
the words “fifteen years”, the words “twenty years” had been substituted.] 

8[(2A)  Notwithstanding  anything  contained  in  sub-section  (1)  or  sub-section  (2),  the  deduction  in 
computing the total income of an undertaking providing telecommunication services, specified in clause 
(ii) of sub-section (4), shall be hundred per cent of the profits and gains of the eligible business for the 
first five assessment years commencing at any time during the periods as specified in sub-section (2) and 
thereafter, thirty per cent of such profits and gains for further five assessment years.] 

(3) This section applies to  9[an  10[11[undertaking] referred to in clause (ii)  12[or clause (iv)  13***] of               

sub-section (4)] which fulfils all the following conditions, namely:— 

(i) it is not formed by splitting up, or the reconstruction, of a business already in existence: 

Provided that this condition shall not apply in respect of an  10[undertaking] which is formed as a 
result  of  the re-establishment,  reconstruction  or  revival  by the assessee of  the  business  of  any  such 
10[undertaking] as is referred to in section 33B, in the circumstances and within the period specified in 
that section; 

1.  Subs.  by  Act  27  of  1999,  s.  50,  for  section  80-IA  (w.e.f.  1-4-2000),  earlier  inserted  by  Act  49  of  1991,  s.  32               

(w.e.f. 1-4-1991), and later on amended by Act  18 of 1992, s. 47 (w.e.f. 1-4-1993), which was earlier amended by Act 38 
of 1993,   s. 15 (w.e.f. 1-4-1994), earlier amended by Act 32 of 1994, s. 27 (w.e.f. 1-4-1994), earlier amended by Act 22 
of 1995,  s. 19 (w.e.f. 1-4-1996), amended by Act 38 of 1996, s. 15 (w.e.f. 1-4-1997), amended by Act 26 of 1997, s. 26 
(w.e.f.  1-4-1996),  as  so  amended  by  Act  7  of  1998,  s.  3  (w.e.f.  1-4-1998),  amended  by  Act  21  of  1998,  s.  34              
(w.e.f. 1-4-1998). 

2. Subs. by Act 14 of 2001, s. 44, for sub-section (1) (w.e.f. 1-4-2002). 
3. Ins. by Act 20 of 2002, s. 33 (w.e.f. 1-4-2003). 
4. Subs. by Act 32 of 2003, s. 38 for “or develops or develops and operates or maintains and operates a special economic 

zone” (w.e.f. 1-4-2002). 

5. Ins. by Act 23 of 2004, s. 17 (w.e.f. 1-4-2005). 
6. The words “or lays and begins to operate a cross-country natural gas distribution network” omitted by Act 33 of 2009,              

s. 36 (w.e.f. 1-4-2010). 

7. The proviso substituted by Act 14 of 2001, s. 44 (w.e.f. 1-4-2002). 
8. Ins. by s. 44, ibid. (w.e.f. 1-4-2001). 
9. Subs. by Act 10 of 2000, s. 38, for “any industrial undertaking “ (w.e.f. 1-4-2000). 
10. Subs. by Act 14 of 2001, s. 44, for “industrial undertaking” (w.e.f. 1-4-2002). 
11. Subs. by Act 23 of 2004, s. 17, for “undertaking referred to in clause (iv)” (w.e.f. 1-4-2005). 
12.  Subs. by Act 22 of 2007, s. 28, for “clause (iv)” (w.e.f. 1-4-2008). 
13. The words, brackets and figures “or clause (vi)” omitted by Act 33 of 2009, s. 36 (w.e.f. 1-4-2010). 

384 

                                                           
 (ii) it is not formed by the transfer to a new business of machinery or plant previously used for 

any purpose: 

1[Provided that  nothing  contained  in  this  sub-section  shall  apply  in  the  case  of  transfer,  either  in 
whole or in part, of machinery or plant previously used by a State Electricity Board referred to in clause 
(7) of section 2 of the Electricity Act, 2003 (36 of 2003), whether or not such transfer is in pursuance of 
the splitting up or reconstruction or reorganisation of the Board under Part XIII of that Act.] 

Explanation 1.—For the purposes of clause (ii), any machinery or plant which was used outside India 
by any person other than the assessee shall not be regarded as machinery or plant previously used for any 
purpose, if the following conditions are fulfilled, namely :— 

 (a) such machinery or plant was not, at any time previous to the date of the installation by the 

assessee, used in India; 

 (b) such machinery or plant is imported into India from any country outside India; and 

 (c)  no  deduction  on  account  of  depreciation  in  respect  of  such  machinery  or  plant  has  been 
allowed or is allowable under the provisions of this Act in computing the total income of any person 
for any period prior to the date of the installation of machinery or plant by the assessee. 

Explanation 2.—Where in the case of an  2[undertaking], any machinery or plant or any part thereof 
previously used for any purpose is transferred to a new business and the total value of the machinery or 
plant or part so transferred does not exceed twenty per cent of the total value of the machinery or plant 
used  in  the  business,  then,  for  the  purposes  of  clause  (ii)  of  this  sub-section,  the  condition  specified 
therein shall be deemed to have been complied with. 

(4) This section applies to— 

  (i) any enterprise carrying on the business  3[of (i) developing or (ii) operating and maintaining 
or  (iii)  developing,  operating  and  maintaining]  any  infrastructure  facility  which  fulfils  all  the 
following conditions, namely :— 

(a) it is owned by a company registered in India or by a consortium of such companies  4[or 
by an authority or a board or a corporation or any other body established or constituted under any 
Central or State Act]: 

5[(b) it has entered into an agreement with the Central Government or a State Government or 
a local authority or any other statutory body for (i) developing or (ii) operating and maintaining 
or (iii) developing, operating and maintaining a new infrastructure facility;] 

 (c) it has started or starts operating and maintaining the infrastructure facility on or after the 

1st day of April, 1995: 

Provided that  where  an  infrastructure  facility  is  transferred  on  or  after  the  1st  day                            

of  April,  1999  by  an  enterprise  which  developed  such  infrastructure  facility  (hereafter                   
referred  to  in  this  section  as  the  transferor  enterprise)  to  another  enterprise  (hereafter  in  this 
section referred to as the transferee enterprise) for the purpose of operating and maintaining the 
infrastructure  facility  on  its  behalf  in  accordance  with  the  agreement  with  the  Central 

1. Ins. by Act 23 of 2004, s. 17 (w.e.f. 1-4-2005).  
2. Subs. by Act 14 of 2001, s. 44, for “industrial undertaking” (w.e.f. 1-4-2002). 
3. Subs. by s. 44, ibid., for “of (i) developing, (ii) maintaining and operating or (iii) developing, maintaining and operating”               

(w.e.f. 1-4-2002).  

4. Ins. by Act 18 of 2005, s. 26 (w.e.f. 1-4-2006). 
5. Subs. by Act 14 of 2001, s. 44, for clause (b) (w.e.f. 1-4-2002). 

385 

                                                           
Government, State Government, local authority or statutory body, the provisions of this section 
shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and 
the  deduction  from  profits  and  gains  would  be  available  to  such  transferee  enterprise  for  the 
unexpired  period  during  which  the  transferor  enterprise  would  have  been  entitled  to  the 
deduction, if the transfer had not taken place: 

1[Provided further that nothing contained in this section shall apply to any enterprise which 
starts the development or operation and maintenance of the infrastructure facility on or after the 
1st day of April, 2017.] 

2[Explanation.—For the purposes of this clause, “infrastructure facility” means— 

(a) a road including toll road, a bridge or a rail system; 

(b)  a  highway  project  including  housing  or  other  activities  being  an  integral  part  of  the 

highway project; 

(c) a water supply project, water treatment system, irrigation project, sanitation and sewerage 

system or solid waste management system; 

(d) a port, airport, inland waterway 3[, inland port or navigational channel in the sea];] 

4[(ii) any undertaking which has started or starts providing telecommunication services, whether 
basic or cellular, including radio paging, domestic satellite service, network of trunking, broadband 
network and internet services on or after the 1st day of April, 1995, but on or before the 5[31st day of 
March, 2005].] 

Explanation.—For the purposes of this clause, “domestic satellite” means a satellite owned and 

operated by an Indian company for providing telecommunication service; 

(iii)  any  undertaking  which  develops,  develops  and  operates  or  maintains  and  operates  an 
industrial  park  6[or  special economic  zone] notified  by  the  Central  Government in  accordance  with 
the scheme framed and notified by that Government for the period beginning on the 1st day of April, 
1997 and ending on 7[the 31st day of March, 2006]: 

8[Provided that in a case where an undertaking develops an industrial park on or after the 1st day 
of  April,  1999  or  a  special  economic  zone  on  or  after  the  1st  day  of  April,  2001  and  transfers  the 
operation and maintenance of such industrial park or such special economic zone, as the case may be, 
to  another  undertaking  (hereafter  in  this  section  referred  to  as  the  transferee  undertaking),  the 
deduction  under  sub-section  (1)  shall  be  allowed  to  such  transferee  undertaking  for  the  remaining 
period  in  the  ten  consecutive  assessment  years  as  if  the  operation  and  maintenance  were  not  so 
transferred to the transferee undertaking:] 

9[Provided further that in the case of any undertaking which develops, develops and operates or 
maintains and operates an industrial park, the provisions of this clause shall have effect as if for the 

1. Ins. by Act 28 of 2016, s. 4 (w.e.f. 1-4-2017). 
2. Subs. by Act 14 of 2001, s. 44, for Explanation (w.e.f. 1-4-2002). 
3. Subs. by Act 22 of 2007, s. 28, for “inland port” (w.e.f. 1-4-2008).  
4. Subs. by Act 14 of 2001, s. 44, for clause (ii) (w.e.f. 1-4-2001). 
5. Subs. by Act 23 of 2004, s. 17, for “31st March, 2004” (w.e.f. 1-4-2005). 
6. Ins. by Act 14 of 2001, s. 44, (w.e.f. 1-4-2002). 
7. Subs. by s. 44, ibid., for “the 31st March, 2002” (w.e.f. 1-4-2001). 
8. Subs. by Act 32 of 2003, s. 38, for the proviso (w.e.f. 1-4-2002). 
9. Subs. by Act 21 of 2006, s. 18, for the proviso (w.e.f. 1-4-2007). 

386 

                                                           
figures,  letters  and  words  “31st  day  of  March,  2006”,  the  figures,  letters  and  words  1[31st  day  of 
March, 2011] had been substituted;] 

(iv) an 2[undertaking] which,— 

  (a) is set up in any part of India for the generation or generation and distribution of power if 
it begins to generate power at any time during the period beginning on the 1st day of April, 1993 
and ending on 3[the 31st day of March, 2017]; 

   (b)  starts  transmission  or  distribution  by  laying  a  network  of  new  transmission  or 
distribution  lines  at  any  time  during  the  period  beginning  on  the  1st  day  of  April,  1999  and 
ending on 3[the 31st day of March, 2017]: 

Provided that  the  deduction  under  this  section  to  an  2[undertaking]  under  sub-clause  (b)  shall  be 
allowed only in relation to the profits derived from laying of such network of new lines for transmission 
or distribution; 

4[(c) undertakes substantial renovation and modernisation of the existing network of transmission 
or distribution lines at any time during the period beginning on the 1st day of April, 2004 and ending 
on 3[the 31st day of March, 2017]. 

Explanation.—For the purposes of this sub-clause, “substantial renovation and modernisation” means 
an increase in the plant and machinery in the network of transmission or distribution lines by at least fifty 
per cent of the book value of such plant and machinery as on the 1st day of April, 2004;] 

5[(v) an undertaking owned by an  Indian company and set up for reconstruction or revival of a 

power generating plant, if— 

(a)  such  Indian  company  is  formed  before  the  30th  day  of  November,  2005  with  majority 
equity  participation  by  public  sector  companies  for  the  purposes  of  enforcing  the  security 
interest  of  the  lenders  to  the  company  owning  the  power  generating  plant  and  such  Indian 
company is notified before the 31st day of December, 2005 by the Central Government for the 
purposes of this clause; 

(b) such undertaking begins to generate or transmit or distribute power before 6[the 31st day 

of March, 2011];] 

7* 

* 

* 

* 

* 

(5) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an 
eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining 
the  quantum  of  deduction  under  that  sub-section  for  the  assessment  year  immediately  succeeding  the 
initial assessment year or any subsequent assessment year, be computed as if such eligible business were 
the only source of income of the assessee during the previous year relevant to the initial assessment year 
and  to  every  subsequent  assessment  year  up  to  and  including  the  assessment  year  for  which  the 
determination is to be made. 

1. Subs. by Act 33 of 2009, s. 36, for “31st day of March, 2009” (w.e.f. 1-4-2009). 
2. Subs. by Act 14 of 2001, s. 44, for “industrial undertaking” (w.e.f. 1-4-2002). 
3. Subs. by Act 25 of 2014, s. 30, for “the 31st day of March, 2014” (w.e.f. 1-4-2015). 
4. Ins. by Act 23 of 2004, s. 17 (w.e.f 1-4-2005). 
5. Ins. by Act 55 of 2005, s. 5 (w.e.f. 1-4-2006). 
6. Subs. by Act 33 of 2009, s. 36, for “the 31st day of March, 2008” (w.e.f. 1-4-2008).  
7. Clause (vi) omitted by Act 33 of 2009, s. 36 (w.e.f. 1-4-2010). 

387 

 
 
 
 
 
 
 
                                                           
(6)  Notwithstanding  anything  contained in  sub-section  (4),  where  housing  or other  activities are  an 
integral part of the highway project and the profits of which are computed on such basis and manner as 
may be prescribed, such profit shall not be liable to tax where the profit has been transferred to a special 
reserve  account  and  the  same  is  actually  utilised  for  the  highway  project  excluding  housing  and  other 
activities before the expiry of three years following the year in which such amount was transferred to the 
reserve account; and the amount remaining unutilised shall be chargeable to tax as income of the year in 
which such transfer to reserve account took place. 

(7) 1[The deduction] under sub-section (1) from profits and gains derived from an 2[undertaking] shall 
not  be  admissible  unless  the  accounts  of  the  2[undertaking]  for  the  previous  year  relevant  to  the 
assessment  year  for  which  the  deduction  is  claimed  have  been  audited  by  an  accountant,  as  defined  in 
the Explanation below sub-section (2) of section 288, and the assessee furnishes, along with his return of 
income, the report of such audit in the prescribed form duly signed and verified by such accountant. 

(8) Where any 3[goods or services] held for the purposes of the eligible business are transferred to any 
other business carried on by the assessee, or where any 3[goods or services] held for the purposes of any 
other business carried on by the assessee are transferred to the eligible business and, in either case, the 
consideration,  if  any,  for  such  transfer  as  recorded  in  the  accounts  of  the  eligible  business  does  not 
correspond to the market value of such  3[goods or services] as on the date of the transfer, then, for the 
purposes  of  the  deduction  under  this  section,  the  profits  and  gains  of  such  eligible  business  shall  be 
computed as if the transfer, in either case, had been made at the market value of such 3[goods or services] 
as on that date: 

Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains 
of  the  eligible  business  in  the  manner  hereinbefore  specified  presents  exceptional  difficulties,  the 
Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. 

4[Explanation.—For  the  purposes  of  this  sub-section,  “market  value”,  in  relation  to  any  goods  or 

services, means— 

(i) the price that such goods or services would ordinarily fetch in the open market; or 

(ii)  the  arm’s  length  price  as  defined  in  clause  (ii)  of section  92F,  where  the  transfer  of  such 

goods or services is a specified domestic transaction referred to in section 92BA.] 

(9) Where any amount of profits and gains of an  2[undertaking] or of an enterprise in the case of an 
assessee  is  claimed  and  allowed  under  this  section  for  any  assessment  year,  deduction  to  the  extent  of 
such profits and gains shall not be allowed under any other provisions of this Chapter under the heading” 
C.—Deductions in respect of certain incomes”, and shall in no case exceed the profits and gains of such 
eligible business of 2[undertaking] or enterprise, as the case may be. 

1. Subs. by Act 20 of 2002, s. 33, for “Where the assessee is a person other than a company or a co-operative society, the 

deduction” (w.e.f. 1-4-2003). 

2. Subs. by Act 14 of 2001, s. 44, for “industrial undertaking” (w.e.f. 1-4-2002). 
3. Subs. by s. 44, ibid., for “goods” (w.e.f. 1-4-2002). 
4. Subs. by Act 23 of 2012, s. 30, for the Explanation (w.e.f. 1-4-2013). 

388 

                                                           
(10)  Where  it  appears  to  the  Assessing  Officer  that,  owing  to  the  close  connection  between  the 
assessee carrying on the eligible business to which this section applies and any other person, or for any 
other  reason,  the  course  of  business  between  them  is  so  arranged  that  the  business  transacted  between 
them  produces  to  the  assessee  more than  the  ordinary  profits  which  might  be  expected to arise  in  such 
eligible business, the Assessing Officer shall, in computing the profits and gains of such eligible business 
for  the  purposes  of  the  deduction  under  this  section,  take  the  amount  of  profits  as  may  be  reasonably 
deemed to have been derived therefrom: 

1[Provided that in case the aforesaid arrangement involves a specified domestic transaction referred to 
in section 92BA, the amount of profits from such transaction shall be determined having regard to arm’s 
length price as defined in clause (ii) of section 92F.] 

(11)  The  Central  Government  may,  after  making  such  inquiry  as  it  may  think  fit,  direct,  by 
notification  in  the  Official  Gazette,  that  the  exemption  conferred  by  this  section  shall  not  apply  to  any 
class  of  industrial  undertaking  or  enterprise  with  effect  from  such  date  as  it  may  specify  in  the 
notification. 

(12)  Where  any  undertaking  of  an  Indian  company  which  is  entitled  to  the  deduction  under  this 
section is transferred, before the expiry of the period specified in this section, to another Indian company 
in a scheme of amalgamation or demerger— 

 (a)  no  deduction  shall  be  admissible  under  this  section  to  the  amalgamating  or  the  demerged 

company for the previous year in which the amalgamation or the demerger takes place; and 

 (b)  the  provisions  of  this  section  shall,  as  far  as  may  be,  apply  to  the  amalgamated  or  the 
resulting company as they would have applied to the amalgamating or the demerged company if the 
amalgamation or demerger had not taken place. 

2[(12A) Nothing contained in sub-section (12) shall apply to any enterprise or undertaking which is 

transferred in a scheme of amalgamation or demerger on or after the 1st day of April, 2007.] 

3[(13)  Nothing  contained  in  this  section  shall  apply  to  any  Special  Economic  Zones  notified  on  or 
after the 1st day of April, 2005 in accordance with the scheme referred to in sub-clause (iii) of clause (c) 
of sub-section (4).] 

4[Explanation.—For the removal of doubts, it is hereby declared that nothing contained in this section 
shall  apply  in  relation  to  a  business  referred  to  in  sub-section  (4)  which  is  in  the  nature  of  a  works 
contract  awarded  by  any  person  (including  the  Central  or  State  Government)  and  executed  by  the 
undertaking or enterprise referred to in sub-section (1).] 

1. Ins. by Act 23 of 2012, s. 30 (w.e.f. 1-4-2013).  
2. Ins. by Act 22 of 2007, s. 28 (w.e.f. 1-4-2008). 
3. Ins. by Act 28 of 2005, s. 27 and the Second Schedule (w.e.f. 10-2-2006). 
4. Ins. by Act 33 of 2009, s. 36 (w.e.f. 1-4-2000). 

389 

                                                           
1[80-IAB. Deductions in respect of profits and gains by an undertaking or enterprise engaged in 
development  of  Special  Economic  Zone.—(1)  Where  the  gross  total  income  of  an  assessee,  being  a 
Developer, includes any profits and gains derived by an undertaking or an enterprise from any business of 
developing  a  Special  Economic  Zone,  notified  on  or after the  1st day  of  April, 2005  under the  Special 
Economic Zones Act, 2005, there shall, in accordance with and subject to the provisions of this section, 
be allowed, in computing the total income of the assessee, a deduction of an amount equal to one hundred 
per cent of the profits and gains derived from such business for ten consecutive assessment years. 

2[Provided that the provisions of this section shall not apply to an assessee, being a developer, where 

the development of Special Economic Zone begins on or after the 1st day of April, 2017.] 

(2) The deduction specified in sub-section (1) may, at the option of the assessee, be claimed by him 
for any ten consecutive assessment years out of fifteen years beginning from the year in which a Special 
Economic Zone has been notified by the Central Government: 

Provided that  where  in  computing  the  total  income  of  any  undertaking,  being  a  Developer  for  any 

assessment  year,  its  profits  and  gains  had  not  been  included  by  application  of  the  provisions  of                     
sub-section  (13)  of sectopm  80-IA,  the  undertaking  being  the  Developer  shall  be  entitled  to  deduction 
referred to in this section only for the unexpired period of ten consecutive assessment years and thereafter 
it shall be eligible for deduction from income as provided in sub-section (1) or sub-section (2), as the case 
may be: 

Provided  further that  in  a  case  where  an  undertaking,  being  a  Developer  who  develops  a  Special 
Economic Zone on or after the 1st day of April, 2005 and transfers the operation and maintenance of such 
Special  Economic  Zone  to  another  Developer  (hereafter  in  this  section  referred  to  as  the  transferee 
Developer),  the  deduction  under  sub-section  (1)  shall  be  allowed  to  such  transferee  Developer  for  the 
remaining period in the ten consecutive assessment years as if the operation and maintenance were not so 
transferred to the transferee Developer. 

(3) The provisions of sub-section (5) and sub-sections (7) to (12) of section 80-JIA shall apply to the 

Special Economic Zones for the purpose of allowing deductions under sub-section (1). 

Explanation.—For the purposes of this section, “Developer” and “Special Economic Zone” shall have 
the  same  meanings  respectively  as  assigned  to  them  in  clauses  (g)  and  (za)  of  section  2  of  the  Special 
Economic Zones Act, 2005.] 

3[80-IAC. Special provision in respect of specified business.—(1) Where the gross total income of 
an assessee, being an eligible start-up, includes any profits and gains derived from eligible business, there 
shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total 
income of the assessee, a deduction of an amount equal to one hundred per cent of the profits and gains 
derived from such business for three consecutive assessment years. 

(2) The deduction specified in sub-section (1) may, at the option of the assessee, be claimed by him 
for  any  three  consecutive  assessment  years  out  of 4[seven years]  beginning  from  the  year  in  which  the 
eligible start-up is incorporated. 

(3) This section applies to a start-up which fulfils the following conditions, namely:— 

(i) it is not formed by splitting up, or the reconstruction, of a business already in existence: 

1. Ins. by Act 28 of 2005, s. 27 and the Second Schedule (w.e.f. l0-2-2006). 
2. Ins. by Act 28 of 2016, s. 41 (w.e.f. 1-4-2017). 
3. Ins. by s. 42, ibid. (w.e.f. 1-4-2017). 
4. Subs. by Act 7 of 2017, s. 36, for “five years” (w.e.f. 1-4-2018). 

390 

                                                           
Provided that this condition shall not apply in respect of a start-up which is formed as a result of 
the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking 
as referred to in section 33B, in the circumstances and within the period specified in that section; 

(ii) it is not formed by the transfer to a new business of machinery or plant previously used for 

any purpose. 

Explanation 1.—For the purposes of this clause, any machinery or plant which was used outside India 
by any person other than the assessee shall not be regarded as machinery or plant previously used for any 
purpose, if all the following conditions are fulfilled, namely:— 

(a) such machinery or plant was not, at any time previous to the date of the installation by the 

assessee, used in India; 

(b) such machinery or plant is imported into India; 

(c)  no  deduction  on  account  of  depreciation  in  respect  of  such  machinery  or  plant  has  been 
allowed or is allowable under the provisions of this Act in computing the total income of any person 
for any period prior to the date of the installation of the machinery or plant by the assessee. 

Explanation  2.—Where  in  the  case  of  a  start-up,  any  machinery  or  plant  or  any  part  thereof 
previously used for any purpose is transferred to a new business and the total value of the machinery 
or plant or part so transferred does not exceed twenty per cent of the total value of the machinery or 
plant  used  in  the  business,  then,  for  the  purposes  of  clause  (ii)  of  this  sub-section,  the  condition 
specified therein shall be deemed to have been complied with. 

(4) The provisions of sub-section (5) and sub-sections (7) to (11) of section 80-IA shall apply to the 

start-ups for the purpose of allowing deductions under sub-section (1). 

Explanation.—For the purposes of this section,— 

1[(i)  “eligible  business”  means  a  business  carried  out  by  an  eligible  start  up  engaged  in 
innovation, development or improvement of products or processes or services or a scalable business 
model with a high potential of employment generation or wealth creation;] 

(ii)  “eligible  start-up”  means  a  company  or  a  limited  liability  partnership  engaged  in  eligible 

business which fulfils the following conditions, namely:— 

(a)  it  is  incorporated  on  or  after  the  1st  day  of  April,  2016  but  before  the  1st  day  of                

April, 2[2021]; 

(b)  the  total  turnover  of  its  business  does  not  exceed  twenty-five  crore  rupees  3[in  the 
previous  year  relevant  to  the  assessment  year  for  which  deduction  under  sub-section  (1)  is 
claimed]; and 

(c) it holds a certificate of eligible business from the Inter-Ministerial Board of Certification 

as notified in the Official Gazette by the Central Government; 

(iii) “limited liability partnership” means a partnership referred to in clause (n) of sub-section (1) 

of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009).] 

1. Subs. by Act 13 of 2018, s. 28, for clause (i) (w.e.f. 1-4-2018). 
2. Subs. by s. 28, ibid., for “2019” (w.e.f. 1-4-2018). 
3. Subs. by s. 28, ibid., for “in any of the previous years beginning on or after the 1st day of April, 2016 and ending on the 

31st day of March, 2021” (w.e.f. 1-4-2018). 

391 

                                                           
80-IB. Deduction in respect of profits and gains from certain industrial undertakings other than 
infrastructure development undertakings.—(1) Where the gross total income of an assessee  includes 
any profits and gains derived from any business referred to in sub-sections (3) to 1[(11), (11A) and (11B)] 
(such business being hereinafter referred to as the eligible business), there shall, in accordance with and 
subject  to  the  provisions  of  this  section,  be  allowed,  in  computing  the  total  income  of  the  assessee,  a 
deduction  from  such  profits  and  gains  of  an  amount  equal  to  such  percentage  and  for  such  number  of 
assessment years as specified in this section. 

(2)  This  section  applies  to  any  industrial  undertaking  which  fulfils  all  the  following  conditions, 

namely:— 

(i) it is not formed by splitting up, or the reconstruction, of a business already in existence: 

Provided that  this  condition  shall  not  apply  in  respect  of  an  industrial  undertaking  which  is 
formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of 
any such industrial undertaking as is referred to in section 33B, in the circumstances and within the 
period specified in that section; 

(ii) it is not formed by the transfer to a new business of machinery or plant previously used for 

any purpose; 

(iii) it manufactures or produces any article or thing, not being any article or thing specified in the 
list  in  the  Eleventh  Schedule,  or  operates  one  or  more  cold  storage  plant  or  plants,  in  any  part  of 
India: 

Provided that the condition in this clause shall, in relation to a small scale industrial undertaking 
or an industrial undertaking referred to in sub-section (4) shall apply as if the words “not being any 
article or thing specified in the list in the Eleventh Schedule” had been omitted. 

Explanation 1.—For the purposes of clause (ii), any machinery or plant which was used outside 
India  by  any  person  other than  the  assessee  shall  not  be regarded  as  machinery  or plant  previously 
used for any purpose, if the following conditions are fulfilled, namely:— 

(a) such machinery or plant was not, at any time previous to the date of the installation by the 

assessee, used in India; 

(b) such machinery or plant is imported into India from any country outside India; and 

(c) no deduction on account of depreciation in respect of such machinery or plant has been 
allowed  or  is  allowable  under  the  provisions  of  this  Act  in  computing  the  total  income  of  any 
person  for  any  period  prior  to  the  date  of  the  installation  of  the  machinery  or  plant  by  the 
assessee. 

Explanation  2.—Where  in the case  of  an industrial undertaking,  any  machinery  or  plant  or  any 
part thereof previously used for any purpose is transferred to a new business and the total value of the 
machinery  or  plant  or  part  so transferred  does  not  exceed  twenty  per  cent.  of  the  total  value  of the 
machinery or plant used in the business, then, for the purposes of clause (ii) of this sub-section, the 
condition specified therein shall be deemed to have been complied with; 

(iv)  in  a  case  where  the  industrial  undertaking  manufactures  or  produces  articles  or  things,  the 
undertaking  employs  ten  or  more  workers  in  a  manufacturing  process  carried  on  with  the  aid  of 
power, or employs twenty or more workers in a manufacturing process carried on without the aid of 
power. 

1. Subs. by Act 23 of 2004, s. 18, for “(11) and (11A)” (w.e.f. 1-4-2005). Earlier “(3) to (11) and (11A)” subs. by Act 14 of 

2001, s. 45 (w.e.f. 1-4-2002). 

392 

                                                           
(3) The amount of deduction in the case of an industrial undertaking shall be twenty-five per cent. (or 
thirty  per  cent.  where the assessee  is  a  company),  of  the  profits  and  gains  derived  from  such  industrial 
undertaking  for  a  period  of  ten  consecutive  assessment  years  (or  twelve  consecutive  assessment  years 
where  the  assessee  is  a  co-operative  society)  beginning  with  the  initial  assessment  year  subject  to  the 
fulfilment of the following conditions, namely:— 

(i) it begins to manufacture or produce, articles or things or to operate such plant or plants at any 
time  during  the  period  beginning  from  the  1st  day  of  April,  1991  and  ending  on  the  31st  day  of 
March,  1995  or  such  further  period  as the  Central  Government  may,  by  notification  in the  Official 
Gazette, specify with reference to any particular undertaking; 

(ii) where it is an industrial undertaking being a small scale industrial undertaking, it begins to 

manufacture  or  produce  articles  or  things  or  to  operate  its  cold  storage  plant  [not  specified  in               
sub-section (4) or sub-section (5)] at any time during the period beginning on the 1st day of April, 
1995 and ending on the 1[31st day of March, 2002]. 

(4) The amount of deduction in the case of an industrial undertaking in an industrially backward State 
specified  in  the  Eighth  Schedule  shall  be  hundred  per  cent  of  the  profits  and  gains  derived  from  such 
industrial undertaking for five assessment years beginning with the initial assessment year and thereafter 
twenty-five per cent. (or thirty per cent. where the assessee is a company) of the profits and gains derived 
from such industrial undertaking: 

Provided that  the  total  period  of  deduction  does  not  exceed  ten  consecutive  assessment  years  (or 
twelve consecutive assessment years where the assessee is a co-operative society) subject to fulfilment of 
the condition that it begins to manufacture or produce articles or things or to operate its cold storage plant 
or plants during the period beginning on the 1st day of April, 1993 and ending on the 2[31st day of March, 
2004]: 

Provided further that in the case of such industries in the North-Eastern Region, as may be notified by 
the  Central  Government,  the  amount  of  deduction  shall  be  hundred  per  cent.  of  profits  and  gains  for  a 
period  of  ten  assessment  years,  and  the  total  period  of  deduction  shall  in  such  a  case  not  exceed  ten 
assessment years: 

3[Provided  also that  no  deduction  under  this  sub-section  shall  be  allowed  for  the  assessment  year 
beginning on the 1st day of April, 2004 or any subsequent year to any undertaking or enterprise referred 
to in sub-section (2) of section 80-IC:] 

4[Provided also that in the case of an industrial undertaking in the State of Jammu and Kashmir, the 
provisions of the first proviso shall have effect as if for the figures, letters and words “31st day of March, 
2004”, the figures, letters and words 5[31st day of March, 2012] had been substituted: 

Provided also that no deduction under this sub-section shall be allowed to an industrial undertaking in 
the  State  of  Jammu  and  Kashmir  which  is  engaged  in  the  manufacture  or  production  of  any  article  or 
thing specified in Part C of the Thirteenth Schedule.] 

1. Subs. by Act 10 of 2000, s. 39, for “31st day of March, 2000” (w.e.f. 1-4-2001).  
2. Subs. by Act 20 of 2002, s. 34, for “31st day of March, 2002” (w.e.f. 1-4-2003).  
3. Ins. by Act 32 of 2003, s. 39 (w.e.f. 1-4-2004). 
4. Subs. by Act 23 of 2004, s. 18, for the proviso (w.e.f. 1-4-2005). 
5. Subs. by Act 22 of 2007, s. 29, for “31st day of March, 2007” (w.e.f. 1-4-2008). 

393 

                                                           
(5)  The  amount  of  deduction  in  the  case  of  an  industrial  undertaking  located  in  such  industrially 
backward  districts  as  the  Central  Government  may,  having  regard  to  the  prescribed  guidelines,  by 
notification in the Official Gazette, specify in this behalf as industrially backward district of category ‘A’ 
or an industrially backward district of category ‘B’ shall be,— 

(i) hundred per cent of the profits and gains derived from an industrial undertaking located in a 
backward district of category ‘A’ for five assessment years beginning with the initial assessment year 
and thereafter, twenty-five per cent. (or thirty per cent. where the assessee is a company) of the profits 
and gains of an industrial undertaking : 

Provided that  the  total  period  of  deduction  shall  not  exceed  ten  consecutive  assessment  years  or 

where the assessee is a co-operative society, twelve consecutive assessment years: 

Provided further that the industrial undertaking begins to manufacture or produce articles or things or 
to  operate  its  cold  storage  plant  or  plants  at  any  time  during  the  period  beginning  on  the  1st  day  of 
October, 1994 and ending on the 1[31st day of March, 2004]; 

(ii)  hundred  per  cent.  of  the  profits  and  gains  derived  from  an  industrial  undertaking  located  in  a 
backward  district  of  category  ‘B’  for  three assessment  years  beginning  with the  initial assessment  year 
and thereafter, twenty-five per cent (or thirty per cent where the assessee is a company) of the profits and 
gains of an industrial undertaking: 

Provided that the total period of deduction does not exceed eight consecutive assessment years (or where 
the assessee is a co-operative society, twelve consecutive assessment years): 

Provided further that the industrial undertaking begins to manufacture or produce articles or things or to 
operate its cold storage plant or plants at any time during the period beginning on the 1st day of October, 
1994 and ending on the 1[31st day of March, 2004]. 

(6) The amount of deduction in the case of the business of a ship shall be thirty per cent. of the profits 
and  gains  derived  from  such  ship for  a  period  of ten  consecutive  assessment  years  including  the  initial 
assessment year provided that the ship— 

(i) is owned by an Indian company and is wholly used for the purposes of the business carried on 

by it; 

(ii)  was  not,  previous  to  the  date  of  its  acquisition  by  the  Indian  company,  owned  or  used  in 

Indian territorial waters by a person resident in India; and 

(iii) is brought into use by the Indian company at any time during the period beginning on the 1st 

day of April, 1991 and ending on the 31st day of March, 1995. 

(7) The amount of deduction in the case of any hotel shall be— 

(a) fifty per cent. of the profits and gains derived from the business of such hotel for a period of 
ten consecutive years beginning from the initial assessment year as is located in a hilly area or a rural 
area or a place of pilgrimage or such other place as the Central Government may, having regard to the 
need  for  development  of  infrastructure  for  tourism  in  any  place  and  other  relevant  considerations, 
specify by notification in the Official Gazette and such hotel starts functioning at any time during the 
period  beginning  on  the  1st  day  of  April,  1990  and  ending  on  the  31st  day  of  March,  1994  or 
beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2001: 

1. Subs. by Act 20 of 2002, s. 34, for “31st day of March, 2002” (w.e.f. 1-4-2003).  

394 

                                                           
 
Provided that nothing contained in this clause shall apply to a hotel located at a place within the 
municipal  jurisdiction  (whether  known  as  a  municipality,  municipal  corporation,  notified  area 
committee  or  a  cantonment  board  or  by  any  other  name)  of  Calcutta,  Chennai,  Delhi  or  Mumbai, 
which has started or starts functioning on or after the 1st day of April, 1997 and before the 31st day of 
March, 2001: 

Provided further that the said hotel is approved by the prescribed authority for the purpose of this 
clause in accordance with the rules made under this Act and where the said hotel is approved by the 
prescribed authority before the 31st day of March, 1992, shall be deemed to have been approved by 
the prescribed authority for the purpose of this section in relation to the assessment year commencing 
on the 1st day of April, 1991; 

(b) thirty per cent. of the profits and gains derived from the business of such hotel as is located in 
any place other than those mentioned in sub-clause (a) for a period of ten consecutive years beginning 
from the initial assessment year if such hotel has started or starts functioning at any time during the 
period  beginning  on  the  1st  day  of  April,  1991  and  ending  on  the  31st  day  of  March,  1995  or 
beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2001: 

Provided that nothing contained in this clause shall apply to a hotel located at a place within the 
municipal  jurisdiction  (whether  known  as  a  municipality,  municipal  corporation,  notified  area 
committee, town area committee or a cantonment board or by any other name) of Calcutta, Chennai, 
Delhi or Mumbai, which has started or starts functioning on or after the 1st day of April, 1997 and 
before the 31st day of March, 2001; 

(c) the deduction under clause (a) or clause (b) shall be available only if— 

(i)  the  business  of  the  hotel  is  not  formed  by  the  splitting  up,  or  the  reconstruction,  of  a 
business already in existence or by the transfer to a new business of a building previously used as 
a hotel or of any machinery or plant previously used for any purpose; 

(ii) the business of the hotel is owned and carried on by a company registered in India with a 

paid-up capital of not less than five hundred thousand rupees; 

(iii) the hotel is for the time being approved by the prescribed authority: 

Provided that any hotel approved by the prescribed authority before the 1st day of April, 1999 

shall be deemed to have been approved under this sub-section. 

1[(7A) The amount of deduction in the case of any multiplex theatre shall be— 

(a)  fifty  per  cent  of  the  profits  and  gains  derived,  from  the  business  of  building,  owning  and 
operating  a  multiplex  theatre,  for  a  period  of  five  consecutive  years  beginning  from  the  initial 
assessment year in any place: 

Provided that nothing contained in this clause shall apply to a multiplex theatre located at a place 
within the municipal jurisdiction (whether known as a municipality, municipal corporation, notified 
area committee or a cantonment board or by any other name) of Chennai, Delhi, Mumbai or Kolkata; 

1. Ins. by Act 20 of 2002, s. 34 (w.e.f. 1-4-2003). 

395 

                                                           
(b) the deduction under clause (a) shall be allowable only if— 

(i) such multiplex theatre is constructed at any time  during the period beginning on the 1st 

day of April, 2002 and ending on the 31st day of March, 2005; 

(ii)  the  business  of  the  multiplex  theatre  is  not  formed  by  the  splitting  up,  or  the 
reconstruction,  of  a  business  already  in  existence  or  by  the  transfer  to  a  new  business  of  any 
building or of any machinery or of plant previously used for any purpose; 

(iii) the assessee furnishes alongwith the return of income, the report of an audit in such form 
and  containing  such  particulars  as  may  be  prescribed and  duly  signed  and  verified  by  an 
accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the 
deduction has been correctly claimed. 

(7B) The amount of deduction in the case of any convention centre shall be— 

(a) fifty per cent of the profits and gains derived, by the assessee from the business of building, 
owning and operating a convention centre, for a period of five consecutive years beginning from the 
initial assessment year; 

(b) the deduction under clause (a) shall be allowable only if— 

(i) such convention centre is constructed at any time during the period beginning on the 1st 

day of April, 2002 and ending on the 31st day of March, 2005; 

(ii)  the  business  of  the  convention  centre  is  not  formed  by  the  splitting  up,  or  the 
reconstruction,  of  a  business  already  in  existence  or  by  the  transfer  to  a  new  business  of  any 
building or of any machinery or plant previously used for any purpose; 

(iii) the assessee furnishes alongwith the return of income, the report of an audit in such form 
and  containing  such  particulars  as  may  be  prescribed,  and  duly  signed  and  verified  by  an 
accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the 
deduction has been correctly claimed.] 

(8)  The  amount  of  deduction  in  the  case  of  any  company  carrying  on  scientific  research  and 
development  shall  be  hundred  per  cent  of  the  profits  and  gains  of  such  business  for  a  period  of  five 
assessment years beginning from the initial assessment year if such company— 

(a) is registered in India; 

(b) has the main object of scientific and industrial research and development; 

(c) is for the time being approved by the prescribed authority at any time before the 1st day of 

April, 1999. 

1[(8A)  The  amount  of  deduction  in  the  case  of  any  company  carrying  on  scientific  research  and 
development  shall  be  hundred  per  cent  of  the  profits  and  gains  of  such  business  for  a  period  of  ten 
consecutive assessment years, beginning from the initial assessment year, if such company— 

1. Ins. by Act 10 of 2000, s. 39 (w.e.f. 1-4-2001). 

396 

                                                           
(i) is registered in India; 

(ii) has its main object the scientific and industrial research and development; 

(iii) is for the time being approved by the prescribed authority at any time after the 31st day of 

March, 2000 but before the 1[1st day of April, 2007]; 

(iv) fulfils such other conditions as may be prescribed.] 

2[(9) The amount of deduction to an undertaking shall be hundred per cent of the profits for a period 
of seven consecutive assessment years, including the initial assessment year, if such undertaking fulfils 
any of the following, namely:— 

(i) is located in North-Eastern Region and has begun or begins commercial production of mineral 

oil before the 1st day of April, 1997; 

(ii) is located in any part of India and has begun or begins commercial production of mineral oil 

on or after the 1st day of April, 1997 3[but not later than the 31st day of March, 2017]: 

4[Provided that  the  provisions  of  this  clause  shall  not  apply  to  blocks  licensed  under  a  contract 
awarded after the 31st day of March, 2011 under the New Exploration Licencing Policy announced 
by  the  Government  of  India vide Resolution  No.  O-19018/22/95-ONG.DO.VL,  dated  the  10th 
February,  1999  or  in  pursuance  of  any  law  for  the time  being  in  force or  by  the  Central  or  a  State 
Government in any other manner;] 

(iii)  is  engaged  in  refining  of  mineral  oil  and  begins  such  refining  on  or  after  the  1st  day  of 

October, 1998 5[but not later than the 31st day of March, 2012]; 

6[(iv) is engaged in commercial production of natural gas in blocks licensed under the VIII Round 

of  bidding  for  award  of  exploration  contracts  (hereafter  referred  to  as  “NELP-VIII”)  under                       
the  New  Exploration  Licencing  Policy  announced  by 
Resolution  No.  O-19018/22/95-ONG.DO.VL,  dated  10th  February,  1999  and  begins  commercial 
production  of  natural  gas on  or after the  1st  day  of April,  2009 5[but  not  later than the 31st  day  of 
March, 2017]; 

the  Government  of 

India vide                           

(v) is engaged in commercial production of natural gas in blocks licensed under the IV Round of 
bidding  for  award  of  exploration  contracts  for  Coal  Bed  Methane  blocks  and  begins  commercial 
production  of  natural  gas on  or after the  1st  day  of April,  2009 5[but  not  later than the 31st  day  of 
March, 2017].] 

Explanation.—For  the  purposes  of  claiming  deduction  under  this  sub-section,  all  blocks  licensed 
under a single contract, which has been awarded under the New Exploration Licencing Policy announced 
by the Government of India vide Resolution No. O-19018/22/95-ONG.DO.VL, dated 10th February, 1999 
or  has  been  awarded  in  pursuance  of  any  law  for  the  time  being  in  force  or  has  been  awarded  by  the 
Central or a State Government in any other manner, shall be treated as a single “undertaking”.] 

1. Subs. by Act 18 of 2005, s. 27, for “1st day of April, 2005” (w.e.f. 1-4-2006). Earlier substituted by Act 23 of 2004, s. 18 

(w.e.f. 1-4-2005), which was substituted by 32 of 2003, s. 39 (w.e.f. 1-4-2004). 

2. Subs. by Act 33 of 2009, s. 37, for sub-section (9) (w.e.f. 1-4-2000). 
3. Ins. by Act 28 of 2016, s. 43 (w.e.f. 1-4-2017). 
4. Ins. by Act 8 of 2011, s. 12 (w.e.f. 1-4-2012). 
5. Ins. by Act 33 of 2009, s. 37 (w.e.f. 1-4-2009). 
6. Ins. by s. 37 ibid. (w.e.f. 1-4-2010). 

397 

                                                           
1[(10)  The  amount  of  deduction  in  the  case  of  an  undertaking  developing  and  building  housing 
projects approved before the 2[31st day of March, 2008] by a local authority shall be hundred per cent of 
the profits derived in the previous year relevant to any assessment year from such housing project if,— 

(a)  such  undertaking  has  commenced  or  commences  development  and  construction  of  the 

housing project on or after the 1st day of October, 1998 and completes such construction,— 

(i) in a case where a housing project has been approved by the local authority before the 1st 

day of April, 2004, on or before the 31st day of March, 2008; 

(ii) in a case where a housing project has been, or, is approved by the local authority on or 
after the 1st day of April, 2004 3[but not later than the 31st day of March, 2005], within four years 
from the end of the financial year in which the housing project is approved by the local authority; 

3[(iii) in a case where a housing project has been approved by the local authority on or after 
the  1st  day  of  April,  2005,  within  five  years  from  the  end  of  the  financial  year  in  which  the 
housing project is approved by the local authority.] 

Explanation.—For the purposes of this clause,— 

(i) in a case where the approval in respect of the housing project is obtained more than 
once, such housing project shall be deemed to have been approved on the date on which the 
building plan of such housing project is first approved by the local authority; 

(ii) the date of completion of construction of the housing project shall be taken to be the 
date on which the completion certificate in respect of such housing project is issued by the 
local authority; 

(b) the project is on the size of a plot of land which has a minimum area of one acre: 

Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried 
out  in  accordance  with  a  scheme  framed  by  the  Central  Government  or  a  State  Government  for 
reconstruction  or redevelopment  of  existing  buildings  in areas  declared  to  be  slum  areas  under  any 
law for the time being in force and such scheme is notified by the Board in this behalf; 

(c)  the  residential  unit  has  a  maximum  built-up  area  of  one  thousand  square  feet  where  such 
residential unit is situated within the city of Delhi or Mumbai or within twenty-five kilometres from 
the  municipal  limits  of  these  cities  and  one  thousand  and  five  hundred  square  feet  at  4[any  other 
place;] 

(d) the  built-up  area of the  shops  and  other  commercial  establishments included  in the  housing 
project does not exceed 5[three per cent.] of the aggregate built-up area of the housing project or 6[five 
thousand square feet], whichever is higher; 

1.  Subs.  by  Act  23  of  2004,  s.  18,  for  sub-section  (10)  (w.e.f.  1-4-2005).  As  later  on  amended  by  Act  10  of  2000,  s.  29                       

(w.e.f. 1-4-2001).  

2. Subs. by Act 33 of 2009, s. 37, for “31st day of March, 2007” (w.e.f. 1-4-2009). 
3. Ins. by Act 14 of 2010, s. 27 (w.e.f. 1-4-2010). 
4. Subs. by Act 33 of 2009, s. 37, for “any other place; and” (w.e.f. 1-4-2010). 
5. Subs. by Act 14 of 2010, s. 27, for “five per cent.” (w.e.f. 1-4-2010). 
6. Subs. by s. 27, ibid., for “two thousand square feet, whichever is less” (w.e.f. 1-4-2010). 

398 

                                                           
 
1[(e) not more than one residential unit in the housing project is allotted to any person not being 

an individual; and 

(f)  in  a  case  where  a  residential  unit  in  the  housing  project  is  allotted  to  a  person  being  an 
individual, no other residential unit in such housing project is allotted to any of the following persons, 
namely:— 

(i) the individual or the spouse or the minor children of such individual, 

(ii) the Hindu undivided family in which such individual is the karta, 

(iii)  any  person  representing  such  individual,  the  spouse  or  the  minor  children  of  such 

individual or the Hindu undivided family in which such individual is the karta.] 

2[Explanation.—For the removal of doubts, it is hereby declared that nothing contained in this sub-
section shall apply to any undertaking which executes the housing project as a works contract awarded by 
any person (including the Central or State Government).] 

(11)  Notwithstanding  anything  contained  in  clause  (iii)  of  sub-section  (2)  and  sub-sections  (3),  (4) 
and (5), the amount of deduction in a case of industrial undertaking deriving profit from the business of 
setting  up  and  operating  a  cold  chain  facility  for  agricultural  produce,  shall  be hundred  per cent  of the 
profits and gains derived from such industrial undertaking for five assessment years beginning with the 
initial  assessment  year  and  thereafter,  twenty-five  per  cent.  (or  thirty  per  cent  where  the  assessee  is  a 
company) of the profits and gains derived from the operation of such facility in a manner that the total 
period of deduction does not exceed ten consecutive assessment years (or twelve consecutive assessment 
years where the assessee is a co-operative society) and subject to fulfilment of the condition that it begins 
to operate such facility on or after the 1st day of April, 1999 but before the 3[1st day of April, 2004]. 

4[(11A) The amount of deduction in a case of  5[an undertaking deriving profit from the business of 
processing, preservation and packaging of fruits or vegetables or  1[meat and meat products or poultry or 
marine  or  dairy  products  or  from]  the  integrated  business  of  handling,  storage  and  transportation  of 
foodgrains,  shall  be  hundred  per  cent  of  the  profits  and  gains  derived  from  such  undertaking  for  five 
assessment years beginning with the initial assessment year and thereafter, twenty-five per cent. (or thirty 
per cent.  where the  assessee  is  a  company)  of  the  profits and  gains  derived  from  the  operation  of  such 
business in a manner that the total period of deduction does not exceed ten consecutive assessment years 
and subject to fulfilment of the condition that it begins to operate such business on or after the 1st day of 
April, 2001]: 

1[Provided that the provisions of this section shall not apply to an undertaking engaged in the business 
of processing, preservation and packaging of meat or meat products or poultry or marine or dairy products 
if it begins to operate such business before the 1st day of April, 2009.] 

6[(11B) The amount of deduction in the case of an undertaking deriving profits from the business of 
operating and maintaining a hospital in a rural area shall be hundred per cent. of the profits and gains of 
such  business  for  a  period  of  five  consecutive  assessment  years,  beginning  with  the  initial  assessment 
year, if— 

(i) such hospital is constructed at any time during the period beginning on the 1st day of October, 

2004 and ending on the 31st day of March, 2008; 

1. Ins. by Act 33 of 2009, s. 37 (w.e.f. 1-4-2010). 
2. Ins. by s. 37, ibid. (w.e.f. 1-4-2001). 
3. Subs. by Act 32 of 2003, s. 39, for “31st day of March, 2004” (w.e.f. 1-4-2004). 
4. Ins. by Act 14 of 2001, s. 45 (w.e.f. 1-4-2002). 
5. Subs. by Act 23 of 2004, s. 18, for “an undertaking deriving profit from” (w.e.f. 1-4-2005). 
6. Ins. by s. 18, ibid. (w.e.f. 1-4-2005). 

399 

                                                           
(ii) the hospital has at least one hundred beds for patients; 

(iii) the construction of the hospital is in accordance with the regulations, for the time being in 

force, of the local authority; and 

(iv) the assessee furnishes along with the return of income, the report of audit in such form and 
containing such particulars as may be prescribed, and duly signed and verified by an accountant, as 
defined  in  the Explanation below  sub-section  (2)  of section  288,  certifying  that  the  deduction  has 
been correctly claimed. 

Explanation.—For  the  purposes  of  this  sub-section,  a  hospital  shall  be  deemed  to  have  been 
constructed on the date on which a completion certificate in respect of such construction is issued by the 
concerned local authority.] 

1[(11C) The amount of deduction in the case of an undertaking deriving profits from the business of 
operating  and  maintaining  a  hospital  located  anywhere  in  India,  other  than  the  excluded  area,  shall  be 
hundred  per  cent  of  the  profits  and  gains  derived  from  such  business  for  a  period  of  five  consecutive 
assessment years, beginning with the initial assessment year, if— 

(i) the hospital is constructed and has started or starts functioning at any time during the period 

beginning on the 1st day of April, 2008 and ending on the 31st day of March, 2013; 

(ii) the hospital has at least one hundred beds for patients; 

(iii) the construction of the hospital is in accordance with the regulations or bye-laws of the local 

authority; and 

(iv)  the  assessee  furnishes  along  with  the  return  of  income,  a  report  of  audit  in  such  form  and 
containing such particulars, as may be prescribed, and duly signed and verified by an accountant, as 
defined  in  the Explanation to  sub-section  (2)  of section  288,  certifying  that  the  deduction  has  been 
correctly claimed. 

Explanation.—For the purposes of this sub-section— 

(a)  a  hospital  shall  be  deemed  to  have  been  constructed  on  the  date  on  which  a  completion 

certificate in respect of such construction is issued by the local authority concerned; 

(b) “initial assessment year” means the assessment year relevant to the previous year in which the 

business of the hospital starts functioning; 

(c) “excluded area” shall mean an area comprising— 

(i) Greater Mumbai urban agglomeration; 

(ii) Delhi urban agglomeration; 

(iii) Kolkata urban agglomeration; 

(iv) Chennai urban agglomeration; 

(v) Hyderabad urban agglomeration; 

(vi) Bangalore urban agglomeration; 

1. Ins. by Act 18 of 2008, s. 18 (w.e.f. 1-4-2009). 

400 

                                                           
(vii) Ahmedabad urban agglomeration; 

(viii) District of Faridabad; 

(ix) District of Gurgaon; 

(x) District of Gautam Budh Nagar; 

(xi) District of Ghaziabad; 

(xii) District of Gandhinagar; and 

(xiii) City of Secunderabad; 

(d)  the  area  comprising  an  urban  agglomeration  shall  be  the  area  included  in  such  urban 

agglomeration on the basis of the 2001 census.] 

(12)  Where  any  undertaking  of  an  Indian  company  which  is  entitled  to  the  deduction  under  this 
section is transferred, before the expiry of the period specified in this section, to another Indian company 
in a scheme of amalgamation or demerger— 

(a)  no  deduction  shall  be  admissible  under  this  section  to  the  amalgamating  or  the  demerged 

company for the previous year in which the amalgamation or the demerger takes place; and 

(b) the provisions of this section shall, as far as may be, apply to the amalgamated or the resulting 
company  as  they  would  have  applied  to  the  amalgamating  or  the  demerged  company  if  the 
amalgamation or demerger had not taken place. 

(13) The provisions contained in sub-section (5) and sub-sections (7) to (12) of section 80-IA shall, so 

far as may be, apply to the eligible business under this section. 

(14) For the purposes of this section,— 

1[(a)  “built-up  area”  means  the  inner  measurements  of  the  residential  unit  at  the  floor  level, 
including  the  projections  and  balconies,  as  increased  by  the  thickness  of  the  walls  but  does  not 
include the common areas shared with other residential units;] 

2[(aa)]“cold chain facility” means a chain of facilities for storage or transportation of agricultural 
produce  under  scientifically  controlled  conditions  including  refrigeration  and  other  facilities 
necessary for the preservation of such produce; 

3[4[(ab)]“convention centre” means a building of a prescribed area comprising of convention halls 
to be used for the purpose of holding conferences and seminars, being of such size and number and 
having such other facilities and amenities, as may be prescribed;] 

(b) “hilly area” means any area located at a height of one thousand metres or more above the sea 

level; 

(c) “initial assessment year”— 

(i) in the case of an industrial undertaking or cold storage plant or ship or hotel, means the 
assessment  year  relevant  to  the  previous  year  in  which  the  industrial  undertaking  begins  to 
manufacture or produce articles or things, or to operate its cold storage plant or plants or the cold 
chain facility or the ship is first brought into use or the business of the hotel starts functioning; 

1. Ins. by Act 23 of 2004, s. 18 (w.e.f. 1-4-2005). 
2. Clause (a) re-lettered as clause (aa) thereof by s. 18, ibid. (w.e.f. 1-4-2005). 
3. Ins. by Act 20 of 2002, s. 34 (w.e.f. 1-4-2003). 
4. Clause (aa) re-lettered as clause (ab) thereof by Act 23 of 2004, s. 18 (w.e.f. 1-4-2005). 

401 

                                                           
(ii) in the case of a company carrying on scientific and industrial research and development, 
means the assessment year relevant to the previous year in which the company is approved by the 
prescribed authority for the purposes of sub-section (8); 

(iii)  in  the  case  of  an  undertaking  engaged  in  the  business  of  commercial  production  or 
refining of  mineral oil referred to in sub-section (9), means the assessment year relevant to the 
previous  year  in  which  the  undertaking  commences  the  commercial  production  or  refining  of 
mineral oil; 

1[(iv) in the case of an undertaking engaged  2[in the business of processing, preservation and 
packaging  of  fruits  or  vegetables  or]  in  the  integrated  business  of  handling,  storage  and 
transportation of foodgrains, means the assessment year relevant to the previous year in which the 
undertaking begins such business;] 

3[(v)  in  the  case  of  a  multiplex  theatre,  means  the  assessment  year  relevant  to  the  previous 
year  in  which  a  cinema  hall,  being  a  part  of  the  said  multiplex  theatre,  starts  operating  on  a 
commercial basis; 

(vi)  in  the  case  of  a  convention  centre,  means  the  assessment  year  relevant  to  the  previous 

year in which the convention centre starts operating on a commercial basis;] 

2[(vii) in the case of an undertaking engaged in operating and maintaining a hospital in a rural 
area, means the assessment year relevant to the previous year in which the undertaking begins to 
provide medical services;] 

(d)  “North-Eastern  Region”  means  the  region  comprising  the  States  of  Arunachal  Pradesh, 

Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura; 

3[(da)  “multiplex  theatre”  means  a  building  of  a  prescribed  area,  comprising  of  two  or  more 
cinema theatres and commercial shops of such size and number and having such other facilities and 
amenities as may be prescribed;] 

(e) “place  of  pilgrimage”  means  a  place  where  any  temple,  mosque,  gurdwara, church  or  other 

place of public worship of renown throughout any State or States is situated; 

(f) “rural area” means any area other than— 

(i) an area which is comprised within the jurisdiction of a municipality (whether known as a 
municipality,  municipal  corporation,  notified  area  committee,  town  area  committee  or  by  any 
other  name)  or  a  cantonment  board  and  which  has  a  population  of  not  less  than  ten  thousand 
according to the preceding census of which relevant figures have been published before the first 
day of the previous year; or 

(ii) an area within such distance not being more than fifteen kilometres from the local limits 
of any municipality or cantonment board referred to in sub-clause (i), as the Central Government 
may, having regard to the stage of development of such area including the extent of, and scope 
for,  urbanisation  of  such  area  and  other  relevant  considerations  specify  in  this  behalf  by 
notification in the Official Gazette; 

(g) “small-scale industrial undertaking” means an industrial undertaking which is, as on the last 
day  of the  previous  year, regarded as a  small-scale industrial undertaking  under section  11B of the 
Industries (Development and Regulation) Act, 1951 (65 of 1951). 

1. Ins. by Act 14 of 2001, s. 45 (w.e.f. 1-4-2002). 
2. Ins. by Act 23 of 2004, s. 18 (w.e.f. 1-4-2005). 
3. Ins. by Act 20 of 2002, s. 34 (w.e.f. 1-4-2003). 

402 

                                                           
1[80-IBA. Deductions in respect of profits and gains from housing projects.—(1) Where the gross 
total income of an assessee includes any profits and gains derived from the business of developing and 
building housing projects, there shall, subject to the provisions of this section, be allowed, a deduction of 
an amount equal to hundred per cent of the profits and gains derived from such business. 

(2) For the purposes of sub-section (1), a housing project shall be a project which fulfils the following 

conditions, namely:— 

(a) the project is approved by the competent authority after the 1st day of June, 2016, but on or 

before the 31st day of March, 2[2020]; 

(b)  the  project  is  completed  within  a  period  of 3[five years]  from  the  date  of  approval  by  the 

competent authority: 

Provided that,— 

(i) where the approval in respect of a housing project is obtained more than once, the project 
shall be deemed to have been approved on the date on which the building plan of such housing 
project was first approved by the competent authority; and 

(ii) the project shall be deemed to have been completed when a certificate of completion of 

project as a whole is obtained in writing from the competent authority; 

(c) the 4[carpet area] of the shops and other commercial establishments included in the housing 

project does not exceed three per cent. of the aggregate 4[carpet area]; 

(d) the project is on a plot of land measuring not less than— 

(i)  one  thousand  square  metres,  where  the  project  is  located  within  the  cities  of  Chennai, 

Delhi, Kolkata or Mumbai 5***; or 

(ii) two thousand square metres, where the project is located in any other place; 

(e) the project is the only housing project on the plot of land as specified in clause (d); 

(f) the 4[carpet area] of the residential unit comprised in the housing project does not exceed— 

(i)  thirty  square  metres,  where  the  project  is  located  within  the  cities  of  Chennai,  Delhi, 

Kolkata or Mumbai 5***; or 

(ii) sixty square metres, where the project is located in any other place; 

1. Ins. by Act 28 of 2016, s. 44 (w.e.f. 1-4-2017). 

2. Subs. by Act 7 of 2019, s. 7, for “2019” (w.e.f. 1-4-2020). 

3. Subs. by Act 7 of 2017, s. 37, for “three years” (w.e.f. 1-4-2018). 

4. Subs. by 37, ibid., for “built-up area” (w.e.f. 1-4-2018). 

5. The words “or within the distance, measured aerially, of twenty-five kilometres from the municipal limits of these cities”  

omitted by s. 37, ibid., (w.e.f. 1-4-2018). 

403 

                                                           
(g) where a residential unit in the housing project is allotted to an individual, no other residential 
unit in the housing project shall be allotted to the individual or the spouse or the minor children of 
such individual; 

(h) the project utilises— 

(i) not less than ninety per cent of the floor area ratio permissible in respect of the plot of land 
under  the  rules  to  be  made  by  the  Central  Government  or  the  State  Government  or  the  local 
authority,  as  the  case  may  be,  where  the  project  is  located  within  the  cities  of  Chennai,  Delhi, 
Kolkata or Mumbai 1*** , or 

(ii) not less than eighty per cent of such floor area ratio where such project is located in any 

place other than the place referred to in sub-clause (i); and 

(i) the assessee maintains separate books of account in respect of the housing project. 

(3) Nothing contained in this section shall apply to any assessee who executes the housing project as 

a works-contract awarded by any person (including the Central Government or the State Government). 

(4)  Where  the  housing  project  is  not  completed  within  the  period  specified  under  clause  (b)  of          

sub-section (2) and in respect of which a deduction has been claimed and allowed under this section, the 
total amount of deduction so claimed and allowed in one or more previous years, shall be deemed to be 
the income of the assessee chargeable under the head “Profits and gains of business or profession” of the 
previous year in which the period for completion so expires. 

(5)  Where  any  amount  of  profits  and  gains  derived  from  the  business  of  developing  and  building 
housing  projects  is  claimed  and  allowed  under  this  section  for  any  assessment  year,  deduction  to  the 
extent of such profit and gains shall not be allowed under any other provisions of this Act. 

(6) For the purposes of this section,— 

2[(a) “carpet area” shall have the same meaning as assigned to it in clause (k) of section 2 of the 

Real Estate (Regulation and Development) Act, 2016 (16 of 2016).] 

(b)  “competent  authority”  means  the  authority  empowered  to  approve  the  building  plan  by  or 

under any law for the time being in force; 

(c) “floor area ratio” means the quotient obtained by dividing the total covered area of plinth area 

on all the floors by the area of the plot of land; 

(d)  “housing  project”  means  a  project  consisting  predominantly  of  residential  units  with  such 
other facilities and amenities as the competent authority may approve subject to the provisions of this 
section; 

(e)  “residential  unit”  means  an  independent  housing  unit  with  separate  facilities  for  living, 
cooking  and  sanitary  requirements,  distinctly  separated  from  other  residential  units  within  the 
building,  which  is  directly  accessible  from  an  outer  door  or  through  an  interior  door  in  a  shared 
hallway and not by walking through the living space of another household.] 

1. The words “or within the distance, measured aerially, of twenty-five kilometres from the municipal limits of these cities” 

omitted by Act 7 of 2017, s. 37 (w.e.f. 1-4-2018). 
2. Subs. by s. 37, ibid., for clause (a) (w.e.f. 1-4-2018). 

404 

                                                           
1[80-IC.  Special  provisions  in  respect  of  certain  undertakings  or  enterprises  in  certain special 
category States.—(1) Where the gross total income of an assessee includes any profits and gains derived 
by  an  undertaking  or  an  enterprise  from  any  business  referred  to  in  sub-section  (2),  there  shall,  in 
accordance with and subject to the provisions of this section, be allowed, in computing the total income of 
the assessee, a deduction from such profits and gains, as specified in sub-section (3). 

(2) This section applies to any undertaking or enterprise,— 

(a)   which  has  begun  or  begins  to  manufacture  or  produce  any  article  or  thing,  not  being  any 
article or thing specified in the Thirteenth Schedule, or which manufactures or produces any article or 
thing, not being any article or thing specified in the Thirteenth Schedule and undertakes substantial 
expansion during the period beginning— 

 (i)  on the 23rd day of December, 2002 and ending before the  2[1st day of April, 2007], in 
any  Export  Processing  Zone  or  Integrated  Infrastructure  Development  Centre  or  Industrial 
Growth Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial 
Area  or  Theme  Park,  as  notified  by  the  Board  in  accordance  with  the  scheme  framed  and 
notified by the Central Government in this regard, in the State of Sikkim; or 

(ii)   on  the  7th  day  of  January,  2003  and  ending  before  the  1st  day  of  April,  2012,  in  any 
Export  Processing  Zone  or  Integrated  Infrastructure  Development  Centre  or  Industrial  Growth 
Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial Area or 
Theme Park, as notified by the Board in accordance with the scheme framed and notified by the 
Central Government in this regard, in the State of Himachal Pradesh or the State of Uttaranchal; 
or 

(iii)  on the 24th day of December, 1997 and ending before the 1st day of April, 2007, in any 
Export  Processing  Zone  or  Integrated  Infrastructure  Development  Centre  or  Industrial  Growth 
Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial Area or 
Theme Park, as notified by the Board in accordance with the scheme framed and notified by the 
Central Government in this regard, in any of the North-Eastern States; 

(b)  which has begun or begins to manufacture or produce any article or thing, specified in the 
Fourteenth Schedule or commences any operation specified in that Schedule, or which manufactures 
or  produces  any  article or thing,  specified in the  Fourteenth  Schedule  or  commences  any  operation 
specified in that Schedule and undertakes substantial expansion during the period beginning— 

 (i)  on the 23rd day of December, 2002 and ending before the 2[1st day of April, 2007], in the 

State of Sikkim; or 

 (ii)  on the 7th day of January, 2003 and ending before the 1st day of April, 2012, in the State 

of Himachal Pradesh or the State of Uttaranchal; or 

(iii)  on the 24th day of December, 1997 and ending before the 1st day of April, 2007, in any 

of the North-Eastern States. 

(3) The deduction referred to in sub-section (1) shall be— 

 (i)  in the case of any undertaking or enterprise referred to in sub-clauses (i) and (iii) of clause (a) 
or sub-clauses (i) and (iii) of clause (b), of sub-section (2), one hundred per cent. of such profits and 
gains for ten assessment years commencing with the initial assessment year; 

(ii)   in  the  case  of  any  undertaking  or  enterprise  referred  to  in  sub-clause  (ii)  of  clause  (a)  or         

sub-clause (ii) of clause (b), of sub-section (2), one hundred per cent of such profits and gains for five 
assessment  years  commencing  with  the  initial  assessment  year  and  thereafter,  twenty-five  per  cent. 
(or thirty per cent. where the assessee is a company) of the profits and gains. 

1. Ins. by Act 32 of 2003, s. 40 (w.e.f. 1-4-2004). 
2. Subs. by Act 22 of 2007, s. 30, for “1st day of April, 2012” (w.e.f. 1-4-2008). 

405 

                                                           
(4)  This  section  applies  to  any  undertaking  or  enterprise  which  fulfils  all  the  following  conditions, 

namely:— 

(i)  it is not formed by splitting up, or the reconstruction, of a business already in existence : 

Provided that  this  condition  shall  not  apply  in  respect  of  an  undertaking  which  is  formed  as  a 
result  of  the re-establishment,  reconstruction  or  revival  by the assessee of  the  business  of  any  such 
undertaking as is referred to in section 33B, in the circumstances and within the period specified in 
that section; 

(ii)  it is not formed by the transfer to a new business of machinery or plant previously used for 

any purpose. 

Explanation.—The  provisions  of Explanations 1 and 2 to  sub-section  (3)  of  sectopm  80-IA shall 
apply for the purposes of clause (ii) of this sub-section as they apply for the purposes of clause (ii) of that 
sub-section. 

(5)  Notwithstanding  anything  contained  in  any  other  provision  of  this  Act,  in  computing  the  total 
income of the assessee, no deduction shall be allowed under any other section contained in Chapter VIA 
or in section 10A or section 10B, in relation to the profits and gains of the undertaking or enterprise. 

(6) Notwithstanding anything contained in this Act, no deduction shall be allowed to any undertaking 
or enterprise under this section, where the total period of deduction inclusive of the period of deduction 
under this section, or under the second proviso to sub-section (4) of section 80-IB or under section 10C, 
as the case may be, exceeds ten assessment years. 

(7) The provisions contained in sub-section (5) and sub-sections (7) to (12) of section 80-IA shall, so 

far as may be, apply to the eligible undertaking or enterprise under this section. 

(8) For the purposes of this section,— 

(i)   “Industrial  Area”  means  such  areas,  which  the  Board,  may,  by  notification  in  the  Official 

Gazette, specify in accordance with the scheme framed and notified by the Central Government; 

(ii)  “Industrial Estate” means such estates, which the Board, may, by notification in the Official 

Gazette, specify in accordance with the scheme framed and notified by the Central Government; 

(iii) “Industrial Growth Centre” means such centres, which the Board, may, by notification in the 
Official  Gazette,  specify  in  accordance  with  the  scheme  framed  and  notified  by  the  Central 
Government; 

(iv)  “Industrial  Park”  means  such  parks,  which  the  Board,  may,  by  notification  in  the  Official 

Gazette, specify in accordance with the scheme framed and notified by the Central Government; 

(v)  “Initial assessment year” means the assessment year relevant to the previous year in which 
the undertaking or the enterprise begins to manufacture or produce articles or things, or commences 
operation or completes substantial expansion; 

(vi) “Integrated Infrastructure Development Centre” means such centres, which the Board, may, 
by notification in the Official Gazette, specify in accordance with the scheme framed and notified by 
the Central Government; 

(vii)  “North-Eastern  States”  means  the  States  of  Arunachal  Pradesh,  Assam,  Manipur, 

Meghalaya, Mizoram, Nagaland and Tripura; 

(viii)  “Software  Technology  Park”  means  any  park  set  up  in  accordance  with  the  Software 
Technology  Park  Scheme  notified  by  the  Government  of  India  in  the  Ministry  of  Commerce  and 
Industry; 

(ix) “Substantial expansion” means increase in the investment in the plant and machinery by at 
least fifty per cent of the book value of plant and machinery (before taking depreciation in any year), 
as on the first day of the previous year in which the substantial expansion is undertaken; 

(x)  “Theme  Park”  means  such  parks,  which  the  Board,  may,  by  notification  in  the  Official 

Gazette, specify in accordance with the scheme framed and notified by the Central Government.] 

406 

1[80-ID.  Deduction  in  respect  of  profits  and  gains  from  business  of  hotels  and  convention 
centres  in  specified  area.—(1)  Where  the  gross  total  income  of  an  assessee  includes  any  profits  and 
gains  derived  by  an  undertaking  from  any  business  referred  to  in  sub-section  (2)  (such  business  being 
hereinafter  referred  to  as  the  eligible  business),  there  shall,  in  accordance  with  and  subject  to  the 
provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an 
amount equal to hundred per cent of the profits and gains derived from such business for five consecutive 
assessment years beginning from the initial assessment year. 

(2) This section applies to any undertaking,— 

(i)  engaged in the business of hotel located in the specified area, if such hotel is constructed and 
has started or starts functioning at any time during the period beginning on the 1st day of April, 2007 
and ending on 2[the 31st day of July, 2010]; or 

(ii) engaged in the business of building, owning and operating a convention centre, located in the 
specified area, if such convention centre is constructed at any time during the period beginning on the 
1st day of April, 2007 and ending on 2[the 31st day of July, 2010]; 

3[(iii) engaged in the business of hotel located in the specified district having a World Heritage 
Site,  if such  hotel  is  constructed  and  has  started  or  starts  functioning  at  any time  during  the  period 
beginning on the 1st day of April, 2008 and ending on the 31st day of March, 2013.] 

(3) The deduction under sub-section (1) shall be available only if— 

(i)   the  eligible  business  is  not  formed  by  the  splitting  up,  or  the  reconstruction,  of  a  business 

already in existence; 

(ii)  the eligible business is not formed by the transfer to a new business of a building previously 

used as a hotel or a convention centre, as the case may be; 

(iii) the eligible business is not formed by the transfer to a new business of machinery or plant 

previously used for any purpose. 

Explanation.—The provisions of Explanations 1 and 2 to sub-section (3) of section 80-IA shall apply 
for  the  purposes  of  clause  (iii)  of  this  sub-section  as  they  apply  for  the  purposes  of  clause  (ii)  of  that     
sub-section; 

(iv) the assessee furnishes along with the return of income, the report of an audit in such form and 
containing such particulars as may be prescribed, and duly signed and verified by an accountant, as 
defined  in  the Explanation below  sub-section  (2)  of  section  288,  certifying  that  the  deduction  has 
been correctly claimed. 

(4)  Notwithstanding  anything  contained  in  any  other  provision  of  this  Act,  in  computing  the  total 
income of the assessee, no deduction shall be allowed under any other section contained in Chapter VIA 
or section 10AA, in relation to the profits and gains of the undertaking. 

(5) The provisions contained in sub-section (5) and sub-sections (8) to (11) of section 80-IA shall, so 

far as may be, apply to the eligible business under this section. 

(6) For the purposes of this section,— 

(a)  “convention centre” means a building of a prescribed area comprising of convention halls to 
be  used  for  the  purpose  of  holding  conferences  and  seminars,  being  of  such  size  and  number  and 
having such other facilities and amenities, as may be prescribed; 

(b)  “hotel” means a hotel of two-star, three-star or four-star category as classified by the Central 

Government; 

1. Ins. by Act 22 of 2007, s. 31 (w.e.f. 1-4-2008). 
2. Subs. by Act 14 of 2010, s. 28, for “the 31st day of March, 2010” (w.e.f. 1-4-2011).  
3. Ins. by Act 18 of 2008, s. 19 (w.e.f. 1-4-2009). 

407 

                                                           
(c) “initial assessment year”— 

(i)  in the case of a hotel, means the assessment year relevant to the previous year in  which 

the business of the hotel starts functioning; 

(ii)   in  the  case  of  a convention  centre,  means  the  assessment  year  relevant  to the  previous 

year in which the convention centre starts operating on a commercial basis; 

(d) “specified area” means the National Capital Territory of Delhi and the districts of Faridabad, 

Gurgaon, Gautam Budh Nagar and Ghaziabad;] 

1[(e) “specified district having a World Heritage Site” means districts, specified in column (2) of 

the Table below, of the States, specified in the corresponding entry in column (3) of the said Table: 

S.No. 

Name of district 

TABLE 

(1) 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

8. 

9. 

(2) 

Agra 

Jalgaon 

Aurangabad 

Kancheepuram 

Puri 

Bharatpur 

Chhatarpur 

Thanjavur 

Bellary 

10. 

South 24 Parganas 

(excluding  areas  falling  within  the  Kolkata 
urban  agglomeration  on  the  basis  of  the  2001 
census) 

11. 

12. 

13. 

14. 

15. 

16. 

17. 

18. 

19. 

20. 

21. 

22. 

Chamoli 

Raisen 

Gaya 

Bhopal 

Panchmahal 

Kamrup 

Goalpara 

Nagaon 

North Goa 

South Goa 

Darjeeling 

Nilgiri 

1. Ins. by Act 18 of 2008, s. 19 (w.e.f. 1-4-2009). 

408 

Name of State 

(3) 

Uttar Pradesh 

Maharashtra 

Maharashtra 

Tamil Nadu 

Orissa 

Rajasthan 

Madhya Pradesh 

Tamil Nadu 

Karnataka 

West Bengal 

Uttarakhand 

Madhya Pradesh 

Bihar 

Madhya Pradesh 

Gujarat 

Assam 

Assam 

Assam 

Goa 

Goa 

West Bengal 

Tamil Nadu.] 

 
  
  
 
                                                           
1[80-IE.  Special  provisions  in  respect  of  certain  undertakings  in  North-Eastern  States.—(1) 
Where the gross total income of an assessee includes any profits and gains derived by an undertaking, to 
which  this  section  applies,  from  any  business  referred  to  in  sub-section  (2),  there  shall  be  allowed,  in 
computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the 
profits and gains derived from such business for ten consecutive assessment years commencing with the 
initial assessment year. 

(2) This section applies to any undertaking which has, during the period beginning on the 1st day of 
April, 2007 and ending before the 1st day of April, 2017, begun or begins, in any of the North-Eastern 
States,— 

(i)  to manufacture or produce any eligible article or thing; 

(ii)  to undertake substantial expansion to manufacture or produce any eligible article or thing; 

(iii) to carry on any eligible business. 

(3) This section applies to any undertaking which fulfils all the following conditions, namely:— 

(i)  it is not formed by splitting up, or the reconstruction, of a business already in existence: 

Provided that  this  condition  shall  not  apply  in  respect  of  an  undertaking  which  is  formed  as  a 
result  of  the re-establishment,  reconstruction  or  revival  by the assessee of  the  business  of  any  such 
undertaking as referred to in section 33B, in the circumstances and within the period specified in the 
said section; 

(ii)  it is not formed by the transfer to a new business of machinery or plant previously used for 

any purpose. 

Explanation.—The provisions of Explanations 1 and 2 to sub-section (3) of section 80-IA shall apply 
for  the  purposes  of  clause  (ii)  of  this  sub-section  as  they  apply  for  the  purposes  of  clause  (ii)  of  that           
sub-section. 

(4)  Notwithstanding  anything  contained  in  any  other  provision  of  this  Act,  in  computing  the  total 
income of the assessee, no deduction shall be allowed under any other section contained in Chapter VIA 
or in section 10A or section 10AA or section 10B or section 10BA, in relation to the profits and gains of 
the undertaking. 

(5) Notwithstanding anything contained in this Act, no deduction shall be allowed to any undertaking 
under  this  section,  where  the  total  period  of  deduction  inclusive  of  the  period  of  deduction  under  this 
section,  or  under  section  80-IC or  under  the  second  proviso  to  sub-section  (4)  of  section  80-IB or 
under section 10C, as the case may be, exceeds ten assessment years. 

(6) The provisions contained in sub-section (5) and sub-sections (7) to (12) of section 80-IA shall, so 

far as may be, apply to the eligible undertaking under this section. 

1. Ins. by Act 22 of 2007, s. 32 (w.e.f. 1-4-2008). 

409 

                                                           
(7) For the purposes of this section,— 

(i)  “initial assessment year” means the assessment year relevant to the previous year in which the 

undertaking begins to manufacture or produce articles or things, or completes substantial expansion; 

(ii)  “North-Eastern States” means the States of Arunachal Pradesh, Assam, Manipur, Meghalaya, 

Mizoram, Nagaland, Sikkim and Tripura; 

(iii) “substantial expansion” means increase in the investment in the plant and machinery by at 
least twenty-five per cent of the book value of plant and machinery (before taking depreciation in any 
year), as on the first day of the previous year in which the substantial expansion is undertaken; 

(iv) “eligible article or thing” means the article or thing other than the following :— 

(a)   goods  falling  under  Chapter  24  of  the  First  Schedule  to  the  Central  Excise  Tariff           

Act, 1985 (5 of 1986), which pertains to tobacco and manufactured tobacco substitutes; 

(b)  pan masala as covered under Chapter 21 of the First Schedule to the Central Excise Tariff 

Act, 1985 (5 of 1986); 

(c)   plastic  carry  bags of less than  20  microns  as  specified  by  the  Ministry  of  Environment 
and Forests vide Notification No. S.O. 705(E), dated the 2nd September, 1999 and S.O. 698(E), 
dated the 17th June, 2003; and 

(d)   goods  falling  under  Chapter  27  of  the  First  Schedule  to  the  Central  Excise  Tariff                

Act, 1985 (5 of 1986), produced by petroleum oil or gas refineries; 

(v)  “eligible business” means the business of,— 

(a)  hotel (not below two star category); 

(b)  adventure and leisure sports including ropeways; 

(c)   providing  medical  and  health  services  in  the  nature  of  nursing  home  with  a  minimum 

capacity of 25 beds; 

(d)  running an old-age home; 

(e)   operating  vocational  training  institute  for  hotel  management,  catering  and  food  craft, 
entrepreneurship development,  nursing  and  para-medical,  civil aviation related training,  fashion 
designing and industrial training; 

(f)  running information technology related training centre; 

(g)  manufacturing of information technology hardware; and 

(h)  bio-technology.] 

80J. [Deduction in respect of profits and gains from newly established industrial undertakings 
or ships or hotel business in certain cases].—Omitted by the Finance (No. 2) Act, 1996 (33 of 1996),       
s. 29 (w.r.e.f. 1-4-1989). 

410 

80JJ. [Deduction in respect of profits and gains from business of poultry farming].—Omitted by 

the Finance Act, 1997 (26 of 1997), s. 26 (w.e.f. 1-4-1998). 

1[80JJA. Deduction in respect of profits and gains from business of collecting and processing of 
bio-degradable  waste.—Where  the  gross  total  income  of  an  assessee  includes  any  profits  and  gains 
derived from the business of collecting and processing or treating of bio-degradable waste for generating 
power 2[or producing bio-fertilizers, bio-pesticides or other biological agents or for producing bio-gas or] 
making  pellets  or  briquettes  for  fuel  or  organic  manure,  there  shall  be  allowed,  in  computing  the  total 
income  of  the  assessee,  3[a  deduction  of  an  amount  equal  to  the  whole  of  such  profits  and  gains  for  a 
period of five consecutive assessment years beginning with the assessment year relevant to the previous 
year in which such business commences]. 

4[80JJAA.  Deduction  in  respect  of  employment  of  new  employees.—(1)  Where  the  gross  total 
income  of  an  assessee  to  whom  section  44AB applies,  includes  any  profits  and  gains  derived  from 
business, there shall, subject to the conditions specified in sub-section (2), be allowed a deduction of an 
amount equal to thirty per cent. of additional employee cost incurred in the course of such business in the 
previous year, for three assessment years including the assessment year relevant to the previous year in 
which such employment is provided. 

(2) No deduction under sub-section (1) shall be allowed,— 

(a)  if the business is formed by splitting up, or the reconstruction, of an existing business: 

Provided that nothing contained in this clause shall apply in respect of a business which is formed 
as  a  result  of  re-establishment,  reconstruction  or  revival  by  the  assessee  of  the  business  in  the 
circumstances and within the period specified in section 33B; 

(b)  if the business is acquired by the assessee by way of transfer from any other person or as a 

result of any business reorganisation; 

(c) unless the assessee furnishes alongwith the return of income the report of the accountant, as 

defined in the Explanation to section 288 giving such particulars in the report as may be prescribed. 

Explanation.—For the purposes of this section,— 

(i)  “additional employee cost” means total emoluments paid or payable to additional employees 

employed during the previous year: 

Provided that in the case of an existing business, the additional employee cost shall be nil, if— 

(a) there  is  no  increase  in  the  number  of  employees  from  the  total  number  of  employees 

employed as on the last day of the preceding year; 

1. Ins. by Act 21 of 1998, s. 35 (w.e.f. 1-4-1999). Earlier section 80JJA was inserted by Act 21 of 1979, s. 13 (w.e.f. 1-4-

1980) and later omitted by Act 11 of 1983, s. 27 (w.e.f. 1-4-1984). 

2. Subs. by Act 27 of 1999, s. 51, for “, producing bio-gas” (w.e.f. 1-4-2000). 
3. Subs. by s. 51, ibid., for “a deduction from such profits and gains of an amount equal to the whole of such income, or five 

lakh rupees, whichever is less” (w.e.f. 1-4-2000). 

4. Subs. by Act 28 of 2016, s. 45, for section 80JJAA (w.e.f. 1-4-2017). Earlier section 80JJAA was inserted by Act 21 of 

1998, s. 36 (w.e.f. 1-4-1999). 

411 

                                                           
(b) emoluments are paid otherwise than by an account payee cheque or account payee bank 

draft or by use of electronic clearing system through a bank account: 

Provided  further that  in  the  first  year  of  a  new  business,  emoluments  paid  or  payable  to 
employees  employed  during  that  previous  year  shall  be  deemed  to  be  the  additional  employee 
cost; 

(ii) “additional employee” means an employee who has been employed during the previous year 
and whose employment has the effect of increasing the total number of employees employed by the 
employer as on the last day of the preceding year, but does not include,— 

(a) an  employee  whose  total  emoluments  are  more  than  twenty-five  thousand  rupees  per 

month; or 

(b) an  employee  for  whom  the  entire  contribution  is  paid  by  the  Government  under  the 
Employees’  Pension  Scheme  notified  in  accordance  with  the  provisions  of  the  Employees’ 
Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952); or 

(c) an  employee  employed  for  a  period  of  less  than  two  hundred  and  forty  days  during  the 

previous year; or 

(d) an employee who does not participate in the recognised provident fund: 

1[Provided that in the case of an assessee who is engaged in the business of manufacturing of 
apparel, 2[or footwear or leather products] the provisions of sub-clause (c) shall have effect as if 
for the  words  “two hundred  and  forty  days”,  the  words  “one  hundred and fifty days”  had  been 
substituted:] 

1[Provided further that where an employee is employed during the previous year for a period 
of less than two hundred and forty days or one hundred and fifty days, as the case may be, but is 
employed for a period of two hundred and forty days or one hundred and fifty days, as the case 
may be, in the immediately succeeding year, he shall be deemed to have been employed in the 
succeeding year and the provisions of this section shall apply accordingly;] 

(iii) “emoluments” means any sum paid or payable to an employee in lieu of his employment by 

whatever name called, but does not include— 

(a) any contribution paid or payable by the employer to any pension fund or provident fund 

or any other fund for the benefit of the employee under any law for the time being in force; and 

(b) any lump-sum payment paid or payable to an employee at the time of termination of his 
service  or  superannuation  or  voluntary  retirement,  such  as  gratuity,  severance  pay,  leave 
encashment, voluntary retrenchment benefits, commutation of pension and the like. 

(3) The provisions of this section, as they stood immediately prior to their amendment by the Finance 
Act, 2016, shall apply to an assessee eligible to claim any deduction for any assessment year commencing 
on or before the 1st day of April, 2016.] 

80K. [Deduction  in  respect  of  dividends  attributable  to  profits  and  gains  from  new  industrial 

undertakings  or  ships  or  hotel  business].—Omitted  by  the  Finance  Act,  1986  (23  of  1986),  s.  19                
(w.e.f. 1-4-1987). 

1. Ins. by Act 47 of 2016, s. 3 (w.e.f. 1-4-2017). 
2. Ins. by Act 13 of 2018, s. 29 (w.e.f. 1-4-2019). 

412 

                                                           
80L. [Deductions  in  respect  of  interest  on  certain  securities,  dividends,  etc].—Omitted  by  the 

Finance Act, 2005 (18 of 2005), s. 28 (w.e.f. 1-4-2006). 

1[80LA. Deductions in respect of certain incomes of Offshore Banking Units and International 

Financial Services Centre.—(1) Where the gross total income of an assessee,— 

 (i) being a scheduled bank, or, any bank incorporated by or under the laws of a country outside 

India; and having an Offshore Banking Unit in a Special Economic Zone; or 

(ii) being a Unit of an International Financial Services Centre, 

includes any income referred to in sub-section (2), there shall be allowed, in accordance with and subject 
to the provisions of this section, a deduction from such income, of an amount equal to— 

(a)  one hundred per cent of such income for five consecutive assessment years beginning with 
the assessment year relevant to the previous year in which the permission, under clause (a) of sub-
section  (1)  of  section  23  of  the  Banking  Regulation  Act,  1949  (10  of  1949)  or  permission  or 
registration under the Securities and Exchange Board of  India Act, 1992 (15 of 1992) or any other 
relevant law was obtained, and thereafter; 

(b) fifty per cent. of such income for five consecutive assessment years. 

(2) The income referred to in sub-section (1) shall be the income— 

(a)  from an Offshore Banking Unit in a Special Economic Zone; or 

(b)   from  the  business  referred  to  in  sub-section  (1)  of  section  6  of  the  Banking  Regulation       

Act,  1949  (10  of  1949)  with  an  undertaking  located  in  a  Special  Economic  Zone  or  any  other 
undertaking  which  develops,  develops  and  operates  or  develops,  operates  and  maintains  a  Special 
Economic Zone; or 

(c)  from any Unit of the International Financial Services Centre from its business for which it has 

been approved for setting up in such a Centre in a Special Economic Zone. 

(3)  No  deduction  under  this  section  shall  be  allowed  unless  the  assessee  furnishes  along  with  the 

return of income,— 

(i)   the  report,  in  the  form  specified  by  the  Central  Board  of  Direct  Taxes  under  clause  (i)  of               

sub-section (2) of section 80LA, as it stood immediately before its substitution by this section, of an 
accountant  as  defined  in  the Explanation below  sub-section  (2)  of section  288,  certifying  that  the 
deduction has been correctly claimed in accordance with the provisions of this section; and 

(ii)   a  copy  of  the  permission  obtained  under  clause  (a)  of  sub-section  (1)  of  section  23  of  the 

Banking Regulation Act, 1949 (10 of 1949). 

1. Subs. by Act 28 of 2005, s. 27 and the Second Schedule, for section 80LA (w.e.f. 10-2-2006). Earlier inserted by 32 of 

2003, s. 42 (w.e.f. 1-4-2004). 

413 

                                                           
Explanation.—For the purposes of this section,— 

(a)   “International  Financial  Services  Centre”  shall  have  the  same  meaning  as  assigned  to  it  in 

clause (q) of section 2 of the Special Economic Zones Act, 2005; 

(b)  “scheduled bank” shall have the same meaning as assigned to it in clause (e) of section 2 of 

the Reserve Bank of India Act, 1934 (2 of 1934); 

(c)   “Special  Economic  Zone”  shall  have  the  same  meaning  as  assigned  to  it  in  clause  (za)  of 

section 2 of the Special Economic Zones Act, 2005; 

(d) “Unit” shall have the same meaning as assigned to it in clause (zc) of section 2 of the Special 

Economic Zones Act, 2005.] 

80M. [Deduction  in  respect  of  certain  inter-corporate  dividends].—Omitted  by  the  Finance               

Act, 2003 (32 of 2003), s. 43 (w.e.f. 1-4-2004). 

80MM. [Deduction in the case of an Indian company in respect of royalties, etc., received from 

any  concern  in  India].—Omitted  by  the  Finance  Act,  1983  (11  of  1983),  s.  29  (w.e.f.  1-4-1984).   
Original section was inserted by the Finance Act, 1969 (14 of 1969), s. 9 (w.e.f. 1-4-1970). 

80N. [Deduction in respect of dividends received from certain foreign companies].—Omitted by 
the  Finance  Act,  1985  (32  of  1985),  s.  22  (w.e.f.  1-4-1986).  Section  85B  which  was  inserted  by  the 
Finance  Act,  1966  (13  of  1966),  s.  17  (w.e.f.  1-4-1966).  Omitted  section  80N  was  inserted  in  place  of 
section  85B  which  was  deleted  by  the  Finance  (No.  2)  Act,  1967  (20  of  1967),  s.  33  and  the  Third 
Schedule (w.e.f. 1-4-1968). 

1[80-O.Deduction  in  respect  of  royalties,  etc.,  from  certain  foreign  enterprises.—2[Where  the 
gross total income of an assessee, being an Indian company] 3[or a person (other than a company) who is 
resident  in  India],]  includes  4[any  income  received  by  the  assessee  from  the  Government  of  a  foreign 
State or foreign enterprise in consideration for the use outside India of any patent, invention, design or 
registered  trade  mark]  5***  6[and  such  income  is  received  in  convertible  foreign  exchange  in  India,  or 
having  been  received  in  convertible  foreign  exchange  outside  India,  or  having  been  converted  into 
convertible  foreign  exchange  outside  India,  is  brought  into  India,  by  or  on  behalf  of  the  assessee  in 
accordance  with  any  law  for  the  time  being  in  force  for  regulating  payments  and  dealings  in  foreign 
exchange,  there  shall  be  allowed,  in  accordance  with  and  subject  to  the  provisions  of  this  section,  7[a 
deduction of an amount equal to— 

(i)  forty per cent. for an assessment year beginning on the 1st day of April, 2001; 

1. Subs. by Act 32 of 1971, s. 21, for section 80-O (w.e.f. 1-4-1972). Earlier was inserted by Act 13 of 1966, s. 17 (w.e.f. 1-
4-1966). Section 80N was inserted in place of section 85B which was deleted by the Finance (No. 2) Act, 1967 (20 of 
1967), s. 33 and the Third Schedule (w.e.f. 1-4-1968). 

2. Subs. by Act 20 of 1974, s. 9, for “(1) Where the gross total income of an assessee, being an Indian company or a person 

(other than a company) who is resident in India,” (w.e.f. 1-4-1975). 

3. Ins. by Act 49 of 1991, s. 34 (w.e.f. 1-4-1992). 
4.  Subs.  by  Act  26  of  1997,  s.  29,  for  certain  words  (w.e.f.  1-4-1998).  Earlier  amended  by  Act  49  of  1991,  s.  34               

(w.e.f. 1-4-1992).  

5. The words “under an agreement approved in this behalf by the Chief Commissioner or the Director General;” omitted by 
Act 49 of 1991, s. 34 (w.e.f. 1-4-1992).Earlier these words were substituted by Act 26 of 1988, s. 26 (w.e.f. 1-4-1989).   
6. Subs. by Act 26 of 1988, s. 26, for certain words (w.e.f. 1-4-1988). Earlier section was amended by Act 20 of 1974, s. 9 

(w.e.f. 1-4-1972). Later on amended by Act   21 of 1984, s. 18 (w.e.f. 1-4-1985). 

7. Subs. by Act 10 of 2000, s. 41, for certain words (w.e.f. 1-4-2001). 

414 

                                                           
(ii)  thirty per cent. for an assessment year beginning on the 1st day of April, 2002; 

(iii) twenty per cent. for an assessment year beginning on the 1st day of April, 2003; 

(iv) ten per cent. for an assessment year beginning on the 1st day of April, 2004, 

of the income so received in, or brought into, India, in computing the total income of the assessee and no 
deduction shall be allowed in respect of the assessment year beginning on the 1st day of April, 2005 and 
any subsequent assessment year]]: 

1* 

* 

* 

* 

* 

2[3[Provided] that such income is received in India within a period of six months from the end of the 

previous year, or 4[within such further period as the competent authority may allow in this behalf]:] 

5[Provided further that no deduction under this section shall be allowed unless the assessee furnishes a 
certificate, in the prescribed form, along with the return of income, certifying that the deduction has been 
correctly claimed in accordance with the provisions of this section.] 

6[Explanation.—For the purposes of this section,— 

(i)  “convertible foreign exchange” means foreign exchange which is for the time being treated by 
the Reserve Bank of India as convertible foreign exchange for the purposes of the law for the time 
being in force for regulating payments and dealings in foreign exchange; 

2[(ii) “foreign enterprise” means a person who is a non-resident;]] 

7[(iii)  services  rendered  or  agreed  to  be  rendered  outside  India  shall  include  services  rendered 

from India but shall not include services rendered in India;] 

8[(iv)  “competent  authority”  means  the  Reserve  Bank  of  India  or  such  other  authority  as  is 
authorised under any law for the time being in force for regulating payments and dealings in foreign 
exchange.] 

9* 

* 

* 

* 

* 

[80P. Deduction  in  respect  of  income  of  co-operative  societies.—(1)  Where,  in  the  case  of  an 
assessee  being  a  co-operative  society,  the  gross  total  income  includes  any  income  referred  to  in  sub-
section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the 
sums specified in sub-section (2), in computing the total income of the assessee. 

(2) The sums referred to in sub-section (1) shall be the following, namely:— 

(a)  in the case of a co-operative society engaged in— 

1. The provisos omitted by Act 49 of 1991, s. 34 (w.e.f.  1-4-1992). 

2. Ins. by Act 11 of 1987, s. 36 (w.e.f. 1-4-1988). 

3. Subs. by Act 49 of 1991, s. 34, for “Provided also” (w.e.f. 1-4-1992). 

4.  Subs.  by  Act  27  of  1999,  s.  53,  for  certain  words  (w.e.f.  1-6-1999).earlier  amended  by  Act    20  of  1974,  s.  9                           

(w.e.f. 1-4-1975). 

5. Ins. by s. 53, ibid. (w.e.f. 1-6-1999). 

6. Subs. by Act 32 of 1985, s. 36, for Explanation (w.e.f. 1-4-1986). 

7. Ins. by Act 49 of 1991, s. 34 (w.e.f. 1-4-1992). 

8. Ins. by Act 27 of 1999, s. 53 (w.e.f. 1-6-1999). 

9. Sub-section (2) omitted by Act 20 of 1974, s. 9 (w.e.f. 1-4-1975). 

415 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
 (i)  carrying on the business of banking or providing credit facilities to its members, or 

 (ii)  a cottage industry, or 

1[(iii)  the marketing of agricultural produce grown by its members, or] 

(iv)   the  purchase  of  agricultural  implements,  seeds,  livestock  or  other  articles  intended  for 

agriculture for the purpose of supplying them to its members, or 

 (v)  the processing, without the aid of power, of the agricultural produce of its members, or 

2[(vi)  the collective disposal of the labour of its members, or 

(vii)  fishing  or  allied  activities,  that  is  to  say,  the  catching,  curing,  processing,  preserving, 
storing or marketing of fish or the purchase of materials and equipment in connection therewith 
for the purpose of supplying them to its members,] 

the  whole  of  the  amount  of  profits  and  gains  of  business  attributable  to  any  one  or  more  of  such 
activities: 

2[Provided that in the case of a co-operative society falling under sub-clause (vi), or sub-clause (vii), 
the  rules  and  bye-laws  of  the  society  restrict  the  voting  rights  to  the  following  classes  of  its  members, 
namely:— 

(1)  the  individuals  who  contribute  their  labour  or,  as  the  case  may  be,  carry  on  the  fishing  or 

allied activities; 

(2) the co-operative credit societies which provide financial assistance to the society; 

(3) the State Government;] 

3[(b)  in the  case  of  a  co-operative  society,  being  a  primary  society  engaged in supplying  milk, 

oilseeds, fruits or vegetables raised or grown by its members to— 

(i) a federal co-operative society, being a society engaged in the business of supplying milk, 

oilseeds, fruits, or vegetables, as the case may be; or 

(ii) the Government or a local authority; or 

(iii)  a  Government  company  as  defined 

in 

section  617  of 

the  Companies                                

Act, 1956 (1 of 1956), or a corporation established by or under a Central, State or Provincial Act 
(being a company or corporation engaged in supplying milk, oilseeds, fruits or vegetables, as the 
case may be, to the public), 

the whole of the amount of profits and gains of such business;] 

(c)   in  the  case  of  a  co-operative  society  engaged  in  activities  other  than  those  specified  in              

clause  (a)  or  clause  (b)  (either  independently  of,  or  in  addition  to,  all  or  any  of  the  activities  so 
specified), 4[so much of its profits and gains attributable to such activities as does not exceed,— 

1. Subs. by Act 11 of 1999, s. 8, for sub-clause (iii) (w.r.e.f. 1-4-1968).  
2. Ins. by Act 32 of 1971, s. 22 (w.e.f. 1-4-1972). 
3.  Subs.  by  Act  11  of  1983,  s.  30,  for  clause  (b)  (w.e.f.  1-4-1984).  Earlier  substituted  by  Act  19  of  1978,  s.  18                          

(w.e.f. 1-4-1979). 

4. Subs. by Act 21 of 1979, s. 14, for “does not exceed twenty thousand rupees” (w.e.f. 1-4-1980). Earlier substituted by  

Act 14 of 1969, s. 10 (w.e.f. 1-4-1970). 

416 

                                                           
(i)   where  such  co-operative  society  is  a  consumers’  co-operative  society,  1[one  hundred 

thousand rupees]; and 

(ii)  in any other case, 2[fifty thousand rupees]. 

Explanation.—In this clause, “consumers’ co-operative society” means a society for the benefit of the 

consumers;] 

(d)  in respect of any income by way of interest or dividends derived by the co-operative society 

from its investments with any other co-operative society, the whole of such income; 

(e)  in respect of any income derived by the co-operative society from the letting of godowns or 
warehouses  for  storage,  processing  or  facilitating  the  marketing  of  commodities,  the  whole  of  such 
income; 

(f)   in  the  case  of  a  co-operative  society,  not  being  a  housing  society  or  an  urban  consumers’ 
society  or  a  society  carrying  on  transport  business  or  a  society  engaged  in  the  performance  of  any 
manufacturing operations with the aid of power, where the gross total income does not exceed twenty 
thousand rupees, the amount of any income by way of interest on securities 3*** or any income from 
house property chargeable under section 22. 

Explanation.—For the purposes of this section, an “urban consumers’ co-operative society” means a 
society  for  the  benefit  of  the  consumers  within  the  limits  of  a  municipal  corporation,  municipality, 
municipal committee, notified area committee, town area or cantonment. 

(3)  In  a  case  where  the  assessee  is  entitled  also  to  the  deduction  under 4[5***  6[section  80HH or 
section 80HHA] 7[or section  80HHB 8[or section  80HHC 9[or section  80HHD]]] 10[or  section  80-I] 11[or 
section 80-IA]] 12***  13***], the deduction under sub-section (1) of this section, in relation to the sums 
specified in clause (a) or clause (b) or clause (c) of sub-section (2), shall be allowed with reference to the 
income,  if  any,  as  referred  to  in  those  clauses  included  in  the  gross  total  income  as  reduced  by  the 
14[deductions  under  15[section  80HH, 16[section  HHA, 17[section  80HHB, section  HHC, 18[section 
80HHD], section 80-I, 19[section 80-IA], 20[section 80J and section 80JJ]]]. 

1. Subs. by Act 21 of 1998, s. 37, for “forty thousand rupees” (w.e.f. 1-4-1999). 
2. Subs. by s. 37, ibid., for “twenty thousand rupees” (w.e.f. 1-4-1999). 
3. The word “chargeable under section 18” omitted by Act 26 of 1988, s. 27 (w.e.f. 1-4-1989). 
4. Subs.by Act 26 of 1974, s. 11, for “section 80H or section 80J” (w.e.f. 1-4-1974). 
5. The words, figures, and letter “section 80H or” omitted by Act 41 of 1975, s. 24 (w.e.f. 1-4-1976). 
6. Subs. by Act 29 of 1977, s. 29, for “section 80HH or section 80J” (w.e.f. 1-4-1978). 
7. Ins. by Act 14 of 1982, s. 32 (w.e.f. 1-4-1983). 
8. Ins. by Act 11 of 1983, s. 39 (w.e.f. 1-4-1983). 
9. Ins. by Act 3 of 1989, s. 57 (w.e.f. 1-4-1989). 
10. Ins. by Act 44 of 1980, s. 35 (w.e.f. 1-4-1981). 
11. Ins. by Act 38 of 1993, s. 18 (w.e.f. 1-4-1991). 
12. Now section 80J omitted by Act 33 of 1996, s. 29 (w.r.e.f. 1-4-1989). 
13. The words, figures and letters “or section 80JJA” omitted by Act 11 of 1983, s. 39 (w.e.f. 1-4-1984). Earlier which was 

inserted by Act 21 of 1979, s. 22 (w.e.f 1-4-1976). 

14.  Subs.  by  Act  41  of  1975,  s.  24,  for  “deduction  under  section  80H,  section  80HH,  section  80J  and  section  80JJ”                    

(w.e.f. 1-4-1976). Section 80J also omitted by s. 25 (w.e.f. 1-4-1976).  

15. Subs.  by Act 29 of 1977, s. 29, for “section 80HH or section 80J” (w.e.f. 1-4-1978). 
16. Subs. by Act 16 of 1981, s. 25,for “section 80HHA, section 80J” (w.e.f. 1-4-1981). 
17. Subs. by Act 11 of 1983, s. 39, for “section 80J, section 80JJ or section 80 JJA” (w.e.f. 1-4-1983).  
18. Ins. by Act 3 of 1989, s. 57 (w.e.f. 1-4-1989). 
19. Ins. by Act 38 of 1993, s. 18 (w.e.f. 1-4-1991). 
20. Subs. by Act 11 of 1983, s. 39, for “section 80J, section 80JJ and section 80JJA” (w.e.f. 1-4-1984). Now, section 80J 

omitted by Act 33 of 1996, s. 29 (w.e.f. 1-4-1989) and section 80JJ omitted by Act 26 of 1997, s. 26 (w.e.f. 1-4-1998). 

417 

                                                           
1[(4) The provisions of this section shall not apply in relation to any co-operative bank other than a 

primary agricultural credit society or a primary co-operative agricultural and rural development bank. 

Explanation.—For the purposes of this sub-section,— 

(a) “co-operative  bank”  and  “primary  agricultural  credit  society”  shall  have  the  meanings 

respectively assigned to them in Part V of the Banking Regulation Act, 1949 (10 of 1949); 

(b) “primary  co-operative  agricultural  and  rural  development  bank”means  a  society  having  its 
area  of  operation  confined  to  a  taluk  and  the  principal  object  of  which  is  to  provide  for  long-term 
credit for agricultural and rural development activities.] 
2[80PA.  Deduction  in  respect  of  certain  income  of  Producer  Companies.—(1)  Where  the  gross 
total income of an assessee, being a Producer Company having a total turnover of less than one hundred 
crore  rupees  in  any  previous  year,  includes  any  profits  and  gains  derived  from  eligible  business,  there 
shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total 
income of the assessee, a deduction of an amount equal to one hundred per cent. of the profits and gains 
attributable to such business for the previous year relevant to an assessment year commencing on or after 
the 1st day of April, 2019, but before the 1st day of April, 2025. 

(2)  In  a  case  where  the  assessee  is  entitled  also  to  deduction  under  any  other  provision  of  this 
Chapter, the deduction under this section shall be allowed with reference to the income, if any, as referred 
to  in  this  section  included  in  the  gross  total  income  as  reduced  by  the  deductions  under  such  other 
provision of this Chapter.  

Explanation.—For the purposes of this section,— 

(i) “eligible business” means— 

(a) the marketing of agricultural produce grown by the members; or 

(b)  the  purchase  of  agricultural  implements,  seeds,  livestock  or  other  articles  intended  for 

agriculture for the purpose of supplying them to the members; or 

(c) the processing of the agricultural produce of the members; 

(ii)  “member”  shall  have  the  meaning  assigned  to  it  in  clause  (d)  of  section  581A  of  the 

Companies Act, 1956; 

(iii) “Producer Company” shall have the meaning assigned to it in clause (l) of section 581A of 

the Companies Act, 1956.] 
3[80Q. Deduction in respect of profits and gains from the business of publication of books.—(1) 
Where in the case of an assessee the gross total income of the previous year relevant to the assessment 
year commencing on the 1st day of April, 1992, or to any one of the four assessment years next following 
that assessment year, includes any profits and gains derived from a business carried on in India of printing 
and  publication  of  books  or  publication  of  books,  there  shall,  in  accordance  with  and  subject  to  the 
provisions of this section, be  allowed, in computing  the  total income  of the  assessee,  a  deduction from 
such profits and gains of an amount equal to twenty per cent thereof. 

(2)  In  a  case  where  the  assessee  is  entitled  also  to  the  deduction  under  section  80HH or  section 
80HHA or  section 80HHC or  section 80-I or section 80-IA or section 80J or  section 80P, in relation to 
any part of the profits and gains referred to in sub-section (1), the deduction under sub-section (1) shall be 
allowed  with  reference  to  such  profits  and  gains  included  in  the  gross  total  income  as  reduced  by  the 
deductions  under  section  80HH, section  80HHA,   section  80HHC, section  80-I, section  80-IA,   section 
80J and section 80P. 

(3)  For  the  purposes  of  this  section,  “books”  shall  not  include  newspapers,  journals,  magazines, 

diaries, brochures, tracts, pamphlets and other publications of a similar nature by whatever name called.] 

1.  Ins. by Act 21 of 2006, s. 19 (w.e.f. 1-4-2007). 
2. Ins. by Act 13 of 2018, s. 30 (w.e.f. 1-4-2019). 
3. Ins. by Act 49 of 1991, s. 35 (w.e.f. 1-4-1992). Earlier section 80Q omitted by Act 16 of 1972, s. 21 (w.e.f. 1-4-1973). 

418 

                                                           
80QQ.  [Deduction  in  respect  of  profits  and  gains  from  the  business  of  publication  of        

books].—Omitted by the Direct Tax Laws (Amendment) Act, 1987 (4  of 1987), s. 26 (w.e.f. 1-4-1989). 
Original  section  was  inserted  by  the  Taxation  Laws  (Amendment)  Act,  1970  (42  of  1970),                             
s. 21 (w.e.f. 1-4-1971). 

1[80QQA. Deduction  in  respect  of  professional  income  of  authors  of  text  books  in  Indian 
languages.—(1)  Where,  in  the  case  of  an  individual  resident  in  India,  being  an  author,  the  gross  total 
income of the previous year relevant to the assessment year 2[commencing on— 

(a) the  1st  day  of  April,  1980,  or  to  any  one  of  the  nine  assessment  years  next  following  that 

assessment year; or 

(b) the  1st  day  of  April,  1992,  or  to  any  one  of  the  four  assessment  years  next  following  that 

assessment year,] 

includes  any  income  derived  by  him  in  the  exercise  of  his  profession  on  account  of  any  lump  sum 
consideration  for  the  assignment  or  grant  of  any  of  his  interests  in  the  copyright  of  any  book,  or  of 
royalties or copyright fees (whether receivable in lump sum or otherwise) in respect of such book, there 
shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total 
income  of  the  assessee,  a  deduction  from  such  income  of  an  amount  equal  to  twenty-five  per  cent. 
thereof. 

(2) No deduction under sub-section (1) shall be allowed unless— 

(a)  the book is either in the nature of a dictionary, thesaurus or encyclopaedia or is one that has 
been prescribed or recommended as a text book, or included in the curriculum, by any University, for 
a degree or post-graduate course of that University; and 

(b)  the book is written in any language specified in the Eighth Schedule to the Constitution or in 
any  such  other  language  as  the  Central  Government  may,  by  notification  in  the  Official  Gazette, 
specify in this behalf having regard to the need for promotion of publication of books of the nature 
referred to in clause (a) in that language and other relevant factors. 

Explanation.—For the purposes of this section,— 

 (i) “author” includes a joint author; 

(ii) “lump sum”, in regard to royalties or copyright fees, includes an advance payment on account 

of such royalties or copyright fees which is not returnable; 

(iii) “University” shall have the same meaning as in the Explanation to clause (ix) of section 47.] 
3[80QQB. Deduction in respect of royalty income, etc., of authors of certain books other than 
text-books.—(1)  Where,  in  the  case  of  an  individual  resident  in  India,  being  an  author,  the  gross  total 
income includes any income, derived by him in the exercise of his profession, on account of any lump 
sum consideration for the assignment or grant of any of his interests in the copyright of any book being a 
work of literary, artistic or scientific nature, or of royalty or copyright fees (whether receivable in lump 
sum or otherwise) in respect of such book, there shall, in accordance with and subject to the provisions of 
this section, be allowed, in computing the total income of the assessee, a deduction from such income, 
computed in the manner specified in sub-section (2). 

(2) The deduction under this section shall be equal to the whole of such income referred to in sub-

section (1), or an amount of three lakh rupees, whichever is less: 

Provided that  where  the  income  by  way  of  such  royalty  or  the  copyright  fee,  is  not  a  lump  sum 
consideration  in  lieu  of  all  rights  of  the  assessee  in  the  book,  so  much  of  the  income,  before  allowing 
expenses attributable to such income, as is in excess of fifteen per cent. of the value of such books sold 
during the previous year shall be ignored: 

1. Ins. by Act 21 of 1979, s. 15 (w.e.f. 1-4-1980). 
2. Subs. by Act 49 of 1991, s. 36, for “commencing on the 1st day of April, 1980, or to any one of the nine assessment years 
next following that assessment year, includes” (w.e.f. 1-4-1992). Earlier “nine” was substituted for “four” by Act 32 of 
1985, s. 23 (w.e.f. 1-4-1985). 

3. Ins. by Act 32 of 2003, s. 44 (w.e.f. 1-4-2004). 

419 

                                                           
Provided further that in respect of any income earned from any source outside India, so much of the 
income shall be taken into account for the purpose of this section as is brought into India by, or on behalf 
of,  the  assessee  in  convertible  foreign  exchange  within  a  period  of  six  months  from  the  end  of  the 
previous  year in  which such  income  is  earned  or  within  such further  period as the competent  authority 
may allow in this behalf. 

(3) No deduction under this section shall be allowed unless the assessee furnishes a certificate in the 
prescribed form and in the prescribed manner, duly verified by any person responsible for making such 
payment to the assessee as referred to in sub-section (1), along with the return of income, setting forth 
such particulars as may be prescribed. 

(4) No deduction under this section shall be allowed in respect of any income earned from any source 
outside  India,  unless  the  assessee  furnishes  a  certificate,  in  the  prescribed  form  from  the  prescribed 
authority, along with the return of income in the prescribed manner. 

(5) Where a deduction for any previous year has been claimed and allowed in respect of any income 
referred  to  in  this  section,  no  deduction  in  respect  of  such  income  shall  be  allowed  under  any  other 
provision of this Act in any assessment year. 

Explanation.—For the purposes of this section,— 

(a) “author” includes a joint author; 

(b)  “books”  shall  not  include  brochures,  commentaries,  diaries,  guides,  journals,  magazines, 
newspapers,  pamphlets,  text-books  for  schools,  tracts  and  other  publications  of  similar  nature,  by 
whatever name called; 

(c)  “competent  authority”  means  the  Reserve  Bank  of  India  or  such  other  authority  as  is 
authorised under any law for the time being in force for regulating payments and dealings in foreign 
exchange; 

(d) “lump sum”, in regard to royalties or copyright fees, includes an advance payment on account 

of such royalties or copyright fees which is not returnable.] 

80R. Deduction  in  respect  of  remuneration  from  certain  foreign  sources  in  the  case  of 
professors,  teachers,  etc.—Where  the  gross  total  income  of  an  individual  who  is  a  citizen  of  India 
includes  any  remuneration  received  by  him  outside  India  from  any  University  or  other  educational 
institution established outside India or 1[any other association or body established outside India], for any 
service rendered by him during his stay outside India in his capacity as a professor, teacher or research 
worker in such University, institution, association or body, there shall be 2[allowed, in computing the total 
income of the individual, 3[a deduction from such remuneration of an amount equal to— 

(i)  sixty per cent. of such remuneration for an assessment year beginning on the 1st day of April, 

2001; 

(ii)  forty-five per cent. of such remuneration for an assessment year beginning on the 1st day of 

April, 2002; 

(iii)   thirty  per  cent.  of  such  remuneration  for  an  assessment  year  beginning  on  the  1st  day  of 

April, 2003; 

(iv)   fifteen  per  cent.  of  such  remuneration  for  an  assessment  year  beginning  on  the  1st  day  of 

April, 2004, 

as is brought into India by, or on behalf of, the assessee in convertible foreign exchange within a period of 
six months from the end of the previous year or within such further period as the competent authority may 

1. Subs. by Act 11 of 1983, s. 31, for “such other association or body established outside India as may be notified in this 

behalf by the Central Government in the Official Gazette” (w.e.f. 1-4-1984). 

2. Subs. by Act 12 of 1990, s. 27, for “allowed a deduction from such remuneration of an amount equal to fifty per cent. 

thereof, in computing the total income of the individual” (w.e.f. 1-4-1991). 

3. Subs. by Act 10 of 2000, s. 42, for certain words (w.e.f. 1-4-2001). 

420 

                                                           
allow in this behalf and no deduction shall be allowed in respect of the assessment year beginning on the 
1st day of April, 2005 and any subsequent assessment year:]] 

Provided that  no  deduction  under  this  section  shall  be  allowed  unless  the  assessee  furnishes  a 
certificate, in the prescribed form, along with the return of income, certifying that the deduction has been 
correctly claimed in accordance with the provisions of this section.] 

1* 

* 

* 

* 

* 

2[Explanation.—For  the  purposes  of  this  section,  the  expression  “competent  authority”  means  the 
Reserve Bank of India or such other authority as is authorised under any law for the time being in force 
for regulating payments and dealings in foreign exchange.] 

3[80RR. Deduction  in  respect  of  professional  income  from  foreign  sources  in  certain                 

cases.—Where  the  gross  total  income  of  an  individual  resident  in  India,  being  an  author,  playwright, 
artist,  4[musician, actor or sportsman (including an athlete)], includes any income derived by him in the 
exercise  of  his  profession  from  the  Government  of  a  foreign  State  or  any  person  not  resident  in  India, 
5[there shall be allowed, in computing the total income of the individual, 6[a deduction from such income 
of an amount equal to— 

(i)  sixty per cent. of such income for an assessment year beginning on the 1st day of April, 2001; 

(ii)  forty-five per cent. of such income for an assessment year beginning on the 1st day of April, 

2002; 

(iii)  thirty  per  cent.  of  such  income  for  an  assessment  year  beginning  on  the  1st  day  of  April, 

2003; 

(iv)  fifteen  per  cent.  of  such  income  for  an assessment  year  beginning  on  the  1st  day  of  April, 

2004, 

as is brought into India by, or on behalf of, the assessee in convertible foreign exchange within a period of 
six months from the end of the previous year or within such further period as the competent authority may 
allow in this behalf and no deduction shall be allowed in respect of the assessment year beginning on the 
1st day of April, 2005 and any subsequent assessment year:] 

Provided that  no  deduction  under  this  section  shall  be  allowed  unless  the  assessee  furnishes  a 
certificate, in the prescribed form, along with the return of income, certifying that the deduction has been 
correctly claimed in accordance with the provisions of this section.]]] 

7[Explanation.—For  the  purposes  of  this  section,  the  expression  “competent  authority”  means  the 
Reserve Bank of India or such other authority as is authorised under any law for the time being in force 
for regulating payments and dealings in foreign exchange.] 

8[80RRA. Deduction  in  respect  of  remuneration  received  for  services  rendered  outside                

India.—(1)  Where  the  gross  total  income  of  an  individual  who  is  a  citizen  of  India  includes  any 
remuneration  received  by  him  in  foreign  currency  from  any  employer  (being  a  foreign  employer  or  an 
Indian concern) for any service rendered by him outside India, there shall, in accordance with and subject 

1. The proviso omitted by Act 12 of 1990, s. 27 (w.e.f. 1-4-1991). 
2. Ins. by Act 27 of 1999, s. 54 ( w.e.f. 1-6-1999). 
3. Ins. by Act 14 of 1969, s. 11 (w.e.f. 1-4-1970). 
4. Subs. by Act 44 of 1980, s. 20, for “musician or actor” (w.e.f. 1-4-1980). 
5. Subs. by  Act 12 of 1990, s. 28, for “and such income is received in, or brought into, India by him or on his behalf in 
accordance  with  the  Foreign  Exchange  Regulation  Act,  1947,  and  any  rules  made  thereunder,  there  shall  be  allowed  a 
deduction  from  such  income  of  an  amount  equal  to  twenty-five  per  cent.  of  the  income.  so  received  or  brought,  in 
computing the total income of the individual” (w.e.f. 1-4-1991). 
6. Subs. by Act 10 of 2000, s. 43, for certain words (w.e.f. 1-4-2001). 
7. Ins. by Act 27 of 1999, s. 55 (w.e.f. 1-6-1999). 
8. Subs. by Act 29 of 1977, s. 19, for section 80RRA (w.e.f. 1-4-1978). Earlier section 80RRA inserted by Act 25 of 1975, s. 

17 (w.e.f. 1-4-1975). 

421 

 
 
 
 
 
 
 
 
                                                           
to the provisions of this section, be allowed, in computing the total income of the individual, 1[a deduction 
from such remuneration of an amount equal to— 

(i)   sixty  per  cent.  of  such  remuneration  for  an  assessment  year  beginning  on  the  1st  day  of            

April, 2001; 

(ii)  forty-five per cent. of such remuneration for an assessment year beginning on the 1st day of 

April, 2002; 

(iii)  thirty  per  cent.  of  such  remuneration  for  an  assessment  year  beginning  on  the  1st  day  of 

April, 2003; 

(iv)  fifteen  per  cent.  of  such  remuneration  for  an  assessment  year  beginning  on  the  1st  day  of 

April, 2004, 

as is brought into India by, or on behalf of, the assessee in convertible foreign exchange within a period of 
six months from the end of the previous year or within such further period as the competent authority may 
allow in this behalf and no deduction shall be allowed in respect of the assessment year beginning on the 
1st day of April, 2005 and any subsequent assessment year:] 

Provided that  no  deduction  under  this  sub-section  shall  be  allowed  unless  the  assessee  furnishes  a 
certificate, in the prescribed form, along with the return of income, certifying that the deduction has been 
correctly claimed in accordance with the provisions of this section.] 

2* 
(2) The deduction under this section shall be allowed— 

* 

* 

* 

* 

 (i)  in the case of an individual who is or was, immediately before undertaking such service, in 
the  employment  of  the  Central  Government  or  any  State  Government,  only  if  such  service  is 
sponsored by the Central Government; 

(ii)  in the case of any other individual, only if he is a technician and the terms and conditions of 
his  service  outside  India  are  approved  in  this  behalf  by  the  Central  Government  or  the  prescribed 
authority. 
Explanation.—For the purposes of this section,— 

(a)   “foreign  currency”  shall  have  the  meaning  assigned  to  it  in  the  3[Foreign  Exchange 

Management Act, 1999 (42 of 1999)]; 
(b)  “foreign employer” means,— 

(i)  the Government of a foreign State; or 
(ii)  a foreign enterprise; or 
(iii)  any association or body established outside India; 

 (c)  “technician” means a person having specialised knowledge and experience in— 

(i)  constructional or manufacturing operations or mining or the generation or distribution of 

electricity or any other form of power; or 

(ii)  agriculture, animal husbandry, dairy farming, deep sea fishing or ship building; or 
(iii)  public administration or industrial or business management; or 
(iv)  accountancy; or 
(v)  any field of natural or applied science (including medical science) or social science; or 
(vi)  any other field which the Board may prescribe in this behalf, 

who is employed in a capacity in which such specialised knowledge and experience are actually utilised; 

4[(d) “competent  authority”  means  the  Reserve  Bank  of  India  or  such  other  authority  as  is 
authorised under any law for the time being in force for regulating payments and dealings in foreign 
exchange.] 

1. Subs. by Act 10 of 2000, s. 44, for certain words (w.e.f. 1-4-2001). 
2. The proviso omitted by Act 12 of 1990, s. 29 (w.e.f. 1-4-1991). 
3. Subs. by Act 17 of 2013, s. 4, for “the Foreign Exchange Regulation Act, 1973 (46 of 1973)” (w.e.f. 1-4-2013). 
4. Ins. by Act 27 of 1999, s. 56 (w.e.f. 1-6-1999). 

422 

 
 
 
 
 
 
 
 
                                                           
1[80RRB. Deduction in respect of royalty on patents.—(1) Where in the case of an assessee, being 

an individual, who is— 

(a)  resident in India; 

(b)  a patentee; 

(c)  in receipt of any income by way of royalty in respect of a patent registered on or after the 1st 

day of April, 2003 under the Patents Act, 1970 (39 of 1970), and 

his gross total income of the previous year includes royalty, there shall, in accordance with and subject to 
the provisions of this section, be allowed a deduction, from such income, of an amount equal to the whole 
of such income or three lakh rupees, whichever is less: 

Provided that where a compulsory licence is granted in respect of any patent under the Patents Act, 
1970 (39 of 1970), the income by way of royalty for the purpose of allowing deduction under this section 
shall  not  exceed  the  amount  of  royalty  under  the  terms  and  conditions  of  a  licence  settled  by  the 
Controller under that Act: 

Provided further that in respect of any income earned from any source outside India, so much of the 
income, shall be taken into account for the purpose of this section as is brought into India by, or on behalf 
of,  the  assessee  in  convertible  foreign  exchange  within  a  period  of  six  months  from  the  end  of  the 
previous  year in  which such  income  is  earned  or  within  such further  period as the competent  authority 
referred to in clause (c) of the Explanation to section 80QQB may allow in this behalf. 

(2) No deduction under this section shall be allowed unless the assessee furnishes a certificate in the 
prescribed  form,  duly  signed  by  the  prescribed  authority,  along  with  the  return  of  income  setting  forth 
such particulars as may be prescribed. 

(3) No deduction under this section shall be allowed in respect of any income earned from any source 
outside  India,  unless  the  assessee  furnishes  a  certificate  in  the  prescribed  form,  from  the  authority  or 
authorities, as may be prescribed, along with the return of income. 

(4) Where a deduction for any previous year has been claimed and allowed in respect of any income 
referred  to  in  this  section,  no  deduction  in  respect  of  such  income  shall  be  allowed,  under  any  other 
provision of this Act in any assessment year. 

Explanation.—For the purposes of this section,— 

(a)  “Controller” shall have the meaning assigned to it in clause (b) of sub-section (1) of section 2 

of the Patents Act, 1970 (39 of 1970); 

(b)   “lump  sum”  includes  an  advance  payment  on  account  of  such  royalties  which  is  not 

returnable; 

(c)  “patent” means a patent (including a patent of addition) granted under the Patents Act, 1970 

(39 of 1970); 

(d)  “patentee” means the person, being the true and first inventor of the invention, whose name is 
entered on the patent register as the patentee, in accordance with the Patents Act, 1970 (39 of 1970), 
and includes every such person, being the true and first inventor of the invention, where more than 
one person is registered as patentee under that Act in respect of that patent; 

(e)  “patent of addition” shall have the meaning assigned to it in clause (q) of sub-section (1) of 

section 2 of the Patents Act, 1970 (39 of 1970); 

(f)   “patented  article”  and  “patented  process”  shall  have  the  meanings  respectively  assigned  to 

them in clause (o) of sub-section (1) of section 2 of the Patents Act, 1970 (39 of 1970); 

1. Ins. by Act 32 of 2003, s. 45 (w.e.f. 1-4-2004). 

423 

                                                           
(g)  “royalty”, in respect of a patent, means consideration (including any lump sum consideration 
but  excluding  any  consideration  which  would  be  the  income  of  the  recipient  chargeable  under  the 
head  “Capital  gains”  or  consideration  for  sale  of  product  manufactured  with  the  use  of  patented 
process or of the patented article for commercial use) for— 

(i)  the transfer of all or any rights (including the granting of a licence) in respect of a patent; 

or 

(ii)  the imparting of any information concerning the working of, or the use of, a patent; or 

(iii)  the use of any patent; or 

(iv)  the rendering of any services in connection with the activities referred to in sub-clauses 

(i) to (iii); 

(h) “true and first inventor” shall have the meaning assigned to it in clause (y) of sub-section (1) 

of section 2 of the Patents Act, 1970 (39 of 1970).] 

80S. [Deduction in respect of compensation for termination of managing agency, etc., in the case of 
assessees other than companies.] Omitted by the Finance Act, 1986 (23 of 1986), s. 22 (w.e.f. 1-4-1987). 
Original  section  was  introduced  in  place  of  old  section  112  by  the  Finance  (No.  2)  Act,  1967  (20  of 
1967), s. 33 and the Third Schedule (w.e.f. 1-4-1968). 

80T. [Deduction in respect of long-term capital gains in the case of assessees other than companies.] 
Omitted by the Finance Act, 1987 (11 of 1987), s. 38 (w.e.f. 1-4-1988). Original section was inserted by 
the Finance (No. 2) Act, 1967 (20 of 1967), s. 33 and the Third Schedule (w.e.f. 1-4-1968) in replacement 
of section 114. 

80TT. [Deduction  in  respect  of  winnings  from  lottery.]  Omitted  by  the  Finance  Act,  1986  (23  of 
1986), s. 24 (w.e.f. 1-4-1987). Original section was inserted by the Finance Act, 1972 (16 of 1972), s. 22 
(w.e.f. 1-4-1972) and amended by the Finance (No. 2) Act, 1980, (w.e.f. 1-4-1981). 

1[CA.—Deductions in respect of other incomes 

80TTA.Deduction in respect of interest on deposits in savings account.—(1) Where the gross total 
income of an assesse  2[(other than the assessee referred to in section 80TTB)], being an individual or a 
Hindu undivided family, includes any income by way of interest on deposits (not being time deposits) in a 
savings account with— 

(a)   a  banking  company  to  which  the  Banking  Regulation  Act,  1949  (10  of  1949),  applies 

(including any bank or banking institution referred to in section 51 of that Act); 

(b)   a  co-operative  society  engaged  in  carrying  on  the  business  of  banking  (including  a                      

co-operative land mortgage bank or a co-operative land development bank); or 

(c)  a Post Office as defined in clause (k) of section 2 of the Indian Post Office Act, 1898 (6 of 

1898), 

1. Ins. by Act 23 of 2012, s. 31 (w.e.f. 1-4-2013). 
2. Ins. by Act 13 of 2018, s. 31 (w.e.f. 1-4-2019). 

424 

                                                           
there shall, in accordance with and subject to the provisions of this section, be allowed, in computing 
the total income of the assessee a deduction as specified hereunder, namely:— 

 (i)  in a case where the amount of such income does not exceed in  the aggregate ten thousand 

rupees, the whole of such amount; and 

(ii)  in any other case, ten thousand rupees. 

(2) Where the income referred to in this section is derived from any deposit in a savings account held 
by,  or  on  behalf  of,  a  firm,  an  association  of  persons  or  a  body  of  individuals,  no  deduction  shall  be 
allowed under this section in respect of such income in computing the total income of any partner of the 
firm or any member of the association or any individual of the body. 

Explanation.—For  the  purposes  of  this  section,  “time  deposits”  means  the  deposits  repayable  on 

expiry of fixed periods.] 

1[80TTB. Deduction in respect of interest on deposits in case of senior citizens.—(1) Where the 
gross  total  income  of  an  assessee,  being  a  senior  citizen,  includes  any  income  by  way  of  interest  on 
deposits with— 

(a) a banking company to which the Banking Regulation Act, 1949, applies (including any bank 

or banking institution referred to in section 51 of that Act); 

(b)  a  co-operative  society  engaged  in  carrying  on  the  business  of  banking  (including  a  co-

operative land mortgage bank or a co-operative land development bank); or 

(c) a Post Office as defined in clause (k) of section 2 of the Indian Post Office Act, 1898, 

there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the 
total income of the assessee, a deduction— 

(i) in a case where the amount of such income does not exceed in the aggregate fifty thousand 

rupees, the whole of such amount; and 

(ii) in any other case, fifty thousand rupees. 

(2) Where the income referred to in sub-section (1) is derived from any deposit held by, or on behalf 
of, a firm, an association of persons or a body of individuals, no deduction shall be allowed under this 
section in respect of such income in computing the total income of any partner of the firm or any member 
of the association or any individual of the body. 

Explanation.—For the purposes of this section, “senior citizen” means an individual resident in India 

who is of the age of sixty years or more at any time during the relevant previous year.] 

2[D.—Other deductions 

80U.  3[Deduction in case of  a  person with  disability.—4[(1)  In  computing  the total  income  of an 
individual,  being  a  resident,  who,  at  any  time  during  the  previous  year,  is  certified  by  the  medical 
authority  to  be  a  person  with  disability,  there  shall  be  allowed  a  deduction  of  a  sum  of  seventy-five 
thousand rupees: 

1. Ins. by Act 13 of 2018, s. 32 (w.e.f. 1-4-2019). 
2. Ins. by Act 19 of 1968, s. 30 and the Third Schedule (w.e.f. 1-4-1969). 
3.  Subs.  by  Act  32  of  2003,  s.  46,  for  section  80U  (w.e.f.  1-4-2004).  Earlier  substituted  by  Act  49  of  1991,  s.  37             

(w.e.f. 1-4-1992). 

4. Subs. by Act 20 of 2015, s. 24, for sub-section (1) (w.e.f. 1-4-2016). 

425 

                                                           
Provided that  where  such  individual  is  a  person  with  severe  disability,  the  provisions  of  this             

sub-section shall have effect as if for the words “seventy-five thousand rupees”, the words “one hundred 
and twenty-five thousand rupees” had been substituted.] 

(2)  Every  individual  claiming  a  deduction  under  this  section  shall  furnish  a  copy  of  the  certificate 
issued by the medical authority in the form and manner, as may be prescribed, along with the return of 
income under section 139, in respect of the assessment year for which the deduction is claimed : 

Provided that  where  the  condition  of  disability  requires  reassessment  of  its  extent  after  a  period 
stipulated in the aforesaid certificate, no deduction under this section shall be allowed for any assessment 
year  relating  to  any  previous  year  beginning  after  the  expiry  of  the  previous  year  during  which  the 
aforesaid  certificate  of  disability  had  expired,  unless  a  new  certificate  is  obtained  from  the  medical 
authority in the form and manner, as may be prescribed, and a copy thereof is furnished along with the 
return of income under section 139. 

1[Explanation.—For the purposes of this section,— 

(a)  “disability” shall have the meaning assigned to it in clause (i) of section 2 of the Persons with 
Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 (1 of 1996), 
and includes “autism”, “cerebral palsy” and “multiple disabilities” referred to in clauses (a), (c) and 
(h)  of  section  2  of  the  National  Trust  for  Welfare  of  Persons  with  Autism,  Cerebral  Palsy,  Mental 
Retardation and Multiple Disabilities Act, 1999 (44 of 1999); 

(b)  “medical authority” means the medical authority as referred to in clause (p) of section 2 of 
the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 
1995 (1 of 1996), or such other medical authority as may, by notification, be specified by the Central 
Government for certifying “autism”, “cerebral palsy”, “multiple disabilities”, “person with disability” 
and “severe disability” referred to in clauses (a), (c), (h), (j) and (o) of section 2 of the National Trust 
for  Welfare  of  Persons  with  Autism,  Cerebral  Palsy,  Mental  Retardation  and  Multiple  Disabilities 
Act, 1999 (44 of 1999); 

(c)  “person with disability” means a person referred to in clause (t) of section 2 of the Persons 
with  Disabilities  (Equal  Opportunities,  Protection  of Rights  and  Full  Participation)  Act,  1995  (1  of 
1996), or clause (j) of section 2 of the National Trust for Welfare of Persons with Autism, Cerebral 
Palsy, Mental Retardation and Multiple Disabilities Act, 1999 (44 of 1999); 

(d)  “person with severe disability” means— 

(i) a  person  with  eighty  per  cent  or  more  of  one  or  more  disabilities,  as  referred  to  in  
sub-section (4) of section 56 of the Persons with Disabilities (Equal Opportunities, Protection of 
Rights and Full Participation) Act, 1995 (1 of 1996); or 

(ii) a person with severe disability referred to in clause (o) of section 2 of the National Trust 
for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities 
Act, 1999 (44 of 1999).]] 

80V. [Deduction from gross total income of the parent in certain cases.] Omitted by the Finance Act, 

1994 (32 of 1994), s. 28(w.e.f. 1-4-1995). 

80VV. [Deduction in respect of expenses incurred in connection with certain proceedings under the 
Act.] Omitted by the Finance Act, 1985 (32 of 1985), s. 25 (w.e.f. 1-4-1986). Original section was inserted 
by the Taxation Laws (Amendment) Act, 1975 (41 of 1975), s. 26(w.e.f. 1-4-1976). 

1. Subs. by Act 23 of 2004, s. 19, for the Explanation (w.e.f. 1-4-2005). 

426 

                                                           
CHAPTER VI-B 

RESTRICTION ON CERTAIN DEDUCTIONS IN THE CASE OF COMPANIES 

[Chapter  VI-B,  omitted  by  the  Finance  Act,  1987  (11  of  1987),  s.  40  (w.e.f.  1-4-1988).  Original 
Chapter was inserted by the Finance Act, 1983 (11 of 1983), s. 32 (w.e.f. 1-4-1984) and amended by the 
Finance Act, 1985, (w.e.f. 1-4-1986) and Finance Act, 1986 (32 of 1985), s. 25(w.e.f. 1-4-1987).] 

CHAPTER VII 

INCOMES FORMING PART OF TOTAL INCOME ON WHICH NO INCOME-TAX IS PAYABLE 

81. to 85C. Omitted  by  the  Finance  (No.  2)  Act,  1967  (20  of  1967),  s.  33  and  the  Third  Schedule 
(w.e.f. 1-4-1968). Provisions of sections 81, 82, 83, 84, 85, 85A, 85B and 85C were incorporated from 
the same date in sections 80P, 80Q, 10(29), 80J (now omitted), 80K (now omitted), 80M (now omitted), 
80N (now omitted) and 80-O, respectively. 

1[86.Share of member of an association of persons or body of individuals in the income of the 
association  or  body.—Where  the  assessee  is  a  member  of  an  association  of  persons  or  body  of 
individuals  (other  than  a  company  or  a  co-operative  society  or  a  society  registered  under  the  Societies 
Registration Act, 1860 (21 of 1860), or under any law corresponding to that Act in force in any part of 
India),income-tax  shall  not  be  payable  by  the  assessee  in  respect  of  his  share  in  the  income  of  the 
association or body computed in the manner provided in section 67A: 

Provided that,— 

(a)   where  the  association  or  body  is  chargeable  to  tax  on  its  total  income  at  the  maximum 
marginal  rate  or  any  higher  rate  under  any  of  the  provisions  of  this  Act,  the  share  of  a  member 
computed as aforesaid shall not be included in his total income; 

(b)  in any other case, the share of a member computed as aforesaid shall form part of his total 

income: 

Provided further that where no income-tax is chargeable on the total income of the association or 
body,  the  share  of  a  member  computed  as  aforesaid  shall  be  chargeable  to  tax  as  part  of  his  total 
income and nothing contained in this section shall apply to the case.] 

86A. [Deduction from tax on certain securities.] Omitted by the Finance Act, 1988 (26 of 1988), s. 28 

(w.e.f.  1-4-1989).  Original  section  was  inserted  by  the  Finance  Act,  1965  (10  of  1985),  s.  22                
(w.e.f. 1-4-1965). 

CHAPTER VIII 

2[REBATES AND RELIEFS] 

3[A.—Rebate of income-tax] 

87. Rebate to be allowed in computing income-tax.—(1) In computing the amount of income-tax 
on  the total  income  of  an assessee  with  which  he is chargeable for any  assessment  year,  there  shall  be 
allowed from the amount of income-tax (as computed before allowing the deductions under this Chapter), 
in accordance with and subject to the provisions of 4[5[sections 87A, 88], 88A, 88B, 88C, 88D and 88E], 
the deductions specified in those sections. 

1. Subs. by Act 18 of 1992, s. 49, for section 86 (w.e.f. 1-4-1993).  
2. Subs. by Act 12 of 1990, s. 30, for Heading (w.e.f. 1-4-1991). 
3. Ins. by s. 30, ibid. (w.e.f. 1-4-1991). 
4.  Subs.  by  Act  23  of  2004,  s.  20,  for  “section  88,  88A,  88B  and  88C”  (w.e.f.  1-4-2005).  Earlier  section  amended  by                      

Act 18 of 1992, s. 50 (w.e.f. 1-4-1993) and Act 

5.  Subs. by Act 17 of 2013, s. 21, for “sections 88” (w.e.f.  1-4-2014). 

427 

                                                           
(2)  The  aggregate  amount  of  the  deductions  under 1[section  87A or section  88]  or section 
88A 2[or section 88B] 3[or section 88C] 4[or section 88D or section 88E] shall not, in any case, exceed the 
amount  of  income-tax  (as  computed  before  allowing  the  deductions  under  this  Chapter)  on  the  total 
income of the assessee with which he is chargeable for any assessment year. 

5[87A. Rebate  of  income-tax  in  case  of  certain  individuals.—An  assessee,  being  an  individual 
resident in India, whose total income does not exceed 6[7[five hundred thousand] rupees], shall be entitled 
to a deduction, from the amount of income-tax (as computed before allowing the deductions under this 
Chapter) on his total income with which he is chargeable for any assessment year, of an amount equal to 
hundred  per  cent  of  such  income-tax  or  an  amount  of 8[9[twelve  thousand  and  five  hundred]  rupees], 
whichever is less.] 

88. Rebate  on  life  insurance  premia, contribution  to  provident fund,  etc.—10[(1)  Subject  to  the 
provisions of this section, an assessee, being an individual, or a Hindu undivided family, shall be entitled 
to a deduction, from the amount of income-tax (as computed before allowing the deductions under this 
Chapter) on his total income  with which he is chargeable for any assessment year, of an amount equal 
to— 

(i)   in  the  case  of  an  individual  or  a  Hindu  undivided  family,  whose  gross  total  income  before 
giving effect to deductions under Chapter VI-A, is one lakh fifty thousand rupees or less, twenty per 
cent of the aggregate of the sums referred to in sub-section (2): 

Provided that an individual shall be entitled to a deduction of an amount equal to thirty per cent 

of the aggregate of the sums referred to in sub-section (2) if his income under the head “Salaries”— 

(a) does not exceed one lakh rupees during the previous year before allowing the deduction 

under section 16; and 

(b)  is  not  less  than  ninety  per  cent  of  his  gross  total  income,  as  defined  in  sub-section  (5) 

of section 80B; 

(ii)  in  the  case  of  an  individual  or  a  Hindu  undivided  family,  whose  gross  total  income  before 
giving effect to deductions under Chapter VI-A, is more than one lakh fifty thousand rupees but does 
not  exceed  five  lakh  rupees,  fifteen  per  cent  of  the  aggregate  of  the  sums  referred  to  in                    
sub-section (2); 

(iii) in the case of an individual or a Hindu undivided family, whose gross total income before 

giving effect to deductions under Chapter VI-A, exceeds five lakh rupees, nil.] 

(2) The sums referred to in sub-section (1) shall be any sums paid or deposited in the previous year by 

the assessee 11***— 

(i)  to effect or to keep in force an insurance on the life of persons specified in sub-section (4); 
(ii)  to effect  or to  keep in  force a  contract  for a  deferred  annuity,  12[not  being  an  annuity  plan 

referred to in clause (xiiia)], on the life of persons specified in sub-section (4): 

1. Subs. by Act 17 of 2013, s. 21, for “section 88” (w.e.f. 1-4-2014). 
2. Ins. by Act 18 of 1992, s. 50 (w.e.f. 1-4-1993). 
3. Ins. by Act 10 of 2000, s. 45 (w.e.f. 1-4-2001). 
4. Ins. by Act 23 of 2004, s. 20 (w.e.f. 1-4-2005). 
5. Ins. by Act 17 of 2013, s. 21 (w.e.f. 1-4-2014). 
6. Subs. by Act 7 of 2017, s. 38, for “five hundred thousand rupees” w.e.f. 1-4-2018). 
7. Subs. by Act 7 of 2019, s. 8, for “three hundred fifty thousand” (w.e.f. 1-4-2020). 
8.  Subs.  by  Act  7  of  2017,  s.  38,  for  “five thousand  rupees”  (w.e.f.  1-4-2018)  and  by  Act  28  of  2016,    s.  46,  for  “two 

thousand rupees” (w.e.f. 1-4-2017). 

9. Subs. by Act 7 of 2019, s. 8, for “two thousand and five hundred” (w.e.f. 1-4-2020). 
10.  Subs.  by  Act  20  of  2002,  s.  37,  for  sub-section  (1)  (w.e.f.  1-4-2003).  Earlier  sub-section  (1)  was  amended  by                    

Act 12 of 1990, s. 30 (w.e.f. 1-4-1991), Act 18 of 1992, s. 51 (w.e.f. 1-4-1993), Act 32 of 1994, s. 29 (w.r.e.f. 1-4-1991) 
and Act 14 of 2001,   s. 47 (w.e.f. 1-4-2002). 

11. The words “out of his income chargeable to tax” omitted by Act 20 of 2002, s. 37 (w.e.f. 1-4-2003). 
12.  Subs.  by  Act  18  of  1992,  s.  51,  for  “not  being  an  annuity  plan  referred  to  in  clause  (ii)  of  sub-section  (1)  of                    

section 80CCA” (w.e.f. 1-4-1993). 

428 

                                                           
Provided that  such  contract  does  not  contain  a  provision  for  the  exercise  by  the  insured  of  an 

option to receive a cash payment in lieu of the payment of the annuity; 

(iii)  by  way  of  deduction  from  the  salary  payable  by  or  on  behalf  of  the  Government  to  any 
individual being a sum deducted in accordance with the conditions of his service, for the purpose of 
securing to him a deferred annuity or making provision for his wife or children, in so far as the sum 
so deducted does not exceed one-fifth of the salary; 

(iv) as a contribution by an individual to any provident fund to which the Provident Funds Act, 

1925 (19 of 1925), applies; 

(v) as a contribution to any provident fund set up by the Central Government and notified by it in 
this behalf in the Official Gazette, where such contribution is to an account standing in the name of 
any person specified in sub-section (4); 

(vi) as a contribution by an employee to a recognised provident fund; 

(vii) as a contribution by an employee to an approved superannuation fund; 

(viii)  in  a  ten-year  account  or  a  fifteen-year  account  under  the  Post  Office  Savings  Bank 
(Cumulative  Time  Deposits)  Rules,  1959,  as  amended  from  time  to  time,  where  such  sums  are 
deposited in an account standing in the name of the persons specified in sub-section (4); 

(ix) as subscription to any such security of the Central Government 1[or any such deposit scheme] 

as that Government may, by notification in the Official Gazette, specify in this behalf; 

(x)   as  subscription  to  the  National  Savings  Certificates  (VI  Issue)  and  National  Savings 

Certificates (VII Issue) issued under the Government Savings Certificates Act, 1959 (46 of 1959); 

(xi)  as  subscription  to  any  such  savings  certificate  as  defined  in  clause  (c)  of  section  2  of  the 
Government  Savings  Certificates  Act,  1959  (46  of  1959),  as  the  Central  Government  may,  by 
notification in the Official Gazette, specify in this behalf; 

(xii) as a contribution, 2[in the name of any person] specified in sub-section (4), for participation 
in  the  Unit-linked  Insurance  Plan,  1971  (hereafter  in  this  section  referred  to  as  the  Unit-linked 
Insurance  Plan)  deemed  to  have  been  made  under  sub-clause  (a)  of  clause  (8)  of  section  19  of  the 
Unit Trust of India Act, 1963 (52 of 1963); 

(xiii) as a contribution 3[in the name of any person specified in sub-section (4)] for participation 
in any such unit-linked insurance plan of the LIC Mutual Fund notified under clause (23D) of section 
10, as the Central Government may, by notification in the Official Gazette, specify in this behalf; 

1[(xiiia)  to  effect  or  to  keep  in  force  a  contract  for  such  annuity  plan  of  the  Life  Insurance 
Corporation  4[or  any  other  insurer]  as  the  Central  Government  may,  by  notification  in  the  Official 
Gazette, specify; 

(xiiib)  as  subscription,  not  exceeding  ten  thousand  rupees,  to  any  units  of  any  Mutual  Fund 
notified under clause (23D) of section 10 or the Unit Trust of India established under the Unit Trust 
of India Act, 1963 (52 of 1963), under any plan formulated in accordance with such scheme as the 
Central Government may, by notification in the Official Gazette, specify in this behalf; 

(xiiic) as a contribution by an individual to any pension fund set up by any Mutual Fund notified 
under clause (23D) of section 10  5[or by the Unit Trust of India established under the Unit Trust of 
India Act, 1963 (52 of 1963)], as the Central Government may, by notification in the Official Gazette, 
specify in this behalf;] 

1. Ins. by Act 18 of 1992, s. 51 (w.e.f. 1-4-1993). 
2. Subs. by Act 32 of 1994, s. 29, for “by any person” (w.e.f. 1-4-1991) 
3. Subs. by s. 29, ibid., for “by any individual” (w.e.f. 1-4-1991). 
4. Ins. by Act 14 of 2001, s. 47 (w.e.f. 1-4-2002).  
5. Ins. by Act 32 of 1994, s. 29 (w.e.f. 1-4-1995). 

429 

                                                           
(xiv) as subscription to any such deposit scheme of  1[, or as a contribution to any such pension 
fund set up by], the National Housing Bank established under section 3 of the National Housing Bank 
Act,  1987  (53  of  1987) (hereafter  in  this  section  referred to  as  the  National  Housing  Bank),  as  the 
Central Government may, by notification in the Official Gazette, specify in this behalf; 

2[(xiva) as subscription to any such deposit scheme of— 

(a) a public sector company which is engaged in providing long-term finance for construction 

or purchase of houses in India for residential purposes; or 

(b) any authority constituted in India by or under any law enacted either for the purpose of 
dealing with and satisfying the need for housing accommodation or for the purpose of planning, 
development or improvement of cities, towns and villages, or for both, 

not being a scheme the interest on deposits whereunder qualifies for the purposes of computing the 
deduction under section 80L, as the Central Government may, by notification in the Official Gazette, 
specify in this behalf;] 

3[(xivb)  as  tuition  fees  (excluding  any  payment  towards  any  development  fees  or  donation  or 

payment of similar nature), whether at the time of admission or thereafter,— 

(a) to any university, college, school or other educational institution situated within India; 

(b) for the purpose of full-time education of any of the persons specified in sub-section (4);] 

(xv) for the purposes of purchase or construction of a residential house property  4*** the income 
from which is chargeable to tax under the head “Income from house property” (or which would, if it 
had  not  been  used  for  the  assessee’s  own  residence,  have  been  chargeable  to  tax  under  that  head), 
where such payments are made towards or by way of— 

(a)  any  instalment  or  part  payment  of  the  amount  due  under  any  self-financing  or  other 
scheme  of  any  development  authority,  housing  board  or  other  authority  engaged  in  the 
construction and sale of house property on ownership basis; or 

(b) any instalment or part payment of the amount due to any company or co-operative society 
of which the assessee is a shareholder or member towards the cost of the house property allotted 
to him; or 

(c) repayment of the amount borrowed by the assessee from— 

(1) the Central Government or any State Government, or 

(2) any bank, including a co-operative bank, or 

(3) the Life Insurance Corporation, or 

(4) the National Housing Bank, or 

(5) any public company formed and registered in India with the main object of carrying 
on the business of providing long-term finance for construction or purchase of houses in India 
for residential purposes 5[which is eligible for deduction under clause (viii) of sub-section (1) 
of section 36], or 

1. Ins. by Act 18 of 1992, s. 51 (w.e.f. 1-4-1993). 
2. Ins. by Act 49 of 1991, s. 38 (w.e.f. 1-4-1992). 
3. Ins. by Act 32 of 2003, s. 47 (w.e.f. 1-4-2004). 
4. The words “construction of which is completed after the 31st day of March, 1987, and the” omitted by Act 49 of 1991,                 

s. 38 (w.e.f. 1-4-1992). 

5. Subs. by Act 10 of 2000, s. 46, for “which is approved for the purposes of clause (viii) of sub-section (1) of section 36                

(w.e.f. 1-4-2000). 

430 

                                                           
(6)  any  company  in  which  the  public  are  substantially  interested  or  any  co-operative 
society, where such company or co-operative society is engaged in the business of financing 
the construction of houses, or 

1[(6A)  the  assessee’s  employer  where  such  employer  is  an  authority  or  a  board  or  a 

corporation or any other body established or constituted under a Central or State Act, or] 

(7) the assessee’s employer where such employer is a public company or a public sector 
company  or  a  University  established  by  law  or  a  college  affiliated  to  such  University  or  a 
local authority 2[or a co-operative society]; 

(d)  stamp duty, registration fee and other expenses for the purpose of transfer of such house 

property to the assessee, 

but shall not include any payment towards or by way of— 

(A)  the admission fee, cost of share and initial deposit which a shareholder of a company or a 

member of a co-operative society has to pay for becoming such shareholder or member; or 

3* 

* 

* 

* 

* 

(C)  the cost  of  any  addition  or alteration to, or renovation  or  repair of, the  house  property 
which is carried out after the issue of the completion certificate in respect of the house property 
by the authority competent to issue such certificate or after the house property or any part thereof 
has either been occupied by the assessee or any other person on his behalf or been let out; or 

 (D)   any  expenditure  in  respect  of  which  deduction  is  allowable  under  the  provisions 

of section 24; 

4[(xvi) as subscription to equity shares or debentures forming part of any eligible issue of capital 
approved  by  the  Board  on  an  application  made  by  a  public  company  5[or  as  subscription  to  any 
eligible issue of capital by any public financial institution] in the prescribed form: 

Provided that where a deduction is claimed and allowed under this clause with reference to the 
cost of any equity shares or debentures, the cost of such shares or debentures shall not be taken into 
account for the purposes of sections 54EA and 54EB. 

6[Explanation.—For the purposes of this clause,— 

(i) “eligible issue of capital” means an issue made by a public company formed and registered 
in India or a public financial institution and the entire proceeds of the issue are utilised wholly 
and exclusively for the purposes of any business referred to in sub-section (4) of section 80-IA; 

(ii)  “public  company”  shall  have  the  meaning  assigned  to  it  in  section  3  of  the  Companies 

Act, 1956 (1 of 1956); 

(iii) “public financial institution” shall have the meaning assigned to it in section 4A of the 

Companies Act, 1956 (1 of 1956);]] 

1. Ins. by Act 23 of 2004, s. 21 (w.e.f. 1-4-2005). 
2. Ins. by Act 18 of 1992, s. 51 (w.e.f. 1-4-1992). 
3. Clause (B) omitted by Act 49 of 1991, s. 38 (w.e.f. 1-4-1992). 
4. Ins. by Act 33 of 1996, s. 34 (w.e.f. 1-4-1997). 
5. Ins. by Act 26 of 1997, s. 30 (w.e.f. 1-4-1998). 
6. Subs. by Act 32 of 2003, s. 47, for the Explanation (w.e.f. 1-4-2004). Earlier it was amended by Act 33 of 1996, s. 34                 

(w.e.f. 1-4-1997), Act 26 of 1997, s. 30 (w.e.f. 1-4-1998), Act 27 of 1999, s. 90 (w.e.f. 1-4-2000). 

431 

 
 
 
 
 
 
 
                                                           
(xvii) as subscription to any units of any mutual fund referred to in clause (23D) of section 10 and 

approved by the Board on an application made by such mutual fund in the prescribed form: 

Provided that where a deduction is claimed  and allowed under this clause with reference to the 
cost  of  units,  the  cost  of  such  units  shall  not  be  taken  into  account  for  the  purposes  of sections 
54EA and 54EB: 

Provided  further that  this  clause  shall  apply  if  the  amount  of  subscription  to  such  units  is 

subscribed only in the eligible issue of capital of any company. 

Explanation.—For the purposes of this clause “eligible issue of capital” means an issue referred 

to in clause (i) of the Explanation to clause (xvi) of sub-section (2) of section 88. 

1[(2A)  The  provisions  of  sub-section  (2)  shall  apply  only  to  so  much  of  any  premium  or  other 
payment made on an insurance policy other than a contract for a deferred annuity as is not in excess of 
twenty per cent of the actual capital sum assured. 

Explanation.—In calculating any such actual capital sum, no account shall be taken— 

(i) of the value of any premiums agreed to be returned, or 

(ii) of any benefit by way of bonus or otherwise over and above the sum actually assured, which 

is to be, or, may be, received under the policy by any person.] 

2[(3) The sums referred to in sub-section (2) shall be paid or deposited at any time during the previous 
year, and the assessee, being an individual or a Hindu undivided family, shall be entitled to a deduction 
under sub-section (1) on so much of the aggregate of such sums paid or deposited as does not exceed the 
total income of the assessee, chargeable to tax during the relevant previous year.] 

(4) The persons referred to in sub-section (2) shall be the following, namely:— 

3[(a)  for the purposes of clauses (i), (v), (xii) and (xiii) of that sub-section,— 

 (i)  in  the  case  of  an  individual,  the  individual,  the  wife  or  husband  and  any  child  of  such 

individual, and 

 (ii) in the case of a Hindu undivided family, any member thereof;] 

(b)  for the purposes of clause (ii) of that sub-section,— 

(i)   in  the  case  of  an  individual,  the  individual,  the  wife  or  husband  and  any  child  of  such 

individual, and 

4* 

* 

* 

* 

* 

(c)  for the purposes of 5[clause (viii)] of that sub-section,— 

(i)  in the case of an individual, such individual or a minor of whom he is the guardian; 

(ii)  in the case of a Hindu undivided family, any member of the family; 

1. Ins. by Act 32 of 2003, s. 47 (w.e.f. 1-4-2004). 
2. Ins. by Act 20 of 2002, s. 37 (w.e.f. 1-4-2003). Earlier sub-section (3) was omitted by Act 22 of 1995, s. 22 (w.e.f. 1-4-

1996). 

3. Subs. by Act 32 of 1994, s. 29, for clause (a) (w.e.f. 1-4-1991). 
4. Sub-clause (ii) omitted by s. 29, ibid. (w.e.f. 1-4-1991). 
5. Subs. by s. 29, ibid., for “clauses (v) and (viii)” (w.e.f. 1-4-1991). 

432 

 
 
 
 
 
 
 
                                                           
1* 

* 

* 

* 

* 

2[(d) for  the  purpose  of  clause  (xivb)  of  that  sub-section,  in  the  case  of  an  individual,  any  two 

children of such individual.] 

3[(5)  Where  the  aggregate  of  any  sums  specified  in  clause  (i)  to  clause  (xvii)  of  sub-section  (2) 
exceeds an amount of one hundred thousand rupees, a deduction under sub-section (1) shall be allowed 
with  reference  to  so  much  of  the  aggregate  as  does  not  exceed  an  amount  of  one  hundred  thousand 
rupees: 

Provided that where the aggregate of any sums specified in clause (i) to clause (xv) of sub-section (2) 
exceeds an amount of seventy thousand rupees, a deduction under sub-section (1) in respect of such sums 
shall  be  allowed  with  reference  to  so  much  of  the  aggregate  as  does  not  exceed  an  amount  of  seventy 
thousand rupees: 

Provided  further that  where  the  aggregate  of  any  sums  specified  in  clause  (xv)  of  sub-section  (2) 
exceeds an amount of twenty thousand rupees, a deduction under sub-section (1) in respect of such sums 
shall  be  allowed  with  reference  to  so  much  of  the  aggregate  as  does  not  exceed  an  amount  of  twenty 
thousand rupees: 

4[Provided  also that  where  the  aggregate  of  any  sum  specified  in  clause  (xivb)  of  sub-section  (2) 
exceeds an amount of twelve thousand rupees in respect of a child, a deduction under sub-section (1) in 
respect of such sum shall be allowed with reference to so much of the aggregate  as does not exceed an 
amount of twelve thousand rupees in respect of such child.] 

5* 

* 

* 

* 

* 

(7) Where, in any previous year, an assessee— 

(i)  terminates his contract of insurance referred to in clause (i) of sub-section (2), by notice to 
that effect or where the contract ceases to be in force by reason of failure to pay any premium, by not 
reviving 6[contract of insurance,— 

(a)  in case of any single premium policy, within two years after the date of commencement 

of insurance; or 

(b)  in any other case, before premiums have been paid for two years; or] 

(ii)  terminates  his  participation  in  any  unit-linked  insurance  plan  referred  to  in  clause  (xii)  or 
clause (xiii) of sub-section (2), by notice to that effect or where he ceases to participate by reason of 
failure  to  pay  any  contribution,  by  not  reviving  his  participation,  before  contributions  in  respect  of 
such participation have been paid for five years; or 

(iii) transfers the house property referred to in clause (xv) of sub-section (2) before the expiry of 
five years from the end of the financial year in which possession of such property is obtained by him, 
or receives back, whether by way of refund or otherwise, any sum specified in that clause, 

1. Sub-clause (iii) omitted by Act 32 of 1994, s. 29 (w.e.f. 1-4-1991). 
2. Ins. by Act 32 of 2003, s. 47 (w.e.f. 1-4-2004). Earlier clause (d) omitted by Act 32 of 1994, s. 29 (w.e.f. 1-4-1991). 
3. Subs. by Act 20 of 2002, s. 37, for sub-section (5) (w.e.f. 1-4-2003). 
4. Ins. by Act 32 of 2003, s. 47 (w.e.f. 1-4-2004). 
5. Sub-sections (5A) and (6) omitted by Act 20 of 2002, s. 37 (w.e.f. 1-4-2003). 
6.  Subs.  by  Act  22  of  1995,  s.  22,  for  “contract  of  insurance,  before  premiums  have  been  paid  for  two  years;  or”                       

(w.e.f. 1-4-1996). 

433 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
then,— 

(a) no deduction shall be allowed to the assessee under sub-section (1) with reference to any of 
the sums, referred to in clauses (i), (xii), (xiii) and (xv) of sub-section (2), paid in such previous year; 
and 

(b) the aggregate amount of the deductions of income-tax so allowed in respect of the previous 
year or years preceding such previous year, shall be deemed to be tax payable by the assessee in the 
assessment year relevant to such previous year and shall be added to the tax on the total income of the 
assessee with which he is chargeable for such assessment year. 

1[(7A) If any equity shares or debentures, with reference to the cost of which a deduction is allowed 
under sub-section (1), are sold or otherwise transferred by the assessee to any person at any time within a 
period of three years from the date of their acquisition, the aggregate amount of the deductions of income-
tax so allowed in respect of such equity shares or debentures in the previous year or years preceding the 
previous  year  in  which  such  sale  or  transfer  has  taken  place  shall  be  deemed  to  be  tax  payable  by  the 
assessee  for  the  assessment  year  relevant  to  such  previous  year  and  shall  be  added  to  the  amount  of 
income-tax on the total income of the assessee with which he is chargeable for such assessment year. 

Explanation.—A person shall be treated as having acquired any shares or debentures on the date on 
which  his  name  is  entered  in  relation  to  those  shares  or  debentures  in  the  register  of  members  or  of 
debenture-holders, as the case may be, of the public company.] 

(8) In this section,— 

(i) “contribution” to any fund shall not include any sums in repayment of loan; 

(ii) “insurance” shall include— 

(a)   a  policy  of  insurance  on  the  life  of  an  individual  or  the  spouse  or  the  child  of  such 
individual or a member of a Hindu undivided family  securing the payment of specified sum on 
the stipulated date of maturity, if such person is alive on such date notwithstanding that the policy 
of insurance provides only for the return of premiums paid (with or without any interest thereon) 
in the event of such person dying before the said stipulated date; 

(b)  a policy of insurance effected by an individual or a member of a Hindu undivided family 
for the benefit of a minor with the object of enabling the minor, after he has attained majority to 
secure insurance  on his  own  life  by  adopting  the  policy  and  on  his being  alive  on a  date  (after 
such adoption) specified in the policy in this behalf; 

(iii)  “Life  Insurance  Corporation”  means  the  Life  Insurance  Corporation  of  India  established 

under the Life Insurance Corporation Act, 1956 (31 of 1956); 

(iv)  “public  company”  shall  have  the  same  meaning  as  in  section  3  of  the  Companies                         

Act, 1956 (1 of 1956); 

(v)  “security”  means  a  Government  security  as  defined  in  clause  (2)  of  section  2  of  the  Public 

Debt Act, 1944 (18 of 1944); 

(vi)  “transfer”  shall  be  deemed  to  include  also  the  transactions  referred  to  in  clause  (f)  of               

section 269UA. 

2[(9) No deduction from the amount of income-tax shall be allowed under this section to an assessee, 
being  an  individual  or  a  Hindu  undivided  family  for  the  assessment  year  beginning  on  the  1st  day  of 
April, 2006 and subsequent years.] 

1. Ins. by Act 33 of 1996, s. 34 (w.e.f. 1-4-1997). 
2. Ins. by Act 18 of 2005, s. 29 (w.e.f. 1-4-2006).  

434 

                                                           
88A. [Rebate  in  respect  of  investment  in  certain  new  shares  or  units].—Omitted  by  the              

Finance (No. 2) Act (33 of 1996), s. 35 (w.e.f. 1-4-1994). 

88B. [Rebate of income-tax in case of individuals of sixty-five years or above].—Omitted by the 

Finance Act, 2005 (18 of 2005), s. 30 (w.e.f. 1-4-2006). 

88C.  [Rebate  of  income-tax  in  case  of  women  below  sixty-five  years].—Omitted  by  s.  31,  ibid.,      

(w.e.f. 1-4-2006). 

88D. [Rebate  of  income-tax  in  case  of  certain  individuals].—Omitted  by  s.32,  ibid.,  (w.e.f.  1-4-

2006). 

1[88E. Rebate in respect of securities transaction tax.—(1) Where the total income of an assessee 
in  a  previous  year  includes  any  income,  chargeable  under  the  head  “Profits  and  gains  of  business  or 
profession”,  arising  from  taxable  securities  transactions,  he  shall  be  entitled  to  a  deduction,  from  the 
amount of income-tax on such income arising from such transactions, computed in the manner provided 
in  sub-section  (2),  of  an  amount  equal  to  the  securities  transaction  tax  paid  by  him  in  respect  of  the 
taxable securities transactions entered into in the course of his business during that previous year: 

Provided that no deduction under this sub-section shall be allowed unless the assessee furnishes along 

with the return of income, evidence of payment of securities transaction tax in the prescribed form: 

Provided further that the amount of deduction under this sub-section shall not exceed the amount of 

income-tax on such income computed in the manner provided in sub-section (2). 

(2)  For  the  purposes  of  sub-section  (1),  the  amount  of  income-tax  on  the  income  arising  from  the 
taxable securities transactions, referred to in that sub-section, shall be equal to the amount calculated by 
applying the average rate of income-tax on such income. 

2[(3) No deduction under this section shall be allowed in, or after, the assessment year beginning on 

the 1st day of April, 2009.] 

Explanation.—For the purposes of this section, the expressions, “taxable securities transaction” and 
“securities  transaction  tax”  shall  have  the  same  meanings  respectively  assigned  to  them  under  Chapter 
VII of the Finance (No. 2) Act, 2004.] 

B.—Relief for income-tax] 

3[89. Relief when salary, etc., is paid in arrears or in advance.—Where an assessee is in receipt of 
a sum in the nature of salary, being paid in arrears or in advance or is in receipt, in any one financial year, 
of salary for more than twelve months or a payment which under the provisions of clause (3) of section 
17 is  a  profit  in  lieu  of  salary,  or  is  in  receipt  of  a  sum  in  the  nature  of  family  pension  as  defined  in 
the Explanation to  clause  (iia)  of section  57,  being  paid  in  arrears,  due  to  which  his  total  income  is 
assessed at a rate higher than that at which it would otherwise have been assessed, the Assessing Officer 
shall, on an application made to him in this behalf, grant such relief as may be prescribed:] 

4[Provided that no such relief shall be granted in respect of any amount received or receivable by an 
assessee  on  his  voluntary  retirement  or  termination  of  his  service,  in  accordance  with  any  scheme  or 
schemes of voluntary retirement or in the case of a public sector company referred to in sub-clause (i) of 
clause (10C) of section 10, a scheme of voluntary separation, if an exemption in respect of any amount 
received or receivable on such voluntary retirement or termination of his service or voluntary separation 
has  been  claimed  by  the  assessee  under  clause  (10C)  of section  10 in  respect  of  such,  or  any  other, 
assessment year.] 

1. Subs. by Act 23 of 2004, s. 23, for section 88E (w.e.f. 1-4-2005). 
2. Ins. by Act 18 of 2008, s. 20 (w.e.f. 1-4-2008). 
3.  Subs.  by  Act  20  of  2002,  s.38,  for  section  89  (w.e.f.  1-4-1996).  Earlier  section  substituted  by42  of  1970,  s.  23                           

(w.e.f. 1-4-1971). 

4. Ins. by Act 33 of 2009, s. 39 (w.e.f. 1-4-2010). 

435 

                                                           
89A. [Tax relief in relation to export turnover].—Omitted by the Finance Act, 1983 (11 of 1983),                

s.  33  (w.e.f.  1-4-1983).  The  provisions  of  this  section  were  later  substituted  by  scheme  contained  in 
section 80HHC, inserted by the Finance Act, 1983 (11 of 1983), s. 24 (w.e.f. 1-4-1983). Originally section 
89A was inserted by the Finance Act, 1982 (29 of 1983), s. 22 (w.e.f. 1-6-1982). 

CHAPTER IX 

DOUBLE TAXATION RELIEF 

1[90. Agreement with foreign countries or specified territories.—(1) The Central Government may 
enter into an agreement with the Government of any country outside India or specified territory outside 
India,— 

(a) for the granting of relief in respect of— 

(i) income on which have been paid both income-tax under this Act and income-tax in that 

country or specified territory, as the case may be, or 

(ii)  income-tax  chargeable  under  this  Act  and  under  the  corresponding  law  in  force  in  that 
country  or  specified  territory,  as  the  case  may  be,  to  promote  mutual  economic relations, trade 
and investment, or 

(b) for the avoidance of double taxation of income under this Act and under the corresponding 

law in force in that country or specified territory, as the case may be, or 

(c)  for  exchange  of  information  for  the  prevention  of  evasion  or  avoidance  of  income-tax 
chargeable  under  this  Act  or  under  the  corresponding  law  in  force  in  that  country  or  specified 
territory, as the case may be, or investigation of cases of such evasion or avoidance, or 

(d) for  recovery  of income-tax  under this  Act  and  under the corresponding  law in  force  in  that 

country or specified territory, as the case may be, 

and  may,  by  notification  in  the  Official  Gazette,  make  such  provisions  as  may  be  necessary  for 
implementing the agreement. 

(2)  Where  the  Central  Government  has  entered  into  an  agreement  with  the  Government  of  any 
country  outside  India  or  specified  territory  outside  India,  as  the  case  may  be,  under  sub-section (1)  for 
granting relief of tax, or as the case may be, avoidance of double taxation, then, in relation to the assessee 
to  whom  such  agreement  applies,  the  provisions  of  this  Act  shall  apply  to  the  extent  they  are  more 
beneficial to that assessee. 

2[(2A) Notwithstanding anything contained in sub-section (2), the provisions of Chapter X A of the 

Act shall apply to the assessee even if such provisions are not beneficial to him.] 

(3) Any term used but not defined in this Act or in the agreement referred to in sub-section (1) shall, 
unless  the  context  otherwise  requires,  and  is  not  inconsistent  with  the  provisions  of  this  Act  or  the 
agreement, have the same meaning as assigned to it in the notification issued by the Central Government 
in the Official Gazette in this behalf. 

1.  Subs.  by  Act  33  of  2009,  s.  40,  for  section  90  (w.e.f.  1-10-2009).  Earlier  section  amended  by  Act  16  of  1972,  s.  23                

(w.e.f. 1-4-1972). Further amended by Act 49 of 1991, s. 39 (w.e.f. 1-4-1972). Earlier substituted by Act 14 of 2001, s. 90 
(w.e.f. 1-4-1962). 

2. Ins. by Act 17 of 2013, s. 23 (w.e.f. 1-4-2016). Earlier inserted by Act 23 of 2012, s. 33 (w.e.f. 1-4-2013), and later on 

omitted by Act 17 of 2013, s. 23 (w.e.f. 1-4-2013). 

436 

                                                           
1[(4) An assessee, not being a resident, to whom an agreement referred to in sub-section (1) applies, 
shall not be entitled to claim any relief under such agreement unless 2[a certificate of his being a resident] 
in any country outside India or specified territory outside India, as the case may be, is obtained by him 
from the Government of that country or specified territory.] 

3[(5)  The  assessee  referred  to  in  sub-section  (4)  shall  also  provide  such  other  documents  and 

information, as may be prescribed.] 

Explanation 1.—For the removal of doubts, it is hereby declared that the charge of tax in respect of a 
foreign company at a rate higher than the rate at which a domestic company is chargeable, shall not be 
regarded as less favourable charge or levy of tax in respect of such foreign company. 

Explanation 2.—For the purposes of this section, “specified territory” means any area outside India 

which may be notified as such by the Central Government. 

4[Explanation 3.—For the removal of doubts, it is hereby declared that where any term is used in any 
agreement entered into under sub-section (1) and not defined under the said agreement or the Act, but is 
assigned  a  meaning  to  it  in  the  notification  issued  under  sub-section  (3)  and  the  notification  issued 
thereunder being in force, then, the meaning assigned to such term shall be deemed to have effect from 
the date on which the said agreement came into force.] 

5[Explanation  4.—For  the  removal  of  doubts,  it  is  hereby  declared  that  where  any  term  used  in  an 
agreement entered into under sub-section (1) is defined under the said agreement, the said term shall have 
the  same  meaning  as  assigned  to  it  in  the  agreement;  and  where  the  term  is  not  defined  in  the  said 
agreement,  but  defined  in  the  Act,  it  shall  have  the  same  meaning  as  assigned  to  it  in  the  Act  and 
explanation, if any, given to it by the Central Government.] 

6[90A. Adoption by Central Government of agreement between specified associations for double 
taxation relief.—(1) Any specified association in India may enter into an agreement with any specified 
association in the specified territory outside India and the Central Government may, by notification in the 
Official  Gazette,  make  such  provisions  as  may  be  necessary  for  adopting  and  implementing  such 
agreement— 

(a) for the granting of relief in respect of— 

(i) income on which have  been paid both income-tax under this Act and income-tax in any 

specified territory outside India; or 

(ii) income-tax  chargeable  under  this  Act  and  under  the  corresponding  law  in  force  in  that 

specified territory outside India to promote mutual economic relations, trade and investment, or 

(b) for the avoidance of double taxation of income under this Act and under the corresponding 

law in force in that specified territory outside India, or 

(c) for  exchange  of  information  for  the  prevention  of  evasion  or  avoidance  of  income-tax 
chargeable under this Act or under the corresponding law in force in that specified territory outside 
India, or investigation of cases of such evasion or avoidance, or 

1. Ins. by Act 23 of 2012, s. 32 (w.e.f. 1-4-2013). 
2. Subs. by Act 17 of 2013, s. 23, for “a certificate, containing such particulars as may be prescribed, of his being a resident” 

(w.e.f. 1-4-2013). 

3. Ins. by s. 23, ibid. (w.e.f. 1-4-2013). 
4. The Explanation 3 inserted by Act 23 of 2012, s. 32 (w.e.f. 1-10-2009). 
5. Ins. by Act 7 of 2017, s. 39 (w.e.f. 1-4-2018). 
6. Ins. by Act 21 of 2006, s. 20 (w.e.f. 1-6-2006). 

437 

                                                           
(d) for  recovery  of  income-tax  under  this  Act  and  under  the  corresponding  law  in  force  in  that 

specified territory outside India. 

(2) Where a specified association in India has entered into an agreement with a specified association 
of any specified territory outside India under sub-section (1) and such agreement has been notified under 
that sub-section, for granting relief of tax, or as the case may be, avoidance of double taxation, then, in 
relation  to  the  assessee  to  whom  such  agreement  applies,  the  provisions  of  this  Act  shall  apply  to  the 
extent they are more beneficial to that assessee. 

1[(2A) Notwithstanding  anything  contained  in  sub-section  (2),  the  provisions  of  Chapter  XA  of  the 

Act shall apply to the assessee even if such provisions are not beneficial to him.] 

(3) Any term used but not defined in this Act or in the agreement referred to in sub-section (1) shall, 
unless  the  context  otherwise  requires,  and  is  not  inconsistent  with  the  provisions  of  this  Act  or  the 
agreement, have the same meaning as assigned to it in the notification issued by the Central Government 
in the Official Gazette in this behalf. 

2[(4) An assessee, not being a resident, to whom the agreement referred to in sub-section (1) applies, 
shall not be entitled to claim any relief under such agreement unless 3[a certificate of his being a resident] 
in  any  specified  territory  outside  India,  is  obtained  by  him  from  the  Government  of  that  specified 
territory.] 

4[(5)  The  assessee  referred  to  in  sub-section  (4)  shall  also  provide  such  other  documents  and 

information, as may be prescribed.] 

Explanation 1.—For the removal of doubts, it is hereby declared that the charge of tax in respect of a 
company  incorporated  in  the  specified  territory  outside  India  at  a  rate  higher  than  the  rate  at  which  a 
domestic company is chargeable, shall not be regarded as less favourable charge or levy of tax in respect 
of such company. 

Explanation 2.—For the purposes of this section, the expressions— 

(a)  “specified  association”  means  any  institution,  association  or  body,  whether  incorporated  or 
not,  functioning  under  any  law  for  the  time  being  in  force  in  India  or  the  laws  of  the  specified 
territory outside India and which may be notified as such by the Central Government for the purposes 
of this section; 

(b)  “specified  territory”  means  any  area  outside  India  which  may  be  notified  as  such  by  the 

Central Government for the purposes of this section. 

5[Explanation 3.—For the removal of doubts, it is hereby declared that where any term is used in any 
agreement entered into under sub-section (1) and not defined under the said agreement or the Act, but is 
assigned  a  meaning  to  it  in  the  notification  issued  under  sub-section  (3)  and  the  notification  issued 
thereunder being in force, then, the meaning assigned to such term shall be deemed to have effect from 
the date on which the said agreement came into force.] 

1. Ins. by Act 17 of 2013, s. 24 (w.e.f. 1-4-2016). Earlier sub-section (2A) was inserted by Act 23 of 2012, s. 33 (w.e.f. 1-4-

2013) and later omitted by Act 17 of 2013, s. 24 (w.e.f. 1-4-2013). 

2. Ins. by Act 23 of 2012, s. 33 (w.e.f. 1-4-2013). 
3. Subs. by Act 17 of 2013, s. 24, for “a certificate, containing such particulars as may be prescribed, of his being a resident” 

(w.e.f. 1-4-2013). 

4. Ins. by s. 24, ibid. (w.e.f. 1-4-2013). 
5. Ins. by Act 23 of 2012, s. 33 (w.e.f. 1-6-2006). 

438 

                                                           
1[Explanation  4.—For  the  removal  of  doubts,  it  is  hereby  declared  that  where  any  term  used  in  an 
agreement entered into under sub-section (1) is defined under the said agreement, the said term shall have 
the  same  meaning  as  assigned  to  it  in  the  agreement;  and  where  the  term  is  not  defined  in  the  said 
agreement,  but  defined  in  the  Act,  it  shall  have  the  same  meaning  as  assigned  to  it  in  the  Act  and 
explanation, if any, given to it by the Central Government.] 

91. Countries with which no agreement exists.—(1) If any person who is resident in India in any 
previous  year  proves  that,  in  respect  of  his  income  which  accrued  or  arose  during  that  previous  year 
outside India (and which is not deemed to accrue or arise in India), he has paid in any country with which 
there  is  no  agreement  under  section  90 for  the  relief  or  avoidance  of  double  taxation,  income-tax,  by 
deduction or otherwise, under the law in force in that country, he shall be entitled to the deduction from 
the Indian income-tax payable by him of a sum calculated on such doubly taxed income at the Indian rate 
of tax or the rate of tax of the said country, whichever is the lower, or at the Indian rate of tax if both the 
rates are equal. 

(2) If any person who is resident in India in any previous year proves that in respect of his income 
which  accrued  or  arose  to  him  during  that  previous  year  in  Pakistan  he  has  paid  in  that  country,  by 
deduction or otherwise, tax payable to the Government under any law for the time being in force in that 
country  relating  to  taxation  of  agricultural  income,  he  shall  be  entitled  to  a  deduction  from  the  Indian 
income-tax payable by him— 

(a) of the amount of the tax paid in Pakistan under any law aforesaid on such income which is 

liable to tax under this Act also; or 

(b) of a sum calculated on that income at the Indian rate of tax; 

whichever is less. 

(3) If any non-resident person is assessed on his share in the income of a registered firm assessed as 
resident  in  India  in  any  previous  year  and  such  share  includes  any  income  accruing  or  arising  outside 
India during that previous year (and which is not deemed to accrue or arise in India) in a country with 
which there is no agreement under section 90 for the relief or avoidance of double taxation and he proves 
that he has paid income-tax by deduction or otherwise under the law in force in that country in respect of 
the income so included he shall be entitled to a deduction from the Indian income-tax payable by him of a 
sum calculated on such doubly taxed income so included at the Indian rate of tax or the rate of tax of the 
said country, whichever is the lower, or at the Indian rate of tax if both the rates are equal. 

Explanation.—In this section,— 

(i)  the  expression  “Indian  income-tax”  means  income-tax  2***  charged  in  accordance  with  the 

provisions of this Act; 

(ii)  the  expression  “Indian  rate  of  tax”  means  the  rate  determined  by  dividing  the  amount  of 
Indian  income-tax  after  deduction  of  any  relief  due  under  the  provisions  of  this  Act  but  before 
deduction of 3[any relief due under this Chapter], by the total income; 

(iii) the expression “rate of tax of the said country” means income-tax and super-tax actually paid 
in  the  said  country  in  accordance  with  the  corresponding  laws  in  force  in  the  said  country  after 
deduction  of  all  relief  due,  but  before  deduction  of  any  relief  due  in  the  said  country  in  respect  of 
double taxation, divided by the whole amount of the income as assessed in the said country; 

1. Ins. by Act 7 of 2017, s. 40 (w.e.f. 1-4-2018). 
2. The words “and super-tax” omitted by Act 10 of 1965, s. 28 (w.e.f. 1-4-1965). 
3. Subs. by Act 5 of 1964, s. 20, for “any relief due under this section” (w.e.f. 1-4-1964). 

439 

                                                           
(iv)  the  expression  “income-tax”  in  relation  to  any  country  includes  any  excess  profits  tax  or 
business profits tax charged on the profits by the Government of any part of that country or a local 
authority in that country. 

CHAPTER X 

SPECIAL PROVISIONS RELATING TO AVOIDANCE OF TAX 

1[92.  Computation  of  income  from  international  transaction  having  regard  to  arm’s  length 
price.—(1) Any income arising from an international transaction shall be computed having regard to the 
arm’s length price. 

Explanation.—For the removal of doubts, it is hereby clarified that the allowance for any expense or 
interest  arising  from  an  international  transaction  shall  also  be  determined  having  regard  to  the  arm’s 
length price. 

(2) Where in an 2[international transaction or specified domestic transaction], two or more associated 
enterprises enter into a mutual agreement or arrangement for the allocation or apportionment of, or any 
contribution  to,  any  cost  or  expense  incurred  or  to  be  incurred  in  connection  with  a  benefit,  service  or 
facility provided or to be provided to any one or more of such enterprises, the cost or expense allocated or 
apportioned  to,  or,  as  the  case  may  be,  contributed  by,  any  such  enterprise  shall  be  determined  having 
regard to the arm’s length price of such benefit, service or facility, as the case may be. 

3[(2A)  Any  allowance  for  an  expenditure  or  interest  or  allocation  of  any  cost  or  expense  or  any 
income  in  relation  to  the  specified  domestic  transaction  shall  be  computed  having  regard  to  the  arm’s 
length price.] 

(3)  The  provisions  of  this  section  shall  not  apply  in  a  case  where  the  computation  of  income 
under4[sub-section  (1)  or  sub-section  (2A)]  or  the  determination  of  the  allowance  for  any  expense  or 
interest under 5[sub-section (1) or sub-section (2A)], or the determination of any cost or expense allocated 
or apportioned, or, as the case may be, contributed under sub-section (2)  3[or sub-section (2A)], has the 
effect of reducing the income chargeable to tax or increasing the loss, as the case may be, computed on 
the  basis  of  entries  made  in  the  books  of  account  in  respect  of  the  previous  year  in  which  the 
2[international transaction or specified domestic transaction] was entered into.] 

92A.  Meaning  of  associated  enterprise.—(1)  For  the  purposes  of  this  section  andsections 
92, 92B, 92C, 92D, 92E and 92F,  “associated  enterprise”,  in  relation  to  another  enterprise,  means  an 
enterprise— 

(a)  which  participates,  directly  or  indirectly,  or  through  one  or  more  intermediaries,  in  the 

management or control or capital of the other enterprise; or 

(b) in respect of which one or more persons who participate, directly or indirectly, or through one 
or more intermediaries, in its management or control or capital, are the same persons who participate, 
directly or indirectly, or through one or more intermediaries, in the management or control or capital 
of the other enterprise. 

1. Subs. by Act 20 of 2002, s. 39, for section 92 (w.e.f. 1-4-2002).earlier subs. by Act 14 of 2001, s. 49 (w.e.f. 1-4-2002). 
2. Subs. by Act 23 of 2012, s. 34, for “international transaction” (we.f. 1-4-2013). 
3. Ins. by s. 34, ibid. (we.f. 1-4-2013). 
4. Subs. by s. 34, ibid., for “sub-section (1)” (we.f. 1-4-2013). 
5. Subs. by s. 34, ibid., for “that sub-section” (we.f. 1-4-2013). 

440 

                                                           
1[(2) For the purposes of sub-section (1), two enterprises shall be deemed to be associated enterprises 

if, at any time during the previous year,—] 

(a) one enterprise holds, directly or indirectly, shares carrying not less than twenty-six per cent. 

of the voting power in the other enterprise; or 

(b) any person or enterprise holds, directly or indirectly, shares carrying not less than twenty-six 

per cent. of the voting power in each of such enterprises; or 

(c) a loan advanced by one enterprise to the other enterprise constitutes not less than fifty-one per 

cent of the book value of the total assets of the other enterprise; or 

(d)  one  enterprise  guarantees  not  less  than  ten  per  cent.  of  the  total  borrowings  of  the  other 

enterprise; or 

(e) more than half of the board of directors or members of the governing board, or one or more 
executive directors or executive members of the governing board of one enterprise, are appointed by 
the other enterprise; or 

(f)  more  than  half  of  the  directors  or  members  of  the  governing  board,  or  one  or  more  of  the 
executive directors or members of the governing board, of each of the two enterprises are appointed 
by the same person or persons; or 

(g) the manufacture or processing of goods or articles or business carried out by one enterprise is 
wholly dependent on the use of  know-how, patents, copyrights, trade-marks, licences, franchises or 
any  other  business  or  commercial  rights  of  similar  nature,  or  any  data,  documentation,  drawing  or 
specification relating to any patent, invention, model, design, secret formula or process, of which the 
other enterprise is the owner or in respect of which the other enterprise has exclusive rights; or 

(h) ninety per cent or more of the raw materials and consumables required for the manufacture or 
processing of goods or articles carried out by one enterprise, are supplied by the other enterprise, or 
by persons specified by the other enterprise, and the prices and other conditions relating to the supply 
are influenced by such other enterprise; or 

(i)  the  goods  or  articles  manufactured  or  processed  by  one  enterprise,  are  sold  to  the  other 
enterprise or to persons specified by the other enterprise, and the prices and other conditions relating 
thereto are influenced by such other enterprise; or 

(j) where one enterprise is controlled by an individual, the other enterprise is also controlled by 

such individual or his relative or jointly by such individual and relative of such individual; or 

(k)  where  one  enterprise  is  controlled  by  a  Hindu  undivided  family,  the  other  enterprise  is 
controlled by a member of such Hindu undivided family or by a relative of a member of such Hindu 
undivided family or jointly by such member and his relative; or 

(l)  where  one  enterprise  is  a  firm,  association  of  persons  or  body  of  individuals,  the  other 
enterprise  holds  not  less  than  ten  per  cent  interest  in  such  firm,  association  of  persons  or  body  of 
individuals; or 

(m)  there  exists  between  the  two  enterprises,  any  relationship  of  mutual  interest,  as  may  be 

prescribed. 

1.  Subs.  by  Act  20  of  2002,  s.  40,  for  “(2)  Two  enterprises  shall  be  deemed  to  be  associated  enterprises,  if,  at  any  time 

during the previous year,—” (w.e.f. 1-4-2002). 

441 

                                                           
92B.  Meaning  of  international  transaction.—(1)  For  the  purposes  of  this  section  and             

sections  92, 92C, 92D and 92E,  “international  transaction”  means  a  transaction  between  two  or  more 
associated enterprises, either or both of whom are non-residents, in the nature of purchase, sale or lease of 
tangible  or  intangible  property,  or  provision  of  services,  or  lending  or  borrowing  money,  or  any  other 
transaction having a bearing on the profits, income, losses or assets of such enterprises, and shall include 
a  mutual  agreement  or  arrangement  between  two  or  more  associated  enterprises  for  the  allocation  or 
apportionment  of,  or  any  contribution  to,  any  cost  or  expense  incurred  or  to  be  incurred  in  connection 
with a benefit, service or facility provided or to be provided to any one or more of such enterprises. 

(2) A transaction entered into by an enterprise with a person other than an associated enterprise shall, 
for the purposes of sub-section (1), be 1[deemed to be an international transaction] entered into between 
two associated enterprises, if there exists a prior agreement in relation to the relevant transaction between 
such other person and the associated enterprise, or the terms of the relevant transaction are determined in 
substance between such other person and the associated enterprise 2[where the enterprise or the associated 
enterprise or both of them are non-residents irrespective of whether such other person is a non-resident or 
not]. 

3[Explanation.—For the removal of doubts, it is hereby clarified that— 

(i)  the expression “international transaction” shall include— 

(a)   the  purchase,  sale,  transfer,  lease  or  use  of  tangible  property  including  building, 
transportation  vehicle,  machinery,  equipment,  tools,  plant,  furniture,  commodity  or  any  other 
article, product or thing; 

(b)  the purchase, sale, transfer, lease or use of intangible property, including the transfer of 
ownership or the provision of use of rights regarding land use, copyrights, patents, trademarks, 
licences,  franchises,  customer  list,  marketing  channel,  brand,  commercial  secret,  know-how, 
industrial  property  right,  exterior  design  or  practical  and  new  design  or  any  other  business  or 
commercial rights of similar nature; 

(c)   capital  financing,  including  any  type  of  long-term  or  short-term  borrowing,  lending  or 
guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred 
payment or receivable or any other debt arising during the course of business; 

(d)   provision  of  services,  including  provision  of  market  research,  market  development, 
marketing  management,  administration,  technical  service,  repairs,  design,  consultation,  agency, 
scientific research, legal or accounting service; 

(e)   a  transaction  of  business  restructuring  or  reorganisation,  entered  into  by  an  enterprise 
with  an  associated  enterprise,  irrespective  of  the  fact  that  it  has  bearing  on  the  profit,  income, 
losses or assets of such enterprises at the time of the transaction or at any future date; 

(ii)  the expression “intangible property” shall include— 

(a) marketing related intangible assets, such as, trademarks, trade names, brand names, logos; 

(b) technology  related  intangible  assets,  such  as,  process  patents,  patent  applications, 

technical documentation such as laboratory notebooks, technical know-how; 

1. Subs. by Act 25 of 2014, s. 31, for “deemed to be a transaction” (w.e.f. 1-4-2015). 

2. Ins. by s. 31, ibid. (w.e.f. 1-4-2015). 

3. Ins. by Act 23 of 2012, s. 35 (w.e.f. 1-4-2002). 

442 

                                                           
(c)   artistic  related  intangible  assets,  such  as,  literary  works  and  copyrights,  musical 

compositions, copyrights, maps, engravings; 

(d) data processing related intangible assets, such as, proprietary computer software, software 

copyrights, automated databases, and integrated circuit masks and masters; 

(e) engineering  related  intangible  assets,  such  as,  industrial  design,  product  patents,  trade 

secrets, engineering drawing and schematics, blueprints, proprietary documentation; 

(f) customer  related  intangible  assets,  such  as,  customer  lists,  customer  contracts,  customer 

relationship, open purchase orders; 

(g) contract  related  intangible  assets,  such  as,  favourable  supplier,  contracts,  licence 

agreements, franchise agreements, non-compete agreements; 

(h) human  capital  related  intangible  assets,  such  as,  trained  and  organised  work  force, 

employment agreements, union contracts; 

(i) location  related  intangible  assets,  such  as,  leasehold  interest,  mineral  exploitation  rights, 

easements, air rights, water rights; 

(j) goodwill  related  intangible  assets,  such  as,  institutional  goodwill,  professional  practice 
goodwill, personal goodwill of professional, celebrity goodwill, general business going concern 
value; 

(k) methods,  programmes,  systems,  procedures,  campaigns,  surveys,  studies,  forecasts, 

estimates, customer lists, or technical data; 

(l) any  other  similar  item  that  derives  its  value  from  its  intellectual  content  rather  than  its 

physical attributes.] 

1[92BA. Meaning  of  specified  domestic  transaction.—For  the  purposes  of  this  section  and   
sections 92, 92C, 92D and 92E, “specified domestic transaction” in case of an assessee means any of the 
following transactions, not being an international transaction, namely:— 

2* 

* 

* 

* 

* 

(ii)  any transaction referred to in section 80A; 

(iii) any transfer of goods or services referred to in sub-section (8) of section 80-IA; 

(iv)  any  business  transacted  between  the  assessee  and  other  person  as  referred  to  in                       

sub-section (10) of section 80-IA; 

(v)   any  transaction,  referred  to  in  any  other  section  under  Chapter  VI-A  or section  10AA,  to 

which provisions of sub-section (8) or sub-section (10) of section 80-IA are applicable; or 

(vi) any other transaction as may be prescribed, 

and where the aggregate of such transactions entered into by the assessee in the previous year exceeds a 
sum of 3[twentycrore rupees].] 

1. Ins. by Act 23 of 2012, s. 36 (w.e.f. 1-4-2013).  
2. Clause (i) omitted by Act 7 of 2017, s. 41 (w.e.f. 1-4-2017). 
3. Subs. by Act 20 of 2015, s. 25, for “five crore rupees” (w.e.f. 1-4-2016). 

443 

 
 
 
 
 
 
 
                                                           
92C.  Computation  of  arm’s  length  price.—(1)  The  arm’s  length  price  in  relation  to  an 
1[international transaction or specified domestic transaction] shall be determined by any of the following 
methods,  being  the  most  appropriate  method,  having  regard  to  the  nature  of  transaction  or  class  of 
transaction or class of associated persons or functions performed by such persons or such other relevant 
factors as the Board may prescribe, namely:— 

(a)  comparable uncontrolled price method; 

(b)  resale price method; 

(c)  cost plus method; 

(d)  profit split method; 

(e)  transactional net margin method; 

(f)  such other method as may be prescribed by the Board. 

(2) The most appropriate method referred to in sub-section (1) shall be applied, for determination of 

arm’s length price, in the manner as may be prescribed: 

2[Provided that where more than one price is determined by the most  appropriate method, the arm’s 

length price shall be taken to be the arithmetical mean of such prices: 

Provided further that if the variation between the arm’s length price so determined and price at which 
the  1[international  transaction  or  specified  domestic  transaction]  has  actually  been  undertaken  does  not 
exceed 3[such percentage 4[not exceeding three per cent.] of the latter], as may be notified] by the Central 
Government  in  the  Official  Gazette  in  this  behalf,  the  price  at  which  the  1[international  transaction  or 
specified  domestic  transaction]  has  actually  been  undertaken  shall  be  deemed  to  be  the  arm’s  length 
price:] 

5[Provided  also that  where  more  than  one  price  is  determined  by  the  most  appropriate  method,  the 
arm’s length price in relation to an international transaction or specified domestic transaction undertaken 
on  or  after  the  1st  day  of  April,  2014,  shall  be  computed  in  such  manner  as  may  be  prescribed  and 
accordingly the first and second proviso shall not apply.] 

6[Explanation.—For  the  removal  of  doubts,  it  is  hereby  clarified  that  the  provisions  of  the  second 
proviso  shall  also  be  applicable  to  all  assessment  or  reassessment  proceedings  pending  before  an 
Assessing Officer as on the 1st day of October, 2009.] 

7[(2A) Where the first proviso to sub-section (2) as it stood before its amendment by the Finance (No. 
2) Act, 2009 (33 of 2009), is applicable in respect of an international transaction for an assessment year 
and the variation between the arithmetical mean referred to in the said proviso and the price at which such 
transaction has actually been undertaken exceeds five per cent of the arithmetical mean, then, the assessee 
shall not be entitled to exercise the option as referred to in the said proviso.] 

8[(2B) Nothing contained in sub-section (2A) shall empower the Assessing Officer either to assess or 
reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made 
or  otherwise  increasing  the  liability  of  the  assessee  under section  154 for  any  assessment  year  the 
proceedings of which have been completed before the 1st day of October, 2009.] 

(3) Where during the course of any proceeding for the assessment of income, the Assessing Officer is, 

on the basis of material or information or document in his possession, of the opinion that— 

(a)  the  price  charged  or paid in  an  1[internationaltransaction or  specified  domestic  transaction] 

has not been determined in accordance with sub-sections (1) and (2); or 

1. Subs. by Act 23 of 2012, s. 38, for “international transaction”  (w.e.f. 1-4-2013). 
2. Ins. by Act 33 of 2009, s. 41 (w.e.f. 1-10-2009). Earlier substituted by Act 20 of 2002, s. 41, for proviso (w.e.f. 1-4-2002). 
3. Subs. by Act 8 of 2011, s. 13, for “five per cent. of the latter” (w.e.f. 1-4-2012). 
4. Subs. by Act 23 of 2012, s. 37, for “does not exceed such percentage of latter as may be notified” (w.e.f. 1-4-2013) 
5. Ins. by Act 25 of 2014, s. 32 (w.e.f. 1-4-2015). 
6. Ins. by Act 23 of 2012, s. 37 (w.r.e.f. 1-10-2009). 
7. Ins. by s. 37, ibid.  (w.r.e.f. 1-4-2002). 
8. Ins. by Act 23 of 2012, s. 37 (w.e.f. 1-7-2012). 

444 

                                                           
(b)  any information and document relating to an 1[internationaltransaction or specified domestic 
transaction]  have  not  been  kept  and  maintained  by  the  assessee  in  accordance  with  the  provisions 
contained in sub-section (1) of section 92D and the rules made in this behalf; or 

(c)  the information or data used in computation of the arm's length price is not reliable or correct; 

or 

(d)   the  assessee  has  failed  to  furnish,  within  the  specified  time,  any  information  or  document 

which he was required to furnish by a notice issued under sub-section (3) of section 92D, 

the  Assessing  Officer  may  proceed  to  determine  the  arm's  length  price  in  relation  to  the  said 
1[internationaltransaction or specified domestic transaction] in accordance with sub-sections (1) and (2), 
on the basis of such material or information or document available with him: 

Provided that an opportunity shall be given by the Assessing Officer by serving a notice calling upon 
the assessee to show cause, on a date and time to be specified in the notice, why the arm's length price 
should not be so determined on the basis of material or information or document in the possession of the 
Assessing Officer. 

(4)  Where  an  arm’s  length  price  is  determined  by  the  Assessing  Officer  under  sub-section  (3),  the 
Assessing Officer may compute the total income of the assessee having regard to the arm's length price so 
determined: 

Provided that  no  deduction  under section  10A or  2[section  10AA] or section  10B or  under                     

Chapter  VI-A  shall  be  allowed  in  respect  of  the  amount  of  income  by  which  the  total  income  of  the 
assessee is enhanced after computation of income under this sub-section: 

Provided  further that  where  the  total  income  of  an  associated  enterprise  is  computed  under  this            

sub-section on determination of the arm’s length price paid to another associated enterprise from which 
tax  has  been  deducted  3[or  was  deductible]  under  the  provisions  of  Chapter  XVIIB,  the  income  of  the 
other associated enterprise shall not be recomputed by reason of such determination of arm's length price 
in the case of the first mentioned enterprise. 

4[92CA.Reference  to  Transfer  Pricing  Officer.—(1)  Where  any  person,  being  the  assessee,  has 
entered into an 1[international transaction or specified domestic] transaction in any previous year, and the 
Assessing  Officer  considers  it  necessary  or  expedient  so  to  do,  he  may,  with  the  previous  approval  of 
the 5[Principal  Commissioner  or  Commissioner],  refer  the  computation  of  the  arm’s  length  price  in 
relation to the said  1[international transaction or specified domestic] transaction under section 92C to the 
Transfer Pricing Officer. 

(2) Where a reference is made under sub-section (1), the Transfer Pricing Officer shall serve a notice 
on the assessee requiring him to produce or cause to be produced on a date to be specified therein, any 
evidence on which the assessee may rely in support of the computation made by him of the arm’s length 
price  in  relation  to  the  1[international  transaction  or  specified  domestic]  transaction  referred  to  in  sub-
section (1). 

6[(2A)  Where  any  other  international  transaction  [other  than  an  international  transaction  referred 
under  sub-section  (1),]  comes  to  the  notice  of  the  Transfer  Pricing  Officer  during  the  course  of  the 
proceedings  before  him,  the  provisions  of  this  Chapter  shall  apply  as  if  such  other  international 
transaction is an international transaction referred to him under sub-section (1).] 

7[(2B)  Where  in  respect  of  an  international  transaction,  the  assessee  has  not  furnished  the  report 
under section  92E and  such  transaction  comes  to  the  notice  of  the  Transfer  Pricing  Officer  during  the 
course of the proceeding before him, the provisions of this Chapter shall apply as if such transaction is an 
international transaction referred to him under sub-section (1).] 

1. Subs. by Act 23 of 2012, s. 38, for “international transaction” (w.e.f. 1-4-2013). 
2. Subs. by Act 21 of 2006, s. 21, for “section 10A or section 10M or section 10B” (w.e.f. 1-4-2007). 
3. Ins. by Act 20 of 2002, s. 41 (w.e.f. 1-4-2002).  
4. Ins. by s. 42, ibid. (1-6-2012). 
5. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.e.f. 1-6-2013). 
6. Ins. by Act 8 of 2011, s. 14 (w.e.f. 1-6-2011). 
7. Ins. by Act 23 of 2012, s. 39 (w.e.f. 1-6-2002). 

445 

                                                           
1[(2C) Nothing contained in sub-section (2B) shall empower the Assessing Officer either to assess or 
reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made 
or  otherwise  increasing  the  liability  of  the  assessee  under section  154,  for  any  assessment  year, 
proceedings for which have been completed before the 1st day of July, 2012.] 

(3) On the date specified in the notice under sub-section (2), or as soon thereafter as may be, after 
hearing such evidence as the assessee may produce, including any information or documents referred to 
in sub-section (3) of section 92D and after considering such evidence as the Transfer Pricing Officer may 
require on any specified points and after taking into account all relevant materials which he has gathered, 
the Transfer Pricing Officer shall, by order in writing, determine the arm's length price in relation to the 
2[internationaltransaction or specified domestic] transaction in accordance with sub-section (3) of section 
92C and send a copy of his order to the Assessing Officer and to the assessee. 

3[(3A)  Wherea  reference  was  made  under  sub-section  (1)  before  the  1st  day  of  June,  2007  but  the 
order under sub-section (3) has not been made by the Transfer Pricing Officer before the said date, or a 
reference under sub-section (1) is made on or after the 1st day of June, 2007, an order under sub-section 
(3) may be made at any time before sixty days prior to the date on which the period of limitation referred 
to  in section  153,  or  as  the  case  may  be,  in section  153B for  making  the  order  of  assessment  or 
reassessment or recomputation or fresh assessment, as the case may be, expires:] 

4[Provided that in the circumstances referred to in clause (ii) or clause (x) of Explanation 1 to section 
153, if the period of limitation available to the Transfer Pricing Officer for making an order is less than 
sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation 
shall be deemed to have been extended accordingly.] 

3[(4) On receipt of the order under sub-section (3), the Assessing Officer shall proceed to compute the 
total  income  of  the  assessee  under  sub-section  (4)  of section  92C in  conformity  with  the  arm’s  length 
price as so determined by the Transfer Pricing Officer.] 

(5) With a view to rectifying any mistake apparent from the record, the Transfer Pricing Officer may 
amend any order passed by him under sub-section (3), and the provisions of section 154 shall, so far as 
may be, apply accordingly. 

(6)  Where  any  amendment  is  made  by  the  Transfer  Pricing  Officer  under  sub-section  (5),  he  shall 
send  a  copy  of  his  order  to  the  Assessing  Officer  who  shall  thereafter  proceed  to  amend  the  order  of 
assessment in conformity with such order of the Transfer Pricing Officer. 

(7) The Transfer Pricing Officer may, for the purposes of determining the arm’s length price under 
this section, exercise all or any of the powers specified in clauses (a) to (d) of sub-section (1) ofsection 
131 or sub-section (6) of section 133 5[or section 133A]. 

Explanation.—For  the  purposes  of  this  section,  “Transfer  Pricing  Officer”  means  a  Joint 
Commissioner or Deputy Commissioner or Assistant Commissioner authorised by the Board to perform 
all  or  any  of  the  functions  of  an  Assessing  Officer  specified  in section  92C and 92D in  respect  of  any 
person or class of persons.] 

6[92CB.Power of Board to make safe harbour rules.—(1) The determination of arm’s length price 

under section 92C or section 92CA shall be subject to safe harbour rules. 

(2) The Board may, for the purposes of sub-section (1), make rules for safe harbour. 

Explanation.—For  the  purposes  of  this  section,  “safe  harbour”  means  circumstances  in  which  the 

income-tax authorities shall accept the transfer price declared by the assessee.] 

1. Ins. by Act 23 of 2012, s. 39 (w.e.f. 1-7-2012). 
2. Subs. by s. 38, ibid., for “international transaction” (w.e.f. 1-4-2013). 
3. Ins. by Act 22 of 2007, s. 33 (w.e.f. 1-6-2007). 
4. Ins. by Act 28 of 2016, s. 47 (w.e.f. 1-6-2016). 
5. Ins. by Act 8 of 2011, s. 14 (w.e.f. 1-6-2011). 
6. Ins. by Act 33 of 2009, s. 41 (w.e.f. 1-4-2009). 

446 

                                                           
1[92CC.  Advance  pricing  agreement.—(1)  The  Board,  with  the  approval  of  the  Central 
Government, may enter into an advance pricing agreement with any person, determining the arm’s length 
price  or  specifying  the  manner  in  which  arm’s  length  price  is  to  be  determined,  in  relation  to  an 
international transaction to be entered into by that person. 

(2) The manner of determination of arm’s length price referred to in sub-section (1), may include the 
methods  referred  to  in  sub-section  (1)  of section  92C or  any  other  method,  with  such  adjustments  or 
variations, as may be necessary or expedient so to do.  

(3) Notwithstanding anything contained in section 92C or section 92CA, the arm’s length price of any 
international transaction, in respect of which the advance pricing agreement  has been entered into, shall 
be determined in accordance with the advance pricing agreement so entered. 

(4)  The  agreement  referred  to  in  sub-section  (1)  shall  be  valid  for  such  period  not  exceeding  five 

consecutive previous years as may be specified in the agreement. 

(5) The advance pricing agreement entered into shall be binding— 

(a)  on  the  person  in  whose  case,  and  in  respect  of  the  transaction  in  relation  to  which,  the 

agreement has been entered into; and 

(b) on 

the 2[Principal  Commissioner  or]  Commissioner,  and 

the 

income-tax  authorities 

subordinate to him, in respect of the said person and the said transaction. 

(6) The  agreement  referred  to in  sub-section  (1)  shall  not  be  binding  if there is  a  change in  law  or 

facts having bearing on the agreement so entered. 

(7) The Board may, with the approval of the Central Government, by an order, declare an agreement 
to  be void  abinitio,  if  it  finds  that  the  agreement  has  been  obtained  by  the  person  by  fraud  or 
misrepresentation of facts. 

(8) Upon declaring the agreement void ab initio,— 

(a) all  the  provisions  of the  Act shall apply  to  the  person as if such agreement had  never been 

entered into; and 

(b)  notwithstanding  anything  contained  in  the  Act, for  the  purpose  of  computing  any  period  of 
limitation under this Act, the period beginning with the date of such agreement and ending on the date 
of order under sub-section (7) shall be excluded: 

Provided that  where  immediately  after  the  exclusion  of  the  aforesaid  period,  the  period  of 
limitation, referred to in any provision of this Act, is less than sixty days, such remaining period shall 
be  extended  to  sixty  days  and  the  aforesaid  period  of  limitation  shall  be  deemed  to  be  extended 
accordingly. 

(9)  The  Board  may,  for  the  purposes  of  this  section,  prescribe a  scheme  specifying  therein  the 

manner, form, procedure and any other matter generally in respect of the advance pricing agreement. 

1. Ins. by Act 23 of 2012, s. 40 (w.e.f. 1-7-2012). 
2. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.e.f. 1-6-2013). 

447 

                                                           
1[(9A) The agreement referred to in sub-section (1), may, subject to such conditions, procedure and 
manner  as  may  be  prescribed,  provide  for  determining  the  arm’s  length  price  or  specify  the  manner  in 
which arm’s length price shall be determined in relation to the international transaction entered into by 
the person during any period not exceeding four previous years preceding the first of the previous years 
referred  to  in  sub-section  (4),  and  the  arm’s  length  price  of  such  international  transaction  shall  be 
determined in accordance with the said agreement.] 

(10)  Where  an  application  is  made  by  a  person  for  entering  into  an  agreement  referred  to  in  sub-
section (1), the proceeding shall be deemed to be pending in the case of the person for the purposes of the 
Act. 

92CD.  Effect  to  advance  pricing  agreement.—(1)  Notwithstanding  anything  to  the  contrary 
contained in section 139, where any person has entered into an agreement and prior to the date of entering 
into the agreement, any return of income has been furnished under the provisions of section 139 for any 
assessment year relevant to a previous year to which such agreement applies, such person shall furnish, 
within a period of three months from the end of the month in which the said agreement was entered into, a 
modified return in accordance with and limited to the agreement. 

(2) Save as otherwise provided in this section, all other provisions of this Act shall apply accordingly 

as if the modified return is a return furnished under section 139. 

(3) If the assessment or reassessment proceedings for an assessment year relevant to a previous year 
to which the agreement applies have been completed before the expiry of period allowed for furnishing of 
modified return under sub-section (1), the Assessing Officer shall, in a case where modified return is filed 
in accordance with the provisions of sub-section (1), proceed to assess or reassess or recompute the total 
income of the relevant assessment year having regard to and in accordance with the agreement. 

(4) Where the assessment or reassessment proceedings for an assessment year relevant to the previous 
year to which the agreement applies are pending on the date of filing of modified return in accordance 
with the provisions of sub-section (1), the Assessing Officer shall proceed to complete the assessment or 
reassessment proceedings in accordance with the agreement taking into consideration the modified return 
so furnished. 

(5) Notwithstanding anything contained in section 153 or section 153B or section 144C,— 

(a) the order of assessment, reassessment or recomputation of total income under sub-section (3) 
shall be passed within a period of one year from the end of the financial year in which the modified 
return under sub-section (1) is furnished; 

(b)  the  period  of  limitation  as  provided  in section  153 or section  153B or section  144C for 
completion of pending assessment or reassessment proceedings referred to in sub-section (4) shall be 
extended by a period of twelve months. 

(6) For the purposes of this section,— 

(i) “agreement” means an agreement referred to in sub-section (1) of section 92CC; 

(ii) the assessment or reassessment proceedings for an assessment year shall be deemed to have 

been completed where— 

(a) an assessment or reassessment order has been passed; or 

1. Ins. by Act 25 of 2014, s. 33 (w.e.f. 1-10-2014). 

448 

                                                           
(b)  no  notice  has  been  issued  under  sub-section  (2)  of section  143 till  the  expiry  of  the 

limitation period provided under the said section.] 

1[92CE.  Secondary  adjustment  in  certain  cases.—(1)  Where  a  primary  adjustment  to  transfer 

price,— 

(i) has been made suomotu by the assessee in his return of income; 

(ii) made by the Assessing Officer has been accepted by the assessee; 

(iii)  is  determined  by  an  advance  pricing  agreement  entered  into  by  the  assessee  under  section 

92CC; 

(iv) is made as per the safe harbour rules framed under section 92CB; or 

(v) is arising as a result of resolution of an assessment by way of the mutual agreement procedure 

under an agreement entered into under section 90 or section 90A for avoidance of double taxation, 

the assessee shall make a secondary adjustment: 

Provided that nothing contained in this section shall apply, if,— 

(i)  the  amount  of  primary  adjustment  made  in  any  previous  year  does  not  exceed  one  crore 

rupees; and 

(ii) the primary adjustment is made in respect of an assessment year commencing on or before the 

1st day of April, 2016. 

(2)  Where,  as  a  result  of  primary  adjustment  to  the  transfer  price,  there  is  an  increase  in  the  total 
income or reduction in the loss, as the case may be, of the assessee, the excess money which is available 
with  its  associated  enterprise,  if  not  repatriated  to  India  within  the  time  as  may  be  prescribed,  shall  be 
deemed  to  be  an  advance  made  by  the  assessee  to  such  associated  enterprise  and  the  interest  on  such 
advance, shall be computed in such manner as may be prescribed. 

(3) For the purposes of this section,— 

(i)  “associated  enterprise”  shall  have  the  meaning  assigned  to  it  in  sub-section  (1)  and                      

sub-section (2) of section 92A; 

(ii) “arm’s length price” shall have the meaning assigned to it in clause (ii) of section 92F; 

(iii) “excess money” means the difference between the arm’s length price determined in primary 

adjustment and the price at which the international transaction has actually been undertaken; 

(iv)  “primary  adjustment”  to  a  transfer  price,  means  the  determination  of  transfer  price  in 
accordance with the arm’s length principle resulting in an increase in the total income or reduction in 
the loss, as the case may be, of the assessee; 

(v) “secondary adjustment” means an adjustment in the books of account of the assessee and its 
associated  enterprise  to  reflect  that  the  actual  allocation  of  profits  between  the  assessee  and  its 
associated  enterprise  are  consistent  with  the  transfer  price  determined  as  a  result  of  primary 
adjustment, thereby removing the imbalance between cash account and actual profit of the assessee.] 

1. Ins. by Act 7 of 2017, s. 42 (w.e.f. 1-4-2018). 

449 

                                                           
92D.  Maintenance  and  keeping  of  information  and  document  by  persons  entering  into  an 
1[international transaction or specified domestic transaction].—(1) Every person who has entered into 
an 1[international transaction or specified domestic transaction] shall keep and maintain such information 
and document in respect thereof, as may be prescribed. 

2[Provided thatthe  person,  being  a  constituent  entity  of  an  international  group,  shall  also  keep  and 

maintain such information and document in respect of an international group as may be prescribed. 

Explanation.—For the purposes of this section,— 

(A)  “constituent  entity”  shall  have  the  meaning  assigned  to  it  in  clause  (d)  of  sub-section  (9) 

of section 286; 

(B)  “international  group”  shall  have  the  meaning  assigned  to  it  in  clause  (g)  of  sub-section  (9) 

of section 286.] 

(2)  Without  prejudice  to  the  provisions  contained  in  sub-section  (1),  the  Board  may  prescribe  the 

period for which the information and document shall be kept and maintained under that sub-section. 

(3) The Assessing Officer or the Commissioner (Appeals) may, in the course of any proceeding under 
this  Act,  require  any  person  who  has  entered  into  an  1[international  transaction  or  specified  domestic 
transaction] to furnish any information or document in respect thereof, as may be prescribed under sub-
section (1), within a period of thirty days from the date of receipt of a notice issued in this regard: 

Provided that the Assessing Officer or the Commissioner (Appeals) may, on an application made by 

such person, extend the period of thirty days by a further period not exceeding thirty days. 

2[(4)  Withoutprejudice  to  the  provisions  of  sub-section  (3),  the  person  referred  to  in  the  proviso  to 
sub-section (1) shall furnish the information and document referred to in the said proviso to the authority 
prescribed  under  sub-section  (1)  of section  286,  in  such  manner,  on  or  before  the  date,  as  may  be 
prescribed.] 

specified  domestic 

92E.Report  from  an  accountant  to  be  furnished  by  persons  entering  into  1[international 
transaction  or 
into 
an1[internationaltransaction or specified domestic transaction] during a previous year shall obtain a report 
from  an  accountant and furnish  such report  on  or  before the  specified  date  in  the  prescribed form  duly 
signed and verified in the prescribed manner by such accountant and setting forth such particulars as may 
be prescribed. 

transaction].—Every  person  who  has 

entered 

92F.Definitions of certain terms relevant to computation of arm’s length price, etc.—In section 

92, 92A, 92B, 92C, 92D and 92E, unless the context otherwise requires,— 

(i)  “accountant”  shall  have  the  same  meaning  as  in  the Explanation below  sub-section  (2)  of 

section 288; 

(ii) “arm’s length price” means a price which is applied or proposed to be applied in a transaction 

between persons other than associated enterprises, in uncontrolled conditions; 

(iii) “enterprise” means a person (including a permanent establishment of such person) who is, or 
has  been,  or  is  proposed to  be,  engaged  in  any  activity,  relating  to  the  production,  storage,  supply, 
distribution,  acquisition  or  control  of  articles  or  goods,  or  know-how,  patents,  copyrights,  trade-
marks, licences, franchises or any other business or commercial rights of similar nature, or any data, 
documentation,  drawing  or  specification  relating  to  any  patent,  invention,  model,  design,  secret 
formula  or  process,  of  which  the  other  enterprise  is  the  owner  or  in  respect  of  which  the  other 

1. Subs. by Act 23 of 2012, s.  38, for “international transaction” (w.e.f. 1-3-2013). 
2. Ins. by Act 28 of 2016, s. 48 (w.e.f. 1-4-2017). 

450 

                                                           
enterprise has exclusive rights, or the provision of services of any kind, 1[or in carrying out any work 
in  pursuance  of  a  contract,]  or  in  investment,  or  providing  loan  or  in  the  business  of  acquiring, 
holding,  underwriting  or  dealing  with  shares,  debentures  or  other  securities  of  any  other  body 
corporate, whether such activity or business is carried on, directly or through one or more of its units 
or divisions or subsidiaries, or whether such unit or division or subsidiary is located at the same place 
where the enterprise is located or at a different place or places; 

1[(iiia) “permanent  establishment”,  referred to in  clause  (iii), includes  a  fixed  place  of  business 

through which the business of the enterprise is wholly or partly carried on;] 

2[(iv)  “specified  date”  shall  have  the  same  meaning  as  assigned  to  “due  date”  in Explanation 

2 below sub-section (1) of section 139; 

(v)  “transaction” includes an arrangement, understanding or action in concert,— 

(A)  whether or not such arrangement, understanding or action is formal or in writing; or 

(B)  whether or not such arrangement, understanding or action is intended to be enforceable 

by legal proceeding.] 

93. Avoidance of income-tax by transactions resulting in transfer of income to non-residents.—
(1) Where there is a transfer of assets by virtue or in consequence whereof, either alone or in conjunction 
with associated operations, any income becomes payable to a non-resident, the following provisions shall 
apply— 

(a)   where  any  person  has,  by  means  of  any  such  transfer,  either  alone  or  in  conjunction  with 
associated  operations,  acquired  any  rights  by  virtue  of  which  he  has,  within  the  meaning  of  this 
section,  power  to  enjoy,  whether  forthwith  or  in  the  future,  any  income  of  a  non-resident  person 
which,  if  it  were  income  of  the  first-mentioned  person,  would  be  chargeable  to  income-tax,  that 
income  shall,  whether  it  would  or  would  not  have  been  chargeable  to  income-tax  apart  from  the 
provisions of this section, be deemed to be income of the first-mentioned person for all the purposes 
of this Act; 

(b)  where, whether before or after any such transfer, any such first-mentioned person receives or 
is entitled to receive any capital sum the payment whereof is in any way connected with the transfer 
or  any  associated  operations,  then  any  income  which,  by  virtue  or  in  consequence  of  the  transfer, 
either alone or in conjunction with associated operations, has become the income of a non-resident 
shall, whether it would or would not have been chargeable to income-tax apart from the provisions of 
this section, be deemed to be the income of the first-mentioned person for all the purposes of this Act. 

Explanation.—The provisions of this sub-section shall apply also in relation to transfers of assets and 

associated operations carried out before the commencement of this Act. 

(2)  Where  any  person  has  been  charged  to  income-tax  on  any  income  deemed  to  be  his  under  the 
provisions of this section and that income is subsequently received by him, whether as income or in any 
other form, it shall not again be deemed to form part of his income for the purposes of this Act. 

(3)  The  provisions  of  this  section  shall  not  apply  if  the  first-mentioned  person  in  sub-section  (1) 

shows to the satisfaction of the 3[Assessing Officer] that— 

(a)  neither the transfer nor any associated operation had for its purpose or for one of its purposes 

the avoidance of liability to taxation; or 

(b)   the  transfer  and  all  associated  operations  were bona  fide commercial  transactions  and  were 

not designed for the purpose of avoiding liability to taxation. 

1. Ins. by Act 20 of 2002, s. 43 (w.e.f. 1-4-2002). 
2. Subs. by s. 43, ibid., for clause (iv) (w.e.f. 1-4-2002). 
3. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 

451 

                                                           
Explanation.—For the purposes of this section,— 

(a)   references  to  assets  representing  any  assets,  income  or  accumulations  of  income  include 
references to shares in or obligation of any company to which, or obligation of any other person to 
whom, those assets, that income or those accumulations are or have been transferred; 

(b)  any body corporate incorporated outside India shall be treated as if it were a non-resident; 

(c)  a person shall be deemed to have power to enjoy the income of a non-resident if— 

(i)  the income is in fact so dealt with by any person as to be calculated at some point of time 
and, whether in the form of income or not, to ensure for the benefit of the first-mentioned person 
in sub-section (1), or 

(ii)  the receipt or accrual of the income operates to increase the value to such first-mentioned 

person of any assets held by him or for his benefit, or 

(iii)  such  first-mentioned  person  receives  or  is  entitled  to  receive  at  any  time  any  benefit 
provided or to be provided out of that income or out of moneys which are or will be available for 
the  purpose  by  reason  of  the  effect  or  successive  effects  of  the  associated  operations  on  that 
income and assets which represent that income, or 

(iv)   such  first-mentioned  person  has  power  by  means  of  the  exercise  of  any  power  of 
appointment or power of revocation or otherwise to obtain for himself, whether with or without 
the consent of any other person, the beneficial enjoyment of the income, or 

(v)  such first-mentioned  person is  able, in  any  manner  whatsoever  and  whether  directly  or 

indirectly, to control the application of the income; 

(d)  in  determining  whether  a  person  has  power  to  enjoy  income,  regard  shall  be  had  to  the 
substantial result and effect of the transfer and any associated operations, and all benefits which may 
at  any  time  accrue  to such  person  as a  result  of  the  transfer  and any  associated  operations shall be 
taken into account irrespective of the nature or form of the benefits. 

(4) (a) “Assets” includes property or rights of any kind and “transfer” in relation to rights includes the 

creation of those rights; 

(b) “associated operation”, in relation to any transfer, means an operation of any kind effected by any 

person in relation to— 

 (i)  any of the assets transferred, or 

(ii)  any assets representing, whether directly or indirectly, any of the assets transferred, or 

(iii)  the income arising from any such assets, or 

(iv)  any assets representing, whether directly or indirectly, the accumulations of income arising 

from any such assets; 

(c) “benefit” includes a payment of any kind; 

(d) “capital sum” means— 

 (i)  any sum paid or payable by way of a loan or repayment of a loan; and 

(ii)  any other sum paid or payable otherwise than as income, being a sum which is not paid or 

payable for full consideration in money or money’s worth. 

94. Avoidance of tax by certain transactions in securities.—(1) Where the owner of any securities 
[in this sub-section and in sub-section (2) referred to as “the owner”] sells or transfers those securities, 
and  buys  back  or  reacquires  the  securities,  then,  if  the  result  of  the  transaction  is  that  any  interest 
becoming  payable  in  respect  of  the  securities  is  receivable  otherwise  than  by  the  owner,  the  interest 
payable as aforesaid shall, whether it would or would not have been chargeable to income-tax apart from 
the  provisions  of  this  sub-section,  be  deemed,  for  all  the  purposes  of  this  Act, to  be  the  income  of  the 
owner and not to be the income of any other person. 

452 

 
Explanation.—The references in this sub-section to buying back or reacquiring the securities shall be 
deemed  to  include references  to  buying  or  acquiring  similar  securities,  so,  however,  that  where  similar 
securities  are  bought  or  acquired,  the  owner  shall  be  under  no  greater  liability  to  income-tax  than  he 
would have been under if the original securities had been bought back or reacquired. 

(2)  Where  any  person  has  had  at  any  time  during  any  previous  year  any  beneficial  interest  in  any 
securities,  and  the  result  of  any  transaction  relating  to  such  securities  or  the  income  thereof  is  that,  in 
respect of such securities within such year, either no income is received by him or the income received by 
him is less than the sum to which the income would have amounted if the income from such securities 
had accrued from day to day and been apportioned accordingly, then the income from such securities for 
such year shall be deemed to be the income of such person. 

(3)  The  provisions  of  sub-section  (1)  or  sub-section  (2)  shall  not  apply  if  the  owner,  or  the  person 
who has had a beneficial interest in the securities, as the case may be, proves to the satisfaction of the 
1[Assessing Officer]— 

(a)  that there has been no avoidance of income-tax, or 

(b)  that the avoidance of income-tax was exceptional and not systematic and that there was not in 
his  case  in  any  of  the  three  preceding  years  any  avoidance  of  income-tax  by  a  transaction  of  the 
nature referred to in sub-section (1) or sub-section (2). 

(4) Where any person carrying on a business which consists wholly or partly in dealing in securities, 
buys  or  acquires  any  securities  and  sells  back  or  retransfers  the  securities,  then,  if  the  result  of  the 
transaction is that interest becoming payable in respect of the securities is receivable by him but is not 
deemed  to  be  his  income  by  reason  of  the  provisions  contained  in  sub-section (1),  no  account  shall  be 
taken of the transaction in computing for any of the purposes of this  Act the profits arising from or loss 
sustained in the business. 

(5) Sub-section (4) shall have effect, subject to any necessary modifications, as if references to selling 

back or retransferring the securities included references to selling or transferring similar securities. 

(6) The 1[Assessing Officer] may, by notice in writing, require any person to furnish him within such 
time as he may direct (not being less than twenty-eight days), in respect of all securities of which such 
person was the owner or in which he had a beneficial interest at any time during the period specified in 
the notice, such particulars as he considers necessary for the purposes of this section and for the purpose 
of discovering whether income-tax has been borne in respect of the interest on all those securities. 

2[(7) Where— 

(a)  any person buys or acquires any securities or unit within a period of three months prior to the 

record date; 

3[(b)  such person sells or transfers— 

 (i)  such securities within a period of three months after such date; or 

 (ii)  such unit within a period of nine months after such date;] 

(c)   the  dividend  or  income  on  such  securities  or  unit  received  or  receivable  by  such  person  is 

exempt, 

then, the loss, if any, arising to him on account of such purchase and sale of securities or unit, to the 
extent such  loss does  not exceed  the amount  of  dividend  or income  received  or  receivable  on such 
securities or unit, shall be ignored for the purposes of computing his income chargeable to tax.] 

1. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2. Ins. by Act 14 of 2001, s. 50 (w.e.f. 1-4-2002). 
3. Subs. by Act 23 of 2004, s. 25, for clause (b) (w.e.f. 1-4-2005). 

453 

 
 
                                                           
1[(8) Where— 

(a) any person buys or acquires any units within a period of three months prior to the record date; 

(b) such person is allotted additional units without any payment on the basis of holding of such 

units on such date; 

(c) such person sells or transfers all or any of the units referred to in clause (a) within a period of 
nine months after such date, while continuing to hold all or any of the additional units referred to in 
clause (b), 

then, the loss, if any, arising to him on account of such purchase and sale of all or any of such units shall 
be  ignored  for  the  purposes  of  computing  his  income  chargeable  to  tax  and  notwithstanding  anything 
contained in any other provision of this Act, the amount of loss so ignored shall be deemed to be the cost 
of purchase or acquisition of such additional units referred to in clause (b) as are held by him on the date 
of such sale or transfer.] 

Explanation.—For the purposes of this section,— 

(a)  “interest” includes a dividend; 
2[(aa) “record date” means such date as may be fixed by— 

(i) a  company  for  the  purposes  of  entitlement  of  the  holder  of  the  securities  to  receive 

dividend; or 

(ii)   a  Mutual  Fund  or  the  Administrator  of  the  specified  undertaking  or  the  specified 
company  as  referred  to  in  the Explanation to  clause  (35)  of section  10,  for  the  purposes  of 
entitlement  of  the  holder  of  the  units  to  receive  income,  or  additional  unit  without  any 
consideration, as the case may be; 

(b)  “securities” includes stocks and shares; 

(c)  securities shall be deemed to be similar if they entitle their holders to the same rights against 
the same persons as to capital and interest and the same remedies for the enforcement of those rights, 
notwithstanding any difference in the total nominal amounts of the respective securities or in the form 
in which they are held or in the manner in which they can be transferred; 

2[(d) “unit”  shall  have  the  meaning  assigned  to  it  in  clause  (b)  of  the Explanation to section 

115AB.] 
3[94A. Special measures in respect of transactions with persons located in notified jurisdictional 
area.—(1) The Central Government may, having regard to the lack of effective exchange of information 
with any country or territory outside India, specify by notification in the Official Gazette such country or 
territory as a notified jurisdictional area in relation to transactions entered into by any assessee. 

(2)  Notwithstanding  anything  to  the  contrary  contained  in  this  Act,  if  an  assessee  enters  into  a 
transaction where one of the parties to the transaction is a person located in a notified jurisdictional area, 
then— 

 (i)   all  the  parties  to  the  transaction  shall  be  deemed  to  be  associated  enterprises  within  the 

meaning of section 92A; 

(ii)  any transaction in the nature of purchase, sale or lease of tangible or intangible property or 
provision of service or lending or borrowing money or any other transaction having a bearing on the 
profits,  income,  losses  or  assets  of  the  assessee  including  a  mutual  agreement  or  arrangement  for 
allocation or apportionment of, or any contribution to, any cost or expense incurred or to be incurred 
in connection with a benefit, service or facility provided or to be provided by or to the assessee shall 
be deemed to be an international transaction within the meaning of section 92B, 

and  the  provisions  of sections  92,  92A,  92B,  92C except  the  second  proviso  to  sub-section 
(2), 92CA,92CB, 92CD, 92E and 92F shall apply accordingly. 

1. Ins. by Act 23 of 2004, s. 25 (w.e.f. 1-4-2005). 
2. Ins. by Act 14 of 2001, s. 50 (w.e.f. 1-4-2002). 
3. Ins. by Act 8 of 2011, s. 15 (w.e.f. 1-6-2011). 

454 

                                                           
(3) Notwithstanding anything to the contrary contained in this Act, no deduction,— 

(a)  in respect of any payment made to any financial institution located in a notified jurisdictional 
area  shall  be  allowed  under  this  Act,  unless  the  assessee  furnishes  an  authorisation  in  the 
prescribedform  authorisingthe  Board  or  any  other  income-tax  authority  acting  on  its  behalf  to  seek 
relevant information from the said financial institution on behalf of such assessee; and 

(b)   in  respect  of  any  other  expenditure  or  allowance  (including  depreciation)  arising  from  the 
transaction  with  a  person  located  in  a  notified  jurisdictional  area  shall  be  allowed  under  any  other 
provision  of  this  Act,  unless  the  assessee  maintains  such  other  documents  and  furnishes  such 
information as may be prescribed, in this behalf. 

(4) Notwithstanding anything to the contrary contained in this Act, where, in any previous  year, the 
assessee has received or credited any sum from any person located in a notified jurisdictional area and the 
assessee does not offer any explanation about the source of the said sum in the hands of such person or in 
the  hands  of  the  beneficial  owner  (if  such  person  is  not  the  beneficial  owner  of  the  said  sum)  or  the 
explanation offered by the assessee, in the opinion of the Assessing Officer, is not satisfactory, then, such 
sum shall be deemed to be the income of the assessee for that previous year. 

(5) Notwithstanding anything contained in any other provisions of this Act, where any person located 
in  a  notified  jurisdictional  area  is  entitled  to  receive  any  sum  or  income  or  amount  on  which  tax  is 
deductible  under  Chapter  XVIIB,  the  tax  shall  be  deducted  at  the  highest  of  the  following  rates, 
namely:— 

(a)  at the rate or rates in force; 

(b)  at the rate specified in the relevant provisions of this Act; 

(c)  at the rate of thirty per cent. 

(6) In this section,— 

 (i)  “person located in a notified jurisdictional area” shall include,— 

(a)  a person who is resident of the notified jurisdictional area; 

(b)  a person, not being an individual, which is established in the notified jurisdictional area; 

or 

(c)  a permanent establishment of a person not falling in sub-clause (a) or sub-clause (b), in 

the notified jurisdictional area; 

(ii)  “permanent establishment” shall have the same meaning as defined in clause (iiia) of section 

92F; 

(iii) “transaction” shall have the same meaning as defined in clause (v) of section 92F.] 

1[94B. Limitation on interest deduction in certain cases.––(1) Notwithstanding anything contained 
in this Act, where an Indian company, or a permanent establishment of a foreign company in India, being 
the borrower, incurs any expenditure by way of interest or of similar nature exceeding one crore rupees 
which  is  deductible  in  computing  income  chargeable  under  the  head  “Profits  and  gains  of  business  or 
profession”  in  respect  of  any  debt  issued  by  a  nonresident,  being  an  associated  enterprise  of  such 
borrower, the interest shall not be deductible in computation of income under the said head to the extent 
that it arises from excess interest, as specified in sub-section (2): 

Provided that where the debt is issued by a lender which is not associated but an associated enterprise 
either provides an implicit or explicit guarantee to such lender or deposits a corresponding and matching 
amount  of  funds  with  the  lender,  such  debt  shall  be  deemed  to  have  been  issued  by  an  associated 
enterprise. 

1. Ins. by Act 7 of 2017, s. 43 (w.e.f. 1-4-2018). 

455 

                                                           
(2) For the purposes of sub-section (1), the excess interest shall mean an amount of total interest paid 
or payable in excess of thirty per cent. of earnings before interest, taxes, depreciation and amortisation of 
the  borrower in the  previous  year  or interest  paid  or payable to  associated  enterprises for  that previous 
year, whichever is less. 

(3)  Nothing  contained  in  sub-section  (1)  shall  apply  to  an  Indian  company  or  a  permanent 

establishment of a foreign company which is engaged in the business of banking or insurance. 

(4)  Where  for  any  assessment  year, the interest expenditure is  not  wholly  deducted against  income 
under the head “Profits and gains of business or profession”, so much of the interest expenditure as has 
not been so deducted, shall be carried forward to the following assessment year or assessment years, and 
it  shall  be  allowed  as  a  deduction  against  the  profits  and  gains,  if  any,  of  any  business  or  profession 
carried  on  by  it  and  assessable  for  that  assessment  year  to  the  extent  of  maximum  allowable  interest 
expenditure in accordance with sub-section (2): 

Provided  that  no  interest  expenditure  shall  be  carried  forward  under  this  sub-section  for  more  than 
eight  assessment  years  immediately  succeeding  the  assessment  year  for  which  the  excess  interest 
expenditure was first computed. 

(5) For the purposes of this section, the expressions–– 

(i) “associated enterprise” shall have the meaning assigned to it in sub-section (1) and sub-section 

(2) of section 92A; 

(ii)  “debt”  means  any  loan,  financial  instrument,  finance  lease,  financial  derivative,  or  any 
arrangement  that  gives rise  to  interest,  discounts  or other finance  charges  that are  deductible in the 
computation of income chargeable under the head “Profits and gains of business or profession”; 

(iii) “permanent establishment” includes a fixed place of business through which the business of 

the enterprise is wholly or partly carried on.’.] 

1[CHAPTER XA 

GENERAL ANTI-AVOIDANCE RULE 

95.  Applicability  of  GeneralAnti-Avoidance  Rule.—2[(1)] Notwithstanding  anything  contained  in 
the Act, an arrangement entered into by an assessee may be declared to be an impermissible avoidance 
arrangement and the consequence in relation to tax arising therefrom  may be determined subject to the 
provisions of this Chapter. 

3[(2) This Chapter shall apply in respect of any assessment year beginning on or after the 1st day of 

April, 2018.] 

Explanation.—For  the  removal  of  doubts,  it  is  hereby  declared  that  the  provisions  of  this  Chapter 

may be applied to any step in, or a part of, the arrangement as they are applicable to the arrangement. 

96.  Impermissible  avoidance  arrangement.—(1) An  impermissible  avoidance  arrangement  means 

an arrangement, the main purpose of which is to obtain a tax benefit, and it— 

(a) creates  rights,  or  obligations,  which  are  not  ordinarily  created  between  persons  dealing  at 

arm’s length; 

(b) results, directly or indirectly, in the misuse, or abuse, of the provisions of this Act; 

(c) lacks commercial substance or is deemed to lack commercial substance under section 97, in 

whole or in part; or 

1. Ins. by Act 17 of 2013, s. 26 (w.e.f. 1-4-2016). Earlier inserted by Act 23 of 2012, s. 41 (w.e.f. 1-4-2014) 
2. Section 95 renumbered as sub-section (1) thereof by Act 20 of 2015, s. 26 (w.e.f. 1-4-2015).  
3. Ins. by s. 26, ibid. (w.e.f. 1-4-2015). 

456 

                                                           
(d)  is entered into, or carried out, by means, or in a manner, which are not ordinarily employed 

for bona fide purposes. 

(2)  An  arrangement  shall  be  presumed,  unless  it  is  proved  to  the  contrary  by  the  assessee,  to  have 
been entered into, or carried out, for the main purpose of obtaining a tax benefit, if the main purpose of a 
step  in,  or  a  part  of,  the  arrangement  is  to  obtain  a  tax  benefit,  notwithstanding  the  fact  that  the  main 
purpose of the whole arrangement is not to obtain a tax benefit. 

97.  Arrangement  to  lack  commercial  substance.—(1) An  arrangement  shall  be  deemed  to  lack 

commercial substance, if— 

(a)   the  substance  or  effect  of  the  arrangement  as  a  whole,  is  inconsistent  with,  or  differs 

significantly from, the form of its individual steps or a part; or 

(b)  it involves or includes— 

 (i) round trip financing; 

 (ii)  an accommodating party; 

(iii) elements that have effect of offsetting or cancelling each other; or 

(iv)  a transaction which is conducted through one or more persons and disguises the value, 
location, source, ownership or control of funds which is the subject matter of such transaction; or 

(c)  it involves the location of an asset or of a transaction or of the place of residence of any party 
which is without any substantial commercial purpose other than obtaining a tax benefit (but for the 
provisions of this Chapter) for a party; or 

(d)  it does not have a significant effect upon the business risks or net cash flows of any party to 
the arrangement apart from any effect attributable to the tax benefit that would be obtained (but for 
the provisions of this Chapter). 

(2)  For  the  purposesof  sub-section  (1), round  trip  financing  includes  any  arrangement  in  which, 

through a series of transactions— 

(a)  funds are transferred among the parties to the arrangement; and 

(b)   such transactions  do  not  have  any  substantial  commercial  purpose  other than  obtaining  the 

tax benefit (but for the provisions of this Chapter), 

without having any regard to— 

(A) whether  or  not  the  funds  involved  in  the  round  trip  financing  can  be  traced  to  any  funds 

transferred to, or received by, any party in connection with the arrangement; 

(B)  the time, or sequence, in which the funds involved in the round trip financing are transferred 

or received; or 

(C)   the  means  by,  or  manner  in,  or  mode  through,  which  funds  involved  in  the  round  trip 

financing are transferred or received. 

(3) For the purposes of this Chapter, a party to an arrangement shall be an accommodating party, if 
the  main purpose  of the  direct  or  indirect  participation  of that party  in the  arrangement,  in  whole  or  in 
part,  is  to  obtain,  directly  or  indirectly,  a  tax  benefit  (but  for  the  provisions  of  this  Chapter)  for  the 
assessee whether or not the party is a connected person in relation to any party to the arrangement. 

(4) For the removal of doubts, it is hereby clarified that the following may be relevant but shall not be 

sufficient for determining whether an arrangement lacks commercial substance or not, namely:— 

(i) the period or time for which the arrangement (including operations therein) exists; 

(ii)  the fact of payment of taxes, directly or indirectly, under the arrangement; 

457 

(iii)  the  fact  that  an  exit  route  (including  transfer  of  any  activity  or  business  or  operations)  is 

provided by the arrangement. 

98. Consequences of impermissible avoidance arrangement.—(1) If an arrangement is declared to 
be  an  impermissible  avoidance  arrangement,  then,  the  consequences,  in  relation  to  tax,  of  the 
arrangement, including denial of tax benefit or a benefit under a tax treaty, shall be determined, in such 
manner as is deemed appropriate, in the circumstances of the case, including by way of but not limited to 
the following, namely:— 

(a)  disregarding,  combining  or  recharacterising  any  step  in,  or  a  part  or  whole  of,  the 

impermissible avoidance arrangement; 

(b) treating the impermissible avoidance arrangement as if it had not been entered into or carried 

out; 

(c)  disregarding  any  accommodating  party  or  treating  any  accommodating  party  and  any  other 

party as one and the same person; 

(d) deeming persons who are connected persons in relation to each other to be one and the same 

person for the purposes of determining tax treatment of any amount; 

(e) reallocating amongst the parties to the arrangement— 

(i) any accrual, or receipt, of a capital nature or revenue nature; or 

(ii) any expenditure, deduction, relief or rebate; 

(f) treating— 

(i)  the place of residence of any party to the arrangement; or 

(ii)  thesitus of an asset or of a transaction, 

at  a  place  other  than  the  place  of  residence,  location  of  the  asset  or  location  of  the  transaction  as 
provided under the arrangement; or 

(g)  considering or looking through any arrangement by disregarding any corporate structure. 

(2) For the purposes of sub-section (1),— 

 (i) any equity may be treated as debt or vice versa; 

 (ii) any  accrual,  or  receipt,  of  a  capital  nature  may  be  treated  as  of  revenue  nature  or vice 

versa; or 

(iii) any expenditure, deduction, relief or rebate may be recharacterised. 

99. Treatment of connected person and accommodating party.—For the purposes of this Chapter, 

in determining whether a tax benefit exists,— 

 (i) the parties who are connected persons in relation to each other may be treated as one and the 

same person; 

(ii) any accommodating party may be disregarded; 

(iii) the accommodating party and any other party may be treated as one and the same person; 

(iv) the  arrangement  may  be  considered  or  looked  through  by  disregarding  any  corporate 

structure. 

100. Application of this Chapter.—The provisions of this Chapter shall apply in addition to, or in 

lieu of, any other basis for determination of tax liability. 

101. Framing  of  guidelines.—The  provisions  of  this  Chapter  shall  be  applied  in  accordance  with 

such guidelines and subject to such conditions, as may be prescribed. 

458 

102. Definitions.—In this Chapter, unless the context otherwise requires,— 

(1) “arrangement” means any step in, or a part or whole of,  any transaction, operation, scheme, 
agreement or understanding, whether enforceable or not, and includes the alienation of any property 
in such transaction, operation, scheme, agreement or understanding; 

(2) “asset” includes property, or right, of any kind; 

(3) “benefit” includes a payment of any kind whether in tangible or intangible form; 

(4)  “connected  person”  means  any  person  who  is  connected  directly  or  indirectly  to  another 

person and includes,— 

(a) any relative of the person, if such person is an individual; 

(b) any director of the company or any relative of such director, if the person is a company; 

(c) any partner or member of a firm or association of persons or body of individuals or any 
relative of such partner or member, if the person is a firm or association of persons or body of 
individuals; 

(d) any member of the Hindu undivided family or any relative of such member, if the person 

is a Hindu undivided family; 

(e) any individual who has a substantial interest in the business of the person or any relative 

of such individual; 

(f)  a  company,  firm  or  an  association  of  persons  or  a  body  of  individuals,  whether 
incorporated or not, or a Hindu undivided family having a substantial interest in the business of 
the person or any director, partner, or member of the company, firm or association of persons or 
body of individuals or family, or any relative of such director, partner or member; 

(g) a company, firm or association of persons or body of individuals, whether incorporated or 
not, or a Hindu undivided family, whose director, partner, or member has a substantial interest in 
the business of the person, or family or any relative of such director, partner or member; 

(h) any other person who carries on a business, if— 

(i) the person being an individual, or any relative of such person, has a substantial interest 

in the business of that other person; or 

(ii)  the  person  being  a  company,  firm,  association  of  persons,  body  of  individuals, 
whether incorporated or not, or a Hindu undivided family, or any director, partner or member 
of  such  company,  firm  or  association  of  persons  or  body  of  individuals  or  family,  or  any 
relative of such director, partner or member, has a substantial interest in the business of that 
other person; 

(5) “fund” includes— 

(a) any cash; 

(b) cash equivalents; and 

(c)  any right, or obligation, to receive or pay, the cash or cash equivalent; 

(6) “party” includes a person or a permanent establishment which participates or takes part in an 

arrangement; 

(7)  “relative”  shall  have  the  meaning  assigned  to  it  in  the Explanation to  clause  (vi)  of                        

sub-section (2) of section 56; 

(8)  a person shall be deemed to have a substantial interest in the business, if,— 

(a)  in  a  case  where  the  business  is  carried  on  by  a  company,  such  person  is,  at  any  time 
during the financial year, the beneficial owner of equity shares carrying twenty per cent or more, 
of the voting power; or 

459 

(b)  in  any  other  case,  such  person  is,  at  any  time  during  the  financial  year,  beneficially 

entitled to twenty per cent or more, of the profits of such business; 

(9) “step” includes a measure or an action, particularly one of a series taken in order to deal with 

or achieve a particular thing or object in the arrangement; 

(10) “tax benefit” includes,— 

(a)  a reduction or avoidance or deferral of tax or other amount payable under this Act; or 

(b)  an increase in a refund of tax or other amount under this Act; or 

(c)  a reduction or avoidance or deferral of tax or other amount that would be payable under 

this Act, as a result of a tax treaty; or 

(d)  an increase in a refund of tax or other amount under this Act as a result of a tax treaty; or 

(e)  a reduction in total income; or 

(f)  an increase in loss, 

in the relevant previous year or any other previous year; 

(11) “tax  treaty”  means  an  agreement  referred  to in  sub-section (1) of section  90 or  sub-section 

(1) of section 90A.] 

103. Original CHAPTER XI dealing with Additional Income-tax on Undistributed Profits contained 
sections  95  to  109,  sub-headings  “A.—General”,  “B.—Incomes  forming  part  of  total  income  on  which  
no supertax is payable”, “C.—Rebate of super-tax” and “D.—Additional super-tax on undistributed fits” 
and  sections  95  to  103  (both  inclusive)  were  omitted  by  Act  9  of  1965,  s.  29  (w.e.f.  1-4-1965). 
Subsequently Chapter XI containing remaining sections 104 to 109 was omitted by Act 21 of 1987, s. 41 
(w.e.f. 1-4-1988). 

104. [Income-tax  on  undistributed  income  of  certain  companies.]—Omitted  by  the  Finance                

Act, 1987 (11 of 1987), s. 41 (w.e.f. 1-4-1988). 

105. [Special provisions for certain companies.]—Omitted by the Finance Act, 1987 (11 of 1987),             

s. 41 (w.e.f. 1-4-1988). 

106. [Period  of  limitation  for  making  orders  under section  104.]—Omitted  by  the  Finance                

Act, 1987 (11 of 1987), s. 41 (w.e.f. 1-4-1988). 

107. [Approval  of  Inspecting  Assistant  Commissioner  for  orders  under section  104.]—Omitted 

by the Finance Act, 1987 (11 of 1987), s. 41 (w.e.f. 1-4-1988). 

107A. [Reduction of minimum distribution in certain cases.]—Omitted by the Finance Act, 1987 
(11 of 1987), s. 41 (w.e.f. 1-4-1988). Earlier s. 107A was inserted by the Finance Act, 1964 (20 of 1964), 
s. 26 (w.e.f. 1-4-1964). 

108. [Savings for company in which public are substantially interested.]—Omitted by the Finance 

Act, 1987 (11 of 1987), s. 41 (w.e.f. 1-4-1988). 

109. 

[“Distributable 

income”,  “investment 

company”  and  “statutory  percentage”         

defined.]—Omitted by the Finance Act, 1987 (11 of 1987), s. 41 (w.e.f. 1-4-1988). 

CHAPTER XII 

DETERMINATION OF TAX IN CERTAIN SPECIAL CASES 
1[110. Determination of tax where total income includes income on which no tax is payable.—
Where there is included in the total income of an assessee any income on which no income-tax is payable 
under the provisions of this Act, the assessee shall be entitled to a deduction, from the amount of income-
tax with which he is chargeable on his total income, of an amount equal to the income-tax calculated at 
the average rate of income-tax on the amount on which no income-tax is payable.] 

1. Subs. by Act 10 of 1965, s. 32, for section 110 (w.e.f. 1-4-1965). 

460 

                                                           
111. Tax  on  accumulated  balance  of  recognised  provident  fund.—(1)  Where  the  accumulated 
balance due to an employee participating in a recognised provident fund is included in his total income, 
owing to the provisions of rule 8 of Part A of the Fourth Schedule not being applicable, the  1[Assessing 
Officer]  shall  calculate  the  total  of  the  various  sums  of  2[tax]  in  accordance  with  the  provisions  of                 
sub-rule (1) of rule 9 thereof. 

(2) Where the accumulated balance due to an employee participating in a recognised provident fund 
which is not included in his total income under the provisions of rule 8 of Part A of the Fourth Schedule 
becomes payable, super-tax shall be calculated in the manner provided in sub-rule (2) of rule 9 thereof. 

3[111A.  Tax  on  short-term  capital  gains  in  certain  cases.—(1)  Where  the  total  income  of  an 
assessee  includes  any  income  chargeable  under the  head  “Capital  gains”,  arising  from  the  transfer  of a 
short-term capital asset, being an equity share in a company or a unit of an equity oriented fund 4[or a unit 
of a business trust] and— 

(a) the transaction of sale of such equity share or unit is entered into on or after the date on which 

Chapter VII of the Finance (No. 2) Act, 2004 comes into force; and 

(b) such transaction is chargeable to securities transaction tax under that Chapter, 

the tax payable by the assessee on the total income shall be the aggregate of— 

(i)  the amount of income-tax calculated on such short-term capital gains at the rate of  5[fifteen 

per cent.]; and 

(ii)  the  amount  of  income-tax  payable  on  the  balance  amount  of  the  total  income  as  if  such 

balance amount were the total income of the assessee: 

Provided that in the case of an individual or a Hindu undivided family, being a resident, where the 
total  income  as  reduced  by  such  short-term  capital  gains  is  below  the  maximum  amount  which  is  not 
chargeable to income-tax, then, such short-term capital gains shall be reduced by the amount by which the 
total income as so reduced falls short of the maximum amount which is not chargeable to income-tax and 
the tax on the balance of such short-term capital gains shall be computed at the rate of 6[fifteen per cent.]. 
7[Provided  further that  nothing  contained  in  clause  (b)  shall  apply  to  a  transaction  undertaken  on  a 
recognised  stock  exchange  located  in  any  International  Financial  Services  Centre  and  where  the 
consideration for such transaction is paid or payable in foreign currency.] 

(2) Where the gross total income of an assessee includes any short-term capital gains referred to in 
sub-section (1), the deduction under Chapter VIA shall be allowed from the gross total income as reduced 
by such capital gains. 

(3)  Where  the  total  income  of  an  assessee  includes  any  short-term  capital  gains  referred  to  in         

sub-section (1), the rebate under section 88 shall be allowed from the income-tax on the total income as 
reduced by such capital gains. 

8[Explanation.—For the purposes of this section,— 

(a)  “equity  oriented  fund”  shall,  have  the  meaning  assigned  to  it  in  the Explanation to 

clause (38) of section 10; 

(b)  “International  Financial  Services  Centre”  shall  have  the  same  meaning  as  assigned  to  it  in 

clause (q) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005); 

(c)  “recognised  stock  exchange”  shall  have  the  meaning  assigned  to  it  in  clause  (ii)  of  the  

Explanation 1 to sub-section (5) of section 43.]] 

1. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2. Subs. by Act 10 of 1965, s. 33, for “income-tax and super-tax” (w.e.f. 1-4-1965). 
3. Ins. by Act 23 of 2004, s. 26 (w.e.f. 1-4-2005). 
4. Ins. by Act 25 of 2014, s. 34 (w.e.f. 1-4-2015). 
5. Subs. by Act 18 of 2008, s. 21, for “ten per cent.” (w.e.f. 1-4-2009). 
6. Subs. by Act 23 of 2012, s. 42, for “ten per cent.” (w.e.f. 1-4-2009). 
7. Ins. by Act 28 of 2016, s. 49 (w.e.f. 1-4-2017). The second proviso omitted by Act 20 of 2015, s. 27 (w.e.f. 1-4-2016). 

Earlier the same proviso was inserted by Act 25 of 2014, s. 34 (w.e.f. 1-4-2015). 

8. Subs. by s. 49, ibid., for the Explanation (w.e.f. 1-4-2017). 

461 

                                                           
 
1[112. Tax  on  long-term  capital  gains.—(1)  Where  the  total  income  of  an  assessee  includes  any 
income, arising from the transfer of a long-term capital asset, which is chargeable under the head “Capital 
gains”, the tax payable by the assessee on the total income shall be the aggregate of,— 

(a) in the case of an individual or a Hindu undivided family, 2[being a resident,]— 

(i)  the amount of income-tax payable on the total income as reduced by the amount of such 

long-term capital gains, had the total income as so reduced been his total income; and 

(ii)  the amount of income-tax calculated on such long-term capital gains at the rate of twenty 

per cent.: 

Provided that where the total income as reduced by such long-term capital gains is below the 
maximum amount which is not chargeable to income-tax, then, such long-term capital gains shall 
be reduced by the amount by which the total income as so reduced falls short of the maximum 
amount  which  is  not  chargeable  to  income-tax  and  the  tax  on  the  balance  of  such  long-term 
capital gains shall be computed at the rate of twenty per cent.; 

(b) in the case of a 3[domestic company],— 

 (i)  the amount of income-tax payable on the total income as reduced by the amount of such 

long-term capital gains, had the total income as so reduced been its total income; and 

(ii)   the  amount  of  income-tax  calculated  on  such  long-term  capital  gains  at  the  rate  of 

4[twenty per cent.]: 

5* 

* 

* 

* 

* 

2[(c) in the case of a non-resident (not being a company) or a foreign company,— 

 (i)  the amount of income-tax payable on the total income as reduced by the amount of such 

long-term capital gains, had the total income as so reduced been its total income; and 

6[(ii) the amount of income-tax calculated on long-term capital gains [except where such gain 
arises from transfer of capital asset referred to in sub-clause (iii)] at the rate of twenty per cent.; 
and] 

(iii) the amount of income-tax on long-term capital gains arising from the transfer of a capital 
asset, being 7[unlisted securities or shares of a company not being a company in which the public 
are substantially interested], calculated at the rate of ten per cent. on the capital gains in respect of 
such asset as computed without giving effect to the first and second proviso to section 48;]] 

8[(d)]  in any other case 9[of a resident],— 

 (i)   the  amount  of  income-tax  payable  on  the  total  income  as  reduced  by  the  amount  of             

long-term capital gains, had the total income as so reduced been its total income; and 

(ii) the  amount  of  income-tax  calculated  on  such  long-term  capital  gains  at  the  rate  of 

10[twenty per cent.; and] 

1.  Ins.  by  Act  18  of  1992,  s.  53  (w.e.f.  1-4-1993).  Earlier  section  112  was  omitted  by  20  of  1967,  s.  33  and  the  Third 

Schedule (w.e.f. 1-4-1968) 

2. Ins. by 32 of 1994, s. 31 (w.e.f. 1-4-1995). 
3. Subs. by s. 31, ibid., for “company” (w.e.f. 1-4-1995). 
4. Subs. by Act 33 of 1996, s. 37, for “thirty per cent.” (w.e.f. 1-4-1997).Earlier substituted by Act 32 of 1994, s. 31, for 

“forty per cent.” (w.e.f. 1-4-1995). 

5. Proviso omitted  by Act 22 of 1995, s. 23 (w.e.f. 1-4-1996). Prior to its omission, the proviso, as amended by the 22 of 

1995, s. 23 (w.e.f. 1-4-1996). Prior to its omission, the proviso, as amended by the 32 of 1994, s. 31 (1-4-1995). 

6. Subs. by Act 23 of 2012, s. 43, for sub-clause (ii) (w.e.f. 1-4-2013). 
7. Subs. by 28 of 2016, s. 50, for “unlisted securities” (w.e.f. 1-4-2017). 
8. Clause (c) relettered as Clause (d) thereof by Act 32 of 1994, s. 31 (w.e.f. 1-4-1995). 
9. Ins. by s. 31, ibid., (w.e.f. 1-4-1995). 
10. Subs. by Act 33 of 1996, s. 37, for “thirty per cent.” (w.e.f. 1-4-1997). 

462 

 
 
 
 
 
 
 
                                                           
1* 

* 

* 

* 

* 

2[Provided that  where  the  tax  payable  in  respect  of  any  income  arising  from  the  transfer  of  a        

long-term capital asset,  3[being listed securities (other than a unit)]  4[or zero coupon bond], exceeds ten 
per  cent  of  the  amount  of  capital  gains  before  giving  effect  to  the  provisions  of  the  second  proviso  to 
section  48,  then,  such  excess  shall  be  ignored  for  the  purpose  of  computing  the  tax  payable  by  the 
assessee: 

5[Provided further that where the tax payable in respect of any income arising from the transfer of  a 
long-term capital asset, being a unit of a Mutual Fund specified under clause (23D) of section 10, during 
the period beginning on the 1st day of April, 2014 and ending on the 10th day of July, 2014, exceeds ten 
per cent. of the amount of capital gains, before giving effect to the provisions of the second proviso to 
section  48,  then,  such  excess  shall  be  ignored  for  the  purpose  of  computing  the  tax  payable  by  the 
assessee.] 

6[Explanation.—For the purposes of this sub-section,— 

7[(a)  the expression “securities” shall have the meaning assigned to it in clause (h) of section 2 of 

the Securities Contracts (Regulation) Act, 1956 (32 of 1956); 

(aa) “listed securities” means the securities which are listed on any recognised stock exchange in 

India; 

(ab) “unlisted securities” means securities other than listed securities. 

8* 

* 

* 

*]]] 

(2) Where the gross total income of an assessee includes any income arising from the transfer of a 
long-term  capital  asset,  the  gross  total  income  shall  be  reduced  by  the  amount  of  such  income  and  the 
deduction under Chapter VI-A shall be allowed as if the gross total income as so reduced were the gross 
total income of the assessee. 

(3)  Where  the  total  income  of  an  assessee  includes  any  income  arising  from  the  transfer  of  a          

long-term capital asset, the total income shall be reduced by the amount of such income and the rebate 
under section 88 shall be allowed from the income-tax on the total income as so reduced.] 

9[112A. Tax on longterm capital gains in certain cases.—(1) Notwithstanding anything contained 
in section 112, the tax payable by an assessee on his total income shall be determined in accordance with 
the provisions of sub-section (2), if— 

(i) the total income includes any income chargeable under the head “Capital gains”; 

(ii) the capital gains arise from the transfer of a long-term capital asset being an equity share in a 

company or a unit of an equity oriented fund or a unit of a business trust; 

(iii) securities transaction tax under Chapter VII of the Finance (No.2) Act, 2004 has,— 

(a)  in  a  case  where  the  long-term  capital  asset  is  in  the  nature  of  an  equity  share  in  a 

company, been paid on acquisition and transfer of such capital asset; or 

1. The Explanation omitted by Act 22 of 1995, s. 23 (w.e.f. 1-4-1996). 
2. Ins. by Act 27 of 1999, s. 57 (w.e.f. 1-4-2000). 
3. Subs. by Act 25 of 2014, s. 35, “being listed securities or unit” (w.e.f. 1-4-2015). 
4. Ins. by 18 of 2005, s. 33 (w.e.f. 1-4-2006). 
5. Ins. by Act 25 of 2014, s. 35 (w.e.f. 1-4-2015). 
6.  Subs.  by  Act  10  of  2000,  s.  49,  for  the  Explanation  (w.e.f.  1-4-2000).  Prior  to  its  Inserted  by  Act  27  of  1999,  s.    57      

(w.e.f. 1-4-2000). 

7. Subs. by Act 23 of 2012, s. 43, for clause (a) (w.e.f. 1-4-2013). 
8. Clause (b) omitted by Act 25 of 2014, s. 35 (w.e.f. 1-4-2015). 
9. Ins. by Act 13 of 2018, s. 33 (w.e.f. 1-4-2019). Earlier omitted by the Finance Act (26 of 1988), s. 30 (w.e.f. 1-4-1989). 
Original section was inserted by Act 15 of 1965, s. 11 (w.e.f. 11-9-1965) and later on amended by Act 13 of  1966, s. 22 
(w.e.f. 1-4-1966), 20 of 1967, s. 33 and the Third Schedule (w.e.f. 1-4-1968), 42 of 1970, s. 24 (w.e.f. 1-4-1968/1969) and 
21 of 1973, s. 14 (w.e.f. 1-4-1972). 

463 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
(b) in a case where the long-term capital asset is in the nature of a unit of an equity oriented 

fund or a unit of a business trust, been paid on transfer of such capital asset. 

(2)  The  tax  payable  by  the  assessee  on  the  total  income  referred  to  in  sub-section  (1)  shall  be  the 

aggregate of— 

(i)  the  amount  of  income-tax  calculated  on  such  long-term  capital  gains  exceeding  one  lakh 

rupees at the rate of ten per cent.; and 

(ii) the amount of income-tax payable on the total income as reduced by the amount of long-term 
capital gains referred to in sub-section (1) as if the total income so reduced were the total income of 
the assessee: 

Provided that in the case of an individual or a Hindu undivided family, being a resident, where 
the total income as reduced by such long-term capital gains is below the maximum amount which is 
not chargeable to income-tax, then, the long-term capital gains, for the purposes of clause (i), shall be 
reduced by the amount by which the total income as so reduced falls short of the maximum amount 
which is not chargeable to income-tax. 

(3) The condition specified in clause (iii) of sub-section (1) shall not apply to a transfer undertaken on 
a  recognised  stock  exchange  located  in  any  International  Financial  Services  Centre  and  where  the 
consideration for such transfer is received or receivable in foreign currency. 

(4)  The  Central  Government  may,  by  notification  in  the  Official  Gazette,  specify  the  nature  of 
acquisition in respect of which the provisions of sub-clause (a) of clause (iii) of sub-section (1) shall not 
apply. 

(5) Where  the  gross  total income  of  an  assessee  includes any  long-term  capital  gains referred  to  in 
sub-section  (1),  the  deduction  under  Chapter  VI-A  shall  be  allowed  from  the  gross  total  income  as 
reduced by such capital gains. 

(6)  Where  the  total  income  of  an  assessee  includes  any  long-term  capital  gains  referred  to  in  sub-
section  (1),  the  rebate  under  section  87A  shall  be  allowed  from  the  income-tax  on  the  total  income  as 
reduced by tax payable on such capital gains. 

Explanation.—For the purposes of this section,— 

(a) “equity oriented fund” means a fund set up under a scheme of a mutual fund specified under 

clause (23D) of section 10 and,— 

(i)  in  a  case  where  the  fund  invests  in  the  units  of  another  fund  which  is  traded  on  a 

recognised stock exchange,— 

(A) a minimum of ninety per cent. of the total proceeds of such fund is invested in the 

units of such other fund; and 

(B) such other fund also invests a minimum of ninety per cent. of its total proceeds in the 

equity shares of domestic companies listed on a recognised stock exchange; and 

(ii) in any other case, a minimum of sixty-five per cent. of the total proceeds of such fund is 

invested in the equity shares of domestic companies listed on a recognised stock exchange: 

Provided that the percentage of equity shareholding or unit held in respect of the fund, as the 
case may be, shall be computed with reference to the annual average of the monthly averages of 
the opening and closing figures; 

(b) “International Financial Services Centre” shall have the meaning assigned to it in clause (q) of 

section 2 of the Special Economic Zones Act, 2005; 

(c)  “recognised  stock  exchange”  shall  have  the  meaning  assigned  to  it  in  clause  (ii)  of 

Explanation 1 to clause (5) of section 43. 

464 

1[113. Tax in the case of block assessment of search cases.—The total undisclosed income of the 

block period, determined under section 158BC, shall be chargeable to tax at the rate of sixty per cent.:] 

2[Provided that the tax chargeable under this section shall be increased by a surcharge, if any, levied 
by any Central Act and applicable in the assessment year relevant to the previous year in which the search 
is initiated under section 132 or the requisition is made under section 132A.] 

114. [Tax on capital gains in cases of assessees other than companies.]—Omitted by the Finance            

(No. 2) Act, 1967, w.e.f. 1-4-1968 and reintroduced with material modifications in section 80T. Section 
114 was substituted first by the Finance (No. 2) Act, 1962, w.e.f. 1-4-1962 and later on amended by the 
Finance Act, 1964, w.e.f. 1-4-1964, the Finance Act, 1965, w.e.f. 1-4-1965, the Finance (No. 2) Act, 1965, 
w.e.f. 11-9-1965 and the Finance Act, 1966, w.e.f. 1-4-1966. 

115. [Tax on capital gains in case of companies.]—Omitted by the Finance Act, 1987 (11 of 1987),           

s. 42 (w.e.f. 1-4-1988). 

3[115A.  Tax  on  dividends,  royalty  and  technical  service  fees  in  the  case  of  foreign              

companies.—4[(1) Where the total income of— 

(a)  a non-resident (not being a company) or of a foreign company, includes any income by way 

of— 

(i)  5[dividends other than dividends referred to in section 115-O]; or 

(ii)   interest  received  from  Government  or  an  Indian  concern  on  monies  borrowed  or  debt 
incurred  by  Government  or  the  Indian  concern  in  foreign  currency  6[not  being  interest  of  the 
nature referred to in 7[sub-clause (iia) or sub-clause (iiaa)]]; or 

6[(iia)  interest  received  from  an  infrastructure  debt  fund  referred  to  in  clause  (47)  of  

section 10; or] 

8[(iiaa) interest of the nature and extent referred to in section 194LC; or] 
9[(iiab) interest of the nature and extent referred to in section 194LD; or] 
10[(iiac) distributed income being interest referred to in sub-section (2) of section 194LBA;] 

(iii)   income  received  in  respect  of  units,  purchased  in  foreign  currency,  of  a  Mutual  Fund 

specified under clause (23D) of section 10 or of the Unit Trust of India, 

the income-tax payable shall be aggregate of— 

(A)  the  amount  of  income-tax  calculated  on  the  amount  of  income  by  way  of  5[dividends 
other than dividends referred to in section 115-O], if any, included in the total income, at the rate 
of twenty per cent; 

(B) the amount of income-tax calculated on the amount of income by way of interest referred 

to in sub-clause (ii), if any, included in the total income, at the rate of twenty per cent.; 

6[(BA)  the  amount  of  income-tax  calculated  on  the  amount  of  income  by  way  of  interest 
referred  to  in  sub-clause  (iia)  11[or  sub-clause  (iiaa)]  9[or  sub-clause  (iiab)]  10[or  sub-clause 
(iiac)], if any, included in the total income, at the rate of five per cent.;] 

1. Ins. by Act 22 of 1995, s. 24 (w.e.f. 1-7-1995). Earlier section 113 dealing with “Tax in the case of non-resident” omitted 

by Act 10 of 1965, s. 35 (w.e.f. 1-4-1965). 
2. Ins. by Act 20 of 2002, s. 44 (w.e.f. 1-6-2002). 
3. Ins. by Act 66 of 1976, s. 20 (w.e.f. 1-6-1976). 
4. Subs. by Act 32 of 1994, s. 32, for sub-section (1) (w.e.f. 1-4-1995). 
5. Subs. by Act 32 of 2003, s. 50, for “dividends” (w.e.f. 1-4-2004). Earlier the word “dividends” substituted by Act 26 of 
1997, s. 32 (w.e.f. 1-4-1998) and the words, figures and letter “other than dividends referred to in section 115-O” omitted 
by Act 20 of 2002, s. 45 (w.e.f. 1-4-2003). 
6. Ins. by Act 8 of 2011, s. 16 (w.e.f. 1-6-2011). 
7. Subs. by Act 23 of 2012, s. 44, for “clause (iia)” (w.e.f. 1-7-2012). 
8. Ins. by s. 44, ibid (w.e.f. 1-7-2012). 
9. Ins. by Act 17 of 2013, s. 27 (w.e.f. 1-4-2014). 
10. Ins. by Act 25 of 2014, s. 36 (w.e.f. 1-4-2015). 
11. Ins. by Act 23 of 2012, s. 44 (w.e.f. 1-7-2012). 

465 

                                                           
(C)  the  amount  of  income-tax  calculated  on  the  income  in  respect  of  units  referred  to  in  

sub-clause (iii), if any, included in the total income, at the rate of twenty per cent; and 

(D) the amount of income-tax with which he or it would have been chargeable had his or its 
total income been reduced by the amount of income referred to in sub-clause (i), sub-clause (ii) 
1[,  sub-clause  (iia)]  2[,  sub-clause  (iiaa)]  3[,  sub-clause  (iiab)]  4[,  sub-clause  (iiac)]  and  
sub-clause (iii); 

(b)  5[a non-resident (not being a company) or a foreign company, includes any income by way of 
royalty or fees for technical services other than income referred to in sub-section (1) of section 44DA] 
received from Government or an Indian concern in pursuance of an agreement made by the foreign 
company with Government or the Indian concern after the 31st day of March, 1976, and where such 
agreement is with an Indian concern, the agreement is approved by the Central Government or where 
it relates to a matter included in the industrial policy, for the time being in force, of the Government 
of  India,  the  agreement  is  in  accordance  with  that  policy,  then,  subject  to  the  provisions  of  
sub-sections (1A) and (2), the income-tax payable shall be the aggregate of,— 

6[(A)  the amount of income-tax calculated on the income by way of royalty, if any, included 

in the total income, at the rate of 7[ten per cent.]; 

(B)  the amount of income-tax calculated on the income by way of fees for technical services, 

if any, included in the total income, at the rate of 7[ten  per cent.]; and] 

(C)  the amount of income-tax with which it would have been chargeable had its total income 

been reduced by the amount of income by way of royalty and fees for technical services. 

Explanation.—For the purposes of this section,— 

(a)  “fees for technical services” shall have the same meaning as in Explanation 2 to clause (vii) 

of sub-section (1) of section 9; 

(b)   “foreign  currency”  shall  have  the  same  meaning  as  in  the Explanation below  item  (g)  of  

sub-clause (iv) of clause (15) of section 10; 

(c)  “royalty” shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of 

section 9; 

(d)  “Unit Trust of India” means the Unit Trust of India established under the Unit Trust of India 

Act, 1963 (52 of 1963).] 

8[(1A) Where the royalty referred to in clause (b) of sub-section (1) is in consideration for the transfer 
of all or any rights (including the granting of a licence) in respect of copyright in any book to an Indian 
concern  9[or  in  respect  of  any  computer  software  to  a  person  resident  in  India],  the  provisions  of  
sub-section (1) shall apply in relation to such royalty as if the words  10[ 11[the agreement is approved by 
the  Central  Government  or  where  it  relates  to  a  matter]  included  in  the  industrial  policy,  for  the  time 
being in force, of the Government of India, the agreement is in accordance with that policy] occurring in 
the said clause had been omitted: 

1. Ins. by Act 8 of 2011, s. 16 (w.e.f. 1-6-2011). 
2. Ins. by Act 23 of 2012, s. 44 (w.e.f. 1-7-2012). 
3. Ins. by Act 17 of 2013, s. 27 (w.e.f. 1-4-2014). 
4. Ins. by Act 25 of 2014, s. 36 (w.e.f. 1-4-2015). 
5.  Subs.  by  Act  32  of  2003,  s.  50,  for  “a  foreign  company,  includes  any  income  by  way  of  royalty  or  fees  for  technical 

services” (w.e.f. 1-4-2004). 

6. Subs. by Act 17 of 2013, s. 27 for sub-clauses (A), (AA), (B) and (BB) (w.e.f. 1-4-2014). 
7. Subs. by Act 20 of 2015, s. 28 for “Twenty-five per cent.” (w.e.f. 1-4-2016). 
8. Ins. by Act 29 of 1977, s. 22 (w.e.f. 1-4-1978). 
9. Ins. by Act 49 of 1991, s. 40 (w.e.f. 1-4-1991). 
10. Subs. by Act 18 of 1992, s. 54, for “and approved by the Central Government” (w.e.f. 1-6-1992). 
11.  Subs.  by  32  of  1994,  s.  32,  for  “approved  by  the  Central  Government  or  where  the  agreement  relates  to  a  matter”  

 (w.e.f. 1-4-1995). 

466 

                                                           
Provided that such book is on a subject, the books on which are permitted, according to the Import 
Trade Control Policy of the Government of India for the period commencing from the 1st day of April, 
1977,  and  ending  with  the  31st  day  of  March,  1978,  to  be  imported  into  India  under  an  Open  General 
Licence: 

1[Provided  further that  such  computer  software  is  permitted  according  to  the  Import  Trade  Control 
Policy of the Government of India for the time being in force to be imported into India under an Open 
General Licence.] 

2[Explanation  1].—In  this  sub-section,  “Open  General  Licence”  means  an  Open  General  Licence 

issued by the Central Government in pursuance of the Imports (Control) Order, 1955.] 

3[Explanation  2.—In  this  sub-section,  the  expression  “computer  software”  shall  have  the  meaning 

assigned to it in clause (b) of the Explanation to section 80HHE.] 

(2)  Nothing  contained  in  sub-section  (1)  shall  apply  in  relation  to  any  income  by  way  of  royalty 
received by a foreign company from an Indian concern in pursuance of an agreement made by it with the 
Indian concern after the 31st day of March, 1976, if such agreement is deemed, for the  4[purposes of the 
first proviso] to clause (vi) of sub-section (1) of section 9, to have been made before the 1st day of April, 
1976;  and  the  provisions  of  the  annual  Finance  Act  for  calculating,  charging,  deducting  or  computing 
income-tax shall apply in relation to such income as if such income had been received in pursuance of an 
agreement made before the 1st day of April, 1976.] 

5[(3) No deduction in respect of any expenditure or allowance shall be allowed to the assessee under 

sections 28 to 44C and section 57 in computing his or its income referred to in sub-section (1). 

(4) Where in the case of an assessee referred to in sub-section (1),— 

(a)  the gross total income consists only of the income referred to in clause (a) of that sub-section, 

no deduction shall be allowed to him or it under Chapter VI-A; 

(b)  the gross total income includes any income referred to in clause (a) of that sub-section, the 
gross total income shall be reduced by the amount of such income and the deduction under Chapter 
VI-A shall be allowed as if the gross total income as so reduced were the gross total income of the 
assessee. 
(5)  It  shall  not  be  necessary  for  an  assessee  referred  to  in  sub-section  (1)  to  furnish  under  

sub-section (1) of section 139 a return of his or its income if— 

(a)   his  or  its  total  income  in  respect  of  which  he  or  it  is  assessable  under  this  Act  during  the 

previous year consisted only of income referred to in clause (a) of sub-section (1); and 

(b) the tax deductible at source under the provisions of Chapter XVII-B has been deducted from 

such income.] 
6[115AB. Tax on income from units purchased in foreign currency or capital gains arising from 
their  transfer.—(1)  Where  the  total  income  of  an  assessee,  being  an  overseas  financial  organisation 
(hereinafter referred to as Offshore Fund) includes— 

(a) income received in respect of units purchased in foreign currency; or 
(b)  income  by  way  of  long-term  capital  gains  arising  from  the  transfer  of  units  purchased  in 

foreign currency, 

the income-tax payable shall be the aggregate of— 

 (i)   the  amount  of  income-tax  calculated  on  the  income  in  respect  of  units  referred  to  in  

clause (a), if any, included in the total income, at the rate of ten per cent; 

(ii) the amount of income-tax calculated on the income by way of long-term capital gains referred 

to in clause (b), if any, included in the total income, at the rate of ten per cent; and 

1. Ins. by Act 49 of 1991, s. 40 (w.e.f. 1-4-1991). 
2. The existing Explanation renumbered as Explanation 1 by s. 40, ibid (w.e.f. 1-4-1991). 
3. Ins. by s. 40, ibid. (w.e.f. 1-4-1991). 
4. Subs. by s. 40, ibid., for “purposes of the proviso” (w.e.f. 1-4-1991). 
5. Ins. by Act 32 of 1994, s. 32 (w.e.f. 1-4-1995). 
6. Ins. by Act 49 of 1991, s. 41 (w.e.f. 1-4-1992). 

467 

                                                           
(iii) the amount of income-tax with which the Offshore Fund would have been chargeable had its 

total income been reduced by the amount of income referred to in clause (a) and clause (b). 

(2) Where the gross total income of the Offshore Fund,— 

(a) consists only of income from units or income by way of long-term capital gains arising from 
the transfer of units, or both, no deduction shall be allowed to the assessee under sections 28 to 44C 
1*** or clause (i) or clause (iii) of section 57 or under Chapter VI-A  2[and nothing contained in the 
provisions  of  the  second  proviso  to section  48 shall  apply  to  income  referred  to  in  clause  (b)  of  
sub-section (1)]; 

(b) includes any income referred to in clause (a), the gross total income shall be reduced by the 
amount of such income and the deduction under Chapter VI-A shall be allowed as if the gross total 
income as so reduced were the gross total income of the assessee. 

Explanation.—For the purposes of this section,— 

(a)  “overseas  financial  organisation”  means  any  fund,  institution,  association  or  body,  whether 
incorporated or not, established under the laws of a country outside India, which has entered into an 
arrangement for investment in India with any public sector bank or public financial institution or a 
mutual  fund  specified  under  clause  (23D)  of  section  10  and  such  arrangement  is  approved  by  the 
3[Securities  and  Exchange  Board  of  India,  established  under  the  Securities  and  Exchange  Board  of 
India Act, 1992 (15 of 1992),] for this purpose; 

(b) “unit” means unit of a mutual fund specified under clause (23D) of section 10 or of the Unit 

Trust of India; 

(c)  “foreign  currency”  shall  have  the  meaning  as  in  4[the  Foreign  Exchange  Management          

Act, 1999 (42 of 1999)]; 

(d) “public sector bank” shall have the meaning assigned to it in clause (23D) of section 10; 

(e)  “public  financial  institution”  shall  have  the  meaning  assigned  to  it  in  section  4A  of  the 

Companies Act, 1956 (1 of 1956); 

(f) “Unit Trust of India” means the Unit Trust of India established under the Unit Trust of India 

Act, 1963 (52 of 1963)]. 
5[115AC.  Tax  on  income  from  bonds  or  Global  Depository  Receipts  purchased  in  foreign 
currency  or  capital  gains  arising  from  their  transfer.—(1)  Where  the  total  income  of  an  assessee, 
being a non- resident, includes— 

(a)  income  by  way  of  interest  on  bonds  of  an  Indian  company  issued  in  accordance  with  such 
scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf, 
or on bonds of a public sector company sold by the  Government, and purchased by him in foreign 
currency; or 

(b) income by way of dividends 6[, other than dividends referred to in section 115-O,] on Global 

Depository Receipts— 

(i)  issued in accordance with such scheme as the Central Government may, by notification in 
the Official Gazette, specify in this behalf, against the initial issue of shares of an Indian company 
and purchased by him in foreign currency through an approved intermediary; or 

(ii)   issued  against  the  shares  of  a  public  sector  company  sold  by  the  Government  and 

purchased by him in foreign currency through an approved intermediary; or 

1. The words, brackets and figures “or sub-section (2) of section 48” omitted by Act 18 of 1992, s. 55 (w.e.f. 1-4-1993). 
2. Ins. by s. 55, ibid. (w.e.f. 1-4-1993). 
3. Subs. by Act 14 of 2001, s. 51, for “Central Government” (w.e.f. 1-6-2001). 
4. Subs. by Act 17 of 2013, s. 4, for “the Foreign Exchange Regulation Act, 1973 (46 of 1973)” (w.e.f. 1-4-2013). 
5. Subs. by Act 14 of 2001, s. 52, for section 115AC (w.e.f. 1-4-2002). 
6.  Subs.  by  Act  32  of  2003,  s.  50,  for  “dividends”  (w.e.f.  1-4-2004).  Earlier  the  words,  figures  and  letter  “other  than 

dividends referred to in section 115-O” omitted by Act 20 of 2002, s. 45 (w.e.f. 1-4-2003). 

468 

                                                           
(iii)  1[issued or re-issued] in accordance with such scheme as the Central Government may, 
by  notification  in  the  Official  Gazette,  specify  in  this  behalf,  against  the  existing  shares  of  an 
Indian company purchased by him in foreign currency through an approved intermediary; or 

2* 

* 

* 

* 

* 

(c)  income  by  way  of  long-term  capital  gains  arising  from  the  transfer  of  bonds  referred  to  in 

clause (a) or, as the case may be, Global Depository Receipts referred to in clause (b), 

the income-tax payable shall be the aggregate of— 

(i)  the amount of income-tax calculated on the income by way of interest or dividends  3[, other 
than  dividends  referred to in section  115-O],  as  the  case  may  be,  in  respect of bonds  referred  to in  
clause (a) or Global Depository Receipts referred to in clause (b), if any, included in the total income, 
at the rate of ten per cent; 

(ii)   the  amount  of  income-tax  calculated  on  the  income  by  way  of  long-term  capital  gains 

referred to in clause (c), if any, at the rate of ten per cent; and 

(iii) the amount of income-tax with which the non-resident would have been chargeable had his 

total income been reduced by the amount of income referred to in clauses (a), (b) and (c). 

(2) Where the gross total income of the non-resident— 

(a) consists only  of  income  by  way  of  interest  or  dividends  2[,  other  than  dividends referred  to 
in section 115-O] in respect of bonds referred to in clause (a) of sub-section (1) or, as the case may 
be,  Global  Depository  Receipts  referred  to  in  clause  (b)  of  that  sub-section,  no  deduction  shall  be 
allowed to him under sections 28 to 44C or clause (i) or clause (iii) of section 57 or under Chapter VI-
A; 

(b) includes any income referred to in clause (a) or clause (b) or clause (c) of sub-section (1), the 
gross total income shall be reduced by the amount of such income and the deduction under Chapter 
VI-A shall be allowed as if the gross total income as so reduced, were the gross total income of the 
assessee. 

(3) Nothing contained in the first and second provisos to section 48 shall apply for the computation of 
long-term  capital  gains  arising  out  of  the  transfer  of  long-term  capital  asset,  being  bonds  or  Global 
Depository Receipts referred to in clause (c) of sub-section (1). 

(4) It shall not be necessary for a non-resident to furnish under sub-section (1) of section 139 a return 

of his income if— 

(a) his total income in respect of which he is assessable under this Act during the previous year 

consisted only of income referred to in clauses (a) and (b) of sub-section (1); and 

(b) the tax deductible at source under the provisions of Chapter XVII-B has been deducted from 

such income. 

(5) Where the assessee acquired Global Depository Receipts or bonds in an amalgamated or resulting 
company by virtue of his holding Global Depository Receipts or bonds in the amalgamating or demerged 
company, as the case may be, in accordance with the provisions of sub-section (1), the provisions of that 
sub-section shall apply to such Global Depository Receipts or bonds. 

Explanation.—For the purposes of this section,— 

(a)  “approved  intermediary”  means  an  intermediary  who  is  approved  in  accordance  with  such 

scheme as may be notified by the Central Government in the Official Gazette; 

(b)  “Global  Depository  Receipts”  shall  have  the  same  meaning  as  in  clause  (a)  of 

the Explanation to section 115ACA.] 

1. Subs. by Act 20 of 2002, s. 46, for “re-issued” (w.e.f. 1-4-2002). 
2. Sub-clause (iv) omitted by s. 46, ibid (w.e.f. 1-4-2002). 
3. Subs. by Act 32 of 2003, s. 51, for “dividends” (w.e.f. 1-4-2004).   

469 

 
 
 
 
 
 
                                                           
1[115ACA. Tax on income from Global Depository Receipts purchased in foreign currency or 
capital  gains  arising  from  their  transfer.—2[(1)  Where  the  total  income  of  an  assessee,  being  an 
individual,  who  is  a  resident  and  an  employee  of  an  Indian  company  engaged  in  specified  knowledge 
based industry or service, or an employee of its subsidiary engaged in specified knowledge based industry 
or service (hereafter in this section referred to as the resident employee), includes— 

(a)  3[income by way of dividends, other than dividends referred to in section 115-O], on Global 
Depository Receipts of an Indian company engaged in specified knowledge based industry or service, 
issued in accordance with such Employees’ Stock Option Scheme as the Central Government may, by 
notification in the Official Gazette, specify in this behalf and purchased by him in foreign currency; 
or 

(b)  income  by  way  of  long-term  capital  gains  arising  from  the  transfer  of  Global  Depository 

Receipts referred to in clause (a), 

the income-tax payable shall be the aggregate of— 

(i)   the  amount  of  income-tax  calculated  on  the  3[income  by  way  of  dividends,  other  than 

dividends  referred  to  in section  115-O],  in  respect  of  Global  Depository  Receipts  referred  to  in                
clause (a), if any, included in the total income, at the rate of ten per cent; 

(ii)   the  amount  of  income-tax  calculated  on  the  income  by  way  of  long-term  capital  gains 

referred to in clause (b), if any, at the rate of ten per cent; and 

(iii) the amount of income-tax with which the resident employee would have been chargeable had 

his total income been reduced by the amount of income referred to in clauses (a) and (b). 

Explanation.—For the purposes of this sub-section,— 

(a)  “specified knowledge based industry or service” means— 

 (i)  information technology software; 

(ii)  information technology service; 

(iii)  entertainment service; 

(iv)  pharmaceutical industry; 

(v)  bio-technology industry; and 

(vi)   any  other  industry  or  service,  as  may  be  specified  by  the  Central  Government,  by 

notification in the Official Gazette; 

(b) “subsidiary” shall have the meaning assigned to it in section 4 of the Companies Act, 1956    

(1 of 1956) and includes subsidiary incorporated outside India.] 

(2) Where the gross total income of the resident employee— 

(a)   consists  only  of  3[income  by  way  of  dividends,  other  than  dividends  referred  to  in                     

section 115-O], in respect of Global Depository Receipts referred to in clause (a) of sub-section (1), 
no deduction shall be allowed to him under any other provision of this Act; 

(b)  includes any income referred to in clause (a) or clause (b) of sub-section (1), the gross total 
income shall be reduced by the amount of such income and the deduction under any provision of this 
Act  shall  be  allowed  as  if  the  gross  total  income  as  so  reduced  were  the  gross  total  income  of  the 
assessee. 

(3) Nothing contained in the first and second provisos to section 48 shall apply for the computation of 
long-term  capital  gains  arising  out  of  the  transfer  of  long-term  capital  asset,  being  Global  Depository 
Receipts referred to in clause (b) of sub-section (1). 

1. Ins. by Act 27 of 1999, s. 59 (w.e.f. 1-4-2000). 
2. Subs. by Act 14 of 2001, s. 53, for sub-section (1) (w.e.f. 1-4-2001). 
3. Subs. by Act 32 of 2003, s. 52, for “income by way of dividends” (w.e.f. 1-4-2004). 

470 

                                                           
Explanation.—For the purposes of this section,— 

(a)  “Global  Depository  Receipts”  means  any  instrument  in  the  form  of  a  depository  receipt  or 
certificate  (by  whatever  name  called)  created  by  the  Overseas  Depository  Bank  outside  India 
and 1[issued to investors against the issue of,— 

(i)  ordinary  shares  of  issuing  company,  being  a  company  listed  on  a  recognised  stock 

exchange in India; or 

(ii) foreign currency convertible bonds of issuing company]; 

(b)  “information  technology  service”  means  any  service  which  results  from  the  use  of  any 
information technology software over a system of information technology products for realising value 
addition; 

(c)  “information  technology  software”  means  any  representation  of  instructions,  data,  sound  or 
image, including source code and object code, recorded in a machine readable form and capable of 
being  manipulated  or  providing  inter-activity  to  a  user,  by  means  of  an  automatic  data  processing 
machine falling under heading information technology products but does not include non-information 
technology products; 

(d) “Overseas Depository Bank” means a bank authorised by the issuing company to issue Global 
Depository Receipts against issue of Foreign Currency Convertible Bonds or ordinary shares of the 
issuing company.] 

2[115AD. Tax  on  income  of  Foreign  Institutional  Investors  from  securities  or  capital  gains 

arising from their transfer.—(1) Where the total income of a Foreign Institutional Investor includes— 

3[(a)  4[income  other  than income  by  way  of  dividends  referred  to  in section  115-O] received in 

respect of securities (other than units referred to in section 115AB); or] 

(b)  income  by  way  of  short-term  or  long-term  capital  gains  arising  from  the  transfer  of  such 

securities, 

the income-tax payable shall be the aggregate of— 

(i)  the  amount  of  income-tax  calculated  on  the  income  in  respect  of  securities  referred  to  in     

clause (a), if any, included in the total income, at the rate of twenty per cent: 

5[Provided that the amount of income-tax calculated on the income by way of interest referred to 

in section 194LD shall be at the rate of five per cent.;] 

(ii)  the  amount  of  income-tax  calculated  on  the  income  by  way  of  short-term  capital  gains 

referred to in clause (b), if any, included in the total income, at the rate of thirty per cent: 

6[Provided that the amount of income-tax calculated on the income by way of short-term capital 

gains referred to in section 111A shall be at the rate of 7[fifteen per cent.];] 

1.  Subs.  by  Act  20  of  2015,  s.  29,  for  “issued  to  non-resident  inventors  against  the  issue  of  ordinary  shares  or  foreign 

currency convertible bonds of issuing company” (w.e.f. 1-4-2016). 

2. Ins. by Act 38 of 1993, s. 21 (w.e.f. 1-4-1993). 
3. Subs. by Act 21 of 1998, s. 38, for clasue (a) (w.e.f. 1-4-1999). 
4. Subs. by Act 32 of 2003, s. 53, for “income” (w.e.f. 1-4-2004). 
5. Ins. by Act 17 of 2013, s. 28 (w.e.f. 1-4-2014). 
6. Ins. by Act 23 of 2004, s. 27 (w.e.f. 1-4-2005). 
7. Subs. by Act 18 of 2008, s. 22, for “ten per cent.” (w.e.f. 1-4-2009). 

471 

                                                           
(iii)  the  amount  of  income-tax  calculated  on  the  income  by  way  of  long-term  capital  gains 

referred to in clause (b), if any, included in the total income, at the rate of ten per cent.; 1*** 

2[Provided that in case of income arising from the transfer of a long-term capital asset referred to 
in section 112A, income-tax at the rate of ten per cent. shall be calculated on such income exceeding 
one lakh rupees; and] 

(iv)  the  amount  of  income-tax  with  which  the  Foreign  Institutional  Investor  would  have  been 
chargeable had its total income been reduced by the amount of income referred to in clause (a) and 
clause (b). 

(2) Where the gross total income of the Foreign Institutional Investor— 

(a) consists only of income in respect of securities referred to in clause (a) of sub-section (1), no 
deduction shall be allowed to it under sections 28 to 44C or clause (i) or clause (iii) of section 57 or 
under Chapter VIA; 

(b) includes any income referred to in clause (a) or clause (b) of sub-section (1), the gross total 
income shall be reduced by the amount of such income and the deduction under Chapter VIA shall be 
allowed  as  if  the  gross  total  income  as  so  reduced,  were  the  gross  total  income  of  the  Foreign 
Institutional Investor. 

(3) Nothing contained in the first and second provisos to section 48 shall apply for the computation of 

capital gains arising out of the transfer of securities referred to in clause (b) of sub-section (1). 

Explanation.—For the purposes of this section,— 

(a)  the  expression  “Foreign  Institutional  Investor”  means  such  investor  as  the  Central 

Government may, by notification in the Official Gazette, specify in this behalf; 

(b) the expression “securities” shall have the meaning assigned to it in clause (h) of section 2 of 

the Securities Contracts (Regulation) Act, 1956 (42 of 1956).] 

115B. Tax  on  profits  and  gains  of  life  insurance  business.—3[(1)]  Where  the  total  income  of  an 
assessee includes any profits and gains from life insurance business, the income-tax payable shall be the 
aggregate of— 

(i) the amount of income-tax calculated on the amount of profits and gains of the life insurance 

business included in the total income, at the rate of twelve and one-half per cent; and 

(ii) the amount of income-tax with which the assessee would have been chargeable had the total 
income of the assessee been reduced by the amount of profits and gains of the life insurance business. 

4[(2) Notwithstanding anything contained in sub-section (1) or in any other law for the time being in 
force or any instrument having the force of law, the assessee shall, in addition to the payment of income-
tax computed under sub-section (1), deposit, during 5[the previous years relevant to the assessment years 
commencing on the 1st day of April, 1989 and the 1st day of April, 1990], an amount equal to thirty-three 
and one-third per cent of the amount of income-tax computed under clause (i) of sub-section (1), in such 
social  security  fund  (hereafter  in  this  sub-section  referred  to  as  the  security  fund),  as  the  Central 
Government may, by notification in the Official Gazette, specify in this behalf: 

1. The word “and” omitted by Act 13 of 2018, s. 34 (w.e.f. 1-4-2019). 
2. Ins. by s. 34, ibid. (w.e.f. 1-4-2019). 
3. Section 115B renumbered as sub-section (1) by Act 26 of 1988, s. 31 (w.e.f. 1-4-1989). 
4. Ins. by s. 31, ibid. (w.e.f. 1-4-1989). 
5. Subs. by Act 13 of 1989, s. 18, for “the previous year relevant to the assessment year commencing on the 1st day of April, 

1989” (w.e.f. 1-4-1990).  

472 

                                                           
Provided that where the assessee makes during the said 1[previous years] any deposit of an amount of 
not  less  than  two  and  one-half  per  cent  of  the  profits  and  gains  of  the  life  insurance  business  in  the 
security fund, the amount of income-tax payable by the assessee under the said clause (i) shall be reduced 
by an amount equal to two and one-half per cent of such profits and gains and, accordingly, the deposit of 
thirty-three and one-third per cent required to be made under this sub-section shall be calculated on the 
income-tax as so reduced].] 

2[115BA. Tax on income of certain domestic companies.—(1) Notwithstanding anything contained 
in this Act but subject to the  3[other provisions of this Chapter], the income-tax payable in respect of the 
total income of a person, being a domestic company, for any previous year relevant to the assessment year 
beginning on or after the 1st day of April, 2017, shall, at the option of such person, be computed at the 
rate of twenty-five per cent, if the conditions contained in sub-section (2) are satisfied. 

(2) For the purposes of sub-section (1), the following conditions shall apply, namely:— 

(a) the company has been set-up and registered on or after the 1st day of March, 2016; 

(b)  the  company  is  not  engaged  in  any  business  other  than  the  business  of  manufacture  or 
production of any article or thing and research in relation to, or distribution of, such article or thing 
manufactured or produced by it; and 

(c) the total income of the company has been computed,— 

(i)  without  any  deduction  under 

the  provisions  of section  10AA or  clause  (iia)                        

of sub-section (1) of section 32 or section 32AC or   section   32AD or section 33AB or section 
33ABA or sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section 
(2AA)  or  sub-section 
(2AB)  of section  35 or section  35AC or section  35AD or section 
35CCC or section  35CCD or  under  any  provisions  of  Chapter  VIA  under  the  heading “C.—
Deductions in respect of certain incomes” other than the provisions of section 80JJAA; 

(ii) without set off of any loss carried forward from any earlier assessment year if such loss is 

attributable to any of the deductions referred to in sub-clause (i); and 

(iii)  depreciation  under section  32,  other  than  clause  (iia)  of  sub-section  (1)  of  the  said 

section, is determined in the manner as may be prescribed. 

(3) The loss referred to in sub-clause (ii) of clause (c) of sub-section (2) shall be deemed to have been 
already  given  full  effect  to  and  no  further  deduction  for  such  loss  shall  be  allowed  for  any  subsequent 
year. 

(4) Nothing contained in this section shall apply unless the option is exercised by the person in the 
prescribed manner on or before the due date specified under sub-section (1) of section 139 for furnishing 
the first of the returns of income which the person is required to furnish under the provisions of this Act: 

Provided that  once  the  option  has  been  exercised  for  any  previous  year,  it  cannot  be  subsequently 

withdrawn for the same or any other previous year.] 

4[115BB. Tax  on  winnings  from  lotteries,  crossword  puzzles,  races  including  horse  races,                 

card  games  and  other  games  of  any  sort  or  gambling  or  betting  of  any  form  or  nature 
whatsoever.—Where the total income of an assessee includes any income by way of winnings from any 
lottery or crossword puzzle or race including horse race (not being income from the activity of owning 
and maintaining race horses) or card game and other game of any sort or from gambling or betting of any 
form or nature whatsoever, the income-tax payable shall be the aggregate of— 

(i)   the  amount  of  income-tax  calculated  on  income  by  way  of  winnings  from  such  lottery  or 
crossword  puzzle  or  race  including  horse  race  or  card  game  and  other  game  of  any  sort  or  from 
gambling or betting of any form or nature whatsoever, at the rate of 5[thirty per cent.]; and 

1. Subs. by Act 13 of 1989, s. 18, for “previous year” (w.e.f. 1-4-1990). 
2. Ins. by Act 28 of 2016, s. 51 (w.e.f. 1-4-2017). 
3. Subs. by Act 13 of 2018, s. 35, for “provisions of section 111A and section 112” (w.e.f. 1-4-2017). 
4. Ins. by Act 3 of 1986, s. 26 (w.e.f. 1-4-1987). 
5. Subs. by Act 14 of 2001, s. 54, for “forty per cent.” (w.e.f. 1-4-2002). 

473 

                                                           
(ii)  the amount of income-tax with which the assessee would have been chargeable had his total 

income been reduced by the amount of income referred to in clause (i). 

Explanation.—For  the  purposes  of  this  section,  “horse  race”  shall  have  the  same  meaning  as 

in section 74A.] 

1[115BBA. Tax on non-resident sportsmen or sports associations.—(1) Where the total income of 

an assessee,— 

(a)  being a sportsman (including an athlete), who is not a citizen of India and is a non-resident, 

includes any income received or receivable by way of— 

(i)  participation in India in any game (other than a game the winnings wherefrom are taxable 

under section 115BB) or sport; or 

(ii)  advertisement; or 

(iii) contribution of articles relating to any game or sport in India in newspapers, magazines 

or journals; or 

(b) being a non-resident sports association or institution, includes any amount guaranteed to be 
paid  or  payable  to  such  association  or  institution  in  relation  to  any  game  (other  than  a  game  the 
winnings wherefrom are taxable under section 115BB) or sport played in India 2[; or] 

2[(c) being an entertainer, who is not a citizen of India and is a non-resident, includes any income 

received or receivable from his performance in India,] 

the income-tax payable by the assessee shall be the aggregate of— 

(i)   the  amount  of  income-tax  calculated  on  income  referred  to  in  3[clause  (a)  or  clause  (b)  or 

clause (c)] at the rate of 4[twenty per cent.]; and 

(ii)  the amount of income-tax with which the assessee would have been chargeable had the total 
income of the assessee been reduced by the amount of income referred to in 3[clause (a) or clause (b) 
or clause (c)]: 

Provided that no deduction in respect of any expenditure or allowance shall be allowed under any 

provision of this Act in computing the income referred to in 3[clause (a) or clause (b) or clause (c)]. 

(2) It shall not be necessary for the assessee to furnish under sub-section (1) of section 139 a return of 

his income if— 

(a) his total income in respect of which he is assessable under this Act during the previous year 
consisted only of income referred to in 3[clause (a) or clause (b) or clause (c)] of sub-section (1); and 

(b) the tax deductible at source under the provisions of Chapter XVIIB has been deducted from 

such income.] 

1. Ins. by Act 36 of 1989, s. 10 (w.e.f. 1-4-1990). 
2. Ins. by Act 23 of 2012, s. 45 (w.e.f. 1-4-2013). 
3. Subs. by s. 45, ibid., for “clause (a) or clause (b)” (w.e.f. 1-4-2013). 
4. Subs. by s. 45, ibid., for “ten per cent.” (w.e.f. 1-4-2013). 

474 

                                                           
1[115BBB. Tax on income from units of an open-ended equity oriented fund of the Unit Trust of 
India or of Mutual Funds.—(1) Where the total income of an assessee includes any income from units 
of  an  open-ended  equity  oriented  fund  of  the  Unit  Trust  of  India  or  of  a  Mutual  Fund,  the  income-tax 
payable shall be the aggregate of— 

(a) the amount of income-tax calculated on income from units of an open-ended equity oriented 

fund of the Unit Trust of India or of a Mutual Fund, at the rate of ten per cent; and 

(b) the amount of income-tax with which the assessee would have been chargeable had his total 

income been reduced by the amount of income referred to in clause (a). 

(2) Nothing contained in sub-section (1) shall apply in relation to any income from units of an open-
ended equity oriented fund of the Unit Trust of India or of the Mutual Fund arising after the 31st day of 
March, 2003. 

Explanation.—For the purposes of this section, the expressions “Mutual Fund”, “open-ended equity 
oriented  fund”  and  “Unit  Trust  of  India”  shall  have  the  meanings  respectively  assigned  to  them  in 
the Explanation to section 115T.] 

2[115BBC. Anonymous donations to be taxed in certain cases.—(1) Where the total income of an 
assessee, being a person in receipt of income on behalf of any university or other educational institution 
referred to in sub-clause (iiiad) or sub-clause (vi) or any hospital or other institution referred to in sub-
clause (iiiae) or sub-clause  (via) or any  fund  or institution  referred  to  in  sub-clause  (iv)  or  any  trust  or 
institution referred to in sub-clause (v) of clause (23C) of section 10 or any trust or institution referred to 
in section 11, includes any income by way of any anonymous donation, the income-tax payable shall be 
the aggregate of— 

3[(i) the  amount  of  income-tax  calculated  at  the  rate  of  thirty  per  cent.  on  the  aggregate  of 

anonymous donations received in excess of the higher of the following, namely:— 

(A) five per cent of the total donations received by the assessee; or 

(B) one lakh rupees, and] 

4[(ii) the amount of income-tax with which the assessee would have been chargeable had his total 
income  been  reduced  by  the  aggregate  of  anonymous  donations  received  in  excess  of  the  amount 
referred to in sub-clause (A) or sub-clause (B) of clause (i), as the case may be.] 

(2) The provisions of sub-section (1) shall not apply to any anonymous donation received by— 

(a) any trust or institution created or established wholly for religious purposes; 

(b)  any  trust  or  institution  created  or  established  wholly  for  religious  and  charitable  purposes 
other  than  any  anonymous  donation  made  with  a  specific  direction  that  such  donation  is  for  any 
university or other educational institution or any hospital or other medical institution run by such trust 
or institution. 

(3) For the purposes of this section, “anonymous donation” means any voluntary contribution referred 
to  in  sub-clause  (iia)  of  clause  (24)  of section  2,  where  a  person  receiving  such  contribution  does  not 
maintain a record of the identity indicating the name and address of the person making such contribution 
and such other particulars as may be prescribed.] 

1. Ins. by Act 20 of 2002, s. 49 (w.e.f. 1-4-2003). 
2. Ins. by Act 21 of 2006, s. 22 (w.e.f. 1-4-2007). 
3. Subs. by Act 33 of 2009, s. 43, for clause (i) (w.e.f. 1-4-2010). 
4. Subs. by Act 25 of 2014, s. 37, for clause (ii) (w.e.f. 1-4-2015). 

475 

                                                           
1[115BBD.  Tax  on  certain  dividends  received  from  foreign  companies.—(1)  Where  the  total 
income of an assessee, being an Indian company, 2*** includes any income by way of dividends declared, 
distributed or paid by a specified foreign company, the income-tax payable shall be the aggregate of— 

(a) the amount of income-tax calculated on the income by way of such dividends, at the rate of 

fifteen per cent; and 

(b) the amount of income-tax with which the assessee would have been chargeable had its total 

income been reduced by the aforesaid income by way of dividends. 

(2)  Notwithstanding  anything  contained  in  this  Act,  no  deduction  in  respect  of  any  expenditure  or 
allowance shall be allowed to the assessee under any provision of this Act in computing its income by 
way of dividends referred to in sub-section (1). 

(3) In this section,— 

 (i)   “dividends”  shall  have  the  same  meaning  as  is  given  to  “dividend”  in  clause  (22)  of              

section 2 but shall not include sub-clause (e) thereof; 

(ii)  “specified foreign company” means a foreign company in which the Indian company holds 

twenty-six per cent or more in nominal value of the equity share capital of the company.] 

3[115BBDA. Tax on certain dividends received from domestic companies.—(1) Notwithstanding 
anything  contained  in  this  Act,  where  the  total  income  of 4[a  specified  assessee,]  resident  in  India, 
includes any income in aggregate exceeding ten lakh rupees, by way of dividends declared, distributed or 
paid by a domestic company or companies, the income-tax payable shall be the aggregate of— 

(a)  the amount of income-tax calculated on the  income by way of such dividends in aggregate 

exceeding ten lakh rupees, at the rate of ten per cent; and 

(b)  the amount of income-tax with which the assessee would have been chargeable had the total 

income of the assessee been reduced by the amount of income by way of dividends. 

(2) No deduction in respect of any expenditure or allowance or set off of loss shall be allowed to the 
assessee  under  any  provision  of  this  Act  in  computing  the  income  by  way  of  dividends  referred  to  in 
clause (a) of sub-section (1). 

(3) In this section, “dividends” shall have the same meaning as is given to “dividend” in clause (22) 

of section 2 but shall not include sub-clause (e) thereof.] 

5[Explanation.—For the purposes of this section,— 

(a)  “dividend”  shall  have  the  meaning  assigned  to  it  in  clause  (22)  of  section  2  but  shall  not 

include sub-clause (e) thereof; 

1. Ins. by Act 8 of 2011, s. 17 (w.e.f. 1-4-2012). 

2. The words “for the previous year relevant to the assessment year beginning on the 1st day of April, 2012 or beginning on 
the 1st day of April, 2013 or beginning on the 1st day of April, 2014” omitted  by Act 25 of 2014, s. 38 (w.e.f. 1-4-2015). 

3. Ins. by Act 28 of 2016, s. 52 (w.e.f. 1-4-2017). 

4.  Subs.  by  Act  7  of  2017,  s.  44,  for  “an  assessee,  being  an  individual,  a  Hindu  Undivided  Family  or  a                                     

firm” (w.e.f. 1-4-2018). 

5. Subs. by s. 44, ibid., for the Explanation (w.e.f. 1-4-2018). 

476 

                                                           
(b) “specified assessee” means a person other than,— 

(i)  a domestic company; or 

(ii)   a  fund  or  institution  or  trust  or  any  university  or  other  educational  institution  or  any 

hospital  or  other  medical  institution  referred  to  in  sub-clause  (iv)  or  sub-clause  (v)  or                        
sub-clause (vi) or sub-clause (via) of clause (23C) of section 10; or 

(iii)  a trust or institution registered under section 12A or section 12AA.] 

1[115BBE. Tax on income referred to in section 68 or section 69 or section 69A or section 69B or 

section 69C or section 69D.—2[(1) Where the total income of an assessee,— 

(a) includes  any  income  referred  to  in  section  68,  section  69,  section  69A,  section  69B,               

section 69C or section 69D and reflected in the return of income furnished under section 139; or 

(b) determined  by  the  Assessing  Officer  includes  any  income  referred  to  in  section  68,                 

section 69, section 69A, section 69B, section 69C or section 69D, if such income is not covered under 
clause (a), 

the income-tax payable shall be the aggregate of— 

 (i) the amount of income-tax calculated on the income referred to in clause (a) and clause (b), at 

the rate of sixty per cent; and 

(ii) the amount of income-tax with which the assessee would have been chargeable had his total 

income been reduced by the amount of income referred to in clause (i).] 

(2)  Notwithstanding  anything  contained  in  this  Act,  no  deduction  in  respect  of  any  expenditure  or 
allowance  3[or  set  off  of  any  loss]  shall  be  allowed  to  the  assessee  under  any  provision  of  this  Act  in 
computing his income referred to in clause (a) 4[and clause (b)] of sub-section (1).] 

5[115BBF. Tax  on  income  from  patent.—(1)  Where  the  total  income  of  an  eligible  assessee 
includes  any  income  by  way  of  royalty  in  respect  of  a  patent  developed  and  registered  in  India,  the 
incometax payable shall be the aggregate of— 

(a) the amount of income-tax calculated on the income by way of royalty in respect of the patent 

at the rate of ten per cent.; and 

(b) the amount of income-tax with which the assessee would have been chargeable had his total 

income been reduced by the income referred to in clause (a). 

(2)  Notwithstanding  anything  contained  in  this  Act,  no  deduction  in  respect  of  any  expenditure  or 
allowance  shall  be  allowed  to  the  eligible  assessee  under  any  provision  of  this  Act  in  computing  his 
income referred to in clause (a) of sub-section (1). 

(3) The eligible assessee may exercise the option for taxation of income by way of royalty in respect 
of  a  patent  developed  and  registered  in  India  in  accordance  with  the  provisions  of  this  section,  in  the 
prescribed manner, on or before the due date specified under sub-section (1) of section 139 for furnishing 
the return of income for the relevant previous year. 

1. Ins. by Act 23 of 2012, s. 47 (w.e.f. 1-4-2013).  
2. Subs. by Act 48 of 2016, s. 2, for section 115BBE (w.e.f. 1-4-2017). 
3. Ins. by Act 28 of 2016, s. 53 (w.e.f. 1-4-2017). 
4. Ins. by Act 13 of 2018, s. 36 (w.r.e.f. 1-4-2017). 
5. Ins. by Act 28 of 2016, s. 54 (w.e.f. 1-4-2017). 

477 

                                                           
(4) Where an eligible assessee opts for taxation of income by  way of royalty in respect of a patent 
developed and registered in India for any previous year in accordance with the provisions of this section 
and  the  assessee  offers  the  income  for  taxation  for  any  of  the  five  assessment  years  relevant  to  the 
previous year succeeding the previous year not in accordance with the provisions of sub-section (1), then, 
the assessee shall not be eligible to claim the benefit of the provisions of this section for five assessment 
years subsequent to the assessment year relevant to the previous year in which such income has not been 
offered to tax in accordance with the provisions of sub-section (1). 

Explanation.—For the purposes of this section,— 

(a) “developed” means at least seventy-five per cent. of the expenditure incurred in India by the 
eligible assessee for any invention in respect of which a patent is granted under the Patents Act, 1970 
(herein referred to as the Patents Act); 

(b) “eligibleassessee” means a person resident in India and who is a patentee; 

(c) “invention” shall have the meaning assigned to it in clause (j) of sub-section (1) of section 2 

of the Patents Act; 

(d)  “lump  sum”  includes  an  advance  payment  on  account  of  such  royalties  which  is  not 

returnable; 

(e) “patent” shall have the meaning assigned to it in clause (m) of sub-section (1) of section 2 of 

the Patents Act; 

(f) “patentee” means the person, being the true and first inventor of the invention, whose name is 
entered on the patent register as the patentee, in accordance with the Patents Act, and includes every 
such  person,  being  the  true  and  first  inventor  of  the  invention,  where  more  than  one  person  is 
registered as patentee under that Act in respect of that patent; 

(g)  “patented  article”  and  “patented  process”  shall  have  the  meanings  respectively  assigned  to 

them in clause (o) of sub-section (1) of section 2 of the Patents Act; 

(h) “royalty”, in respect of a patent, means consideration (including any lump sum consideration 
but  excluding  any  consideration  which  would  be  the  income  of  the  recipient  chargeable  under  the 
head  “Capital  gains”  or  consideration  for  sale  of  product  manufactured  with  the  use  of  patented 
process or the patented article for commercial use) for the— 

(i) transfer of all or any rights (including the granting of a licence) in respect of a patent; or  

(ii) imparting of any information concerning the working of, or the use of, a patent; or 

(iii) use of any patent; or 

(iv) rendering of any services in connection with the activities referred to in sub-clauses (i)           

to (iii);  

(i) “true and first inventor” shall have the meaning assigned to it in clause (y) of sub-section (1) 

of section 2 of the Patents Act.] 

478 

1[115BBG. Tax  on  income  from  transfer  of  carbon  credits.—(1)  Where  the  total  income  of  an 
assessee includes any income by way of transfer of carbon credits, the income-tax payable shall be the 
aggregate of— 

(a)  the amount of income-tax calculated on the income by way of transfer of carbon credits, at 

the rate of ten per cent; and 

(b)  the amount of income-tax with which the assessee would have been chargeable had his total 

income been reduced by the amount of income referred to in clause (a). 

(2)  Notwithstanding  anything  contained  in  this  Act,  no  deduction  in  respect  of  any  expenditure  or 
allowance  shall  be  allowed  to  the  assessee  under  any  provision  of  this  Act  in  computing  his  income 
referred to in clause (a) of sub-section (1). 

Explanation.—For  the  purposes  of  this  section,  “carbon  credit”  in  respect  of  one  unit  shall  mean 
reduction of one tonne of carbon dioxide emissions or emissions of its equivalent gases which is validated 
by the United Nations Framework on Climate Change and which can be traded in market at its prevailing 
market price.] 

2[CHAPTER XII-A 

SPECIAL PROVISIONS RELATING TO CERTAIN INCOMES OF NON-RESIDENTS 

115C. Definitions.—In this Chapter, unless the context otherwise requires,— 

(a) “convertible foreign exchange” means foreign exchange which is for the time being treated by 
the Reserve Bank of India as convertible foreign exchange for the purposes of 3[the Foreign Exchange 
Management Act, 1999 (42 of 1999),] and any rules made thereunder; 

(b)  “foreign  exchange  asset”  means  any  specified  asset  which  the  assessee  has  acquired  or 

purchased with, or subscribed to in, convertible foreign exchange; 

(c) “investment income” means any  4[income derived other than dividends referred to in section 

115-O] from a foreign exchange asset; 

(d) “long-term capital gains” means income chargeable under the head “Capital gains” relating to 

a capital asset, being a foreign exchange asset which is not a short-term capital asset; 

(e)  “non-resident  Indian”  means  an  individual,  being  a  citizen  of  India  or  a  person  of  Indian 

origin who is not a “resident”. 

Explanation.—A person shall be deemed to be of Indian origin if he, or either of his parents or 

any of his grand-parents, was born in undivided India; 

(f) “specified asset” means any of the following assets, namely:— 

 (i)  shares in an Indian company; 

 (ii) debentures issued by an Indian company which is not a private company as defined in the 

Companies Act, 1956 (1 of 1956); 

(iii)  deposits  with  an  Indian  company  which  is  not  a  private  company as  defined  in  the 

Companies Act, 1956 (1 of 1956); 

1. Ins. by Act 7 of 2017, s. 45 (w.e.f. 1-4-2018). 
2. Ins. by Act 11 of 1983, s. 36 (w.e.f. 1-6-1983). 
3. Subs. by Act 17 of 2013, s. 4, for “The Foreign Exchange Regulation Act, 1973 (46 of 1973)” (w.e.f. 1-4-2013). 
4. Subs. by Act 32 of 2003, s. 54, for “income-derive” (w.e.f. 1-4-2004). 

479 

                                                           
(iv) any security of the Central Government as defined in clause (2) of section 2 of the Public 

Debt Act, 1944 (18 of 1944); 

(v) such other assets as the Central Government may specify in this behalf by notification in 

the Official Gazette. 

115D. Special provision for computation of total income of non-residents.—(1) No deduction in 
respect of any expenditure or allowance shall be allowed under any provision of this Act in computing the 
investment income of a non-resident Indian. 

(2) Where in the case of an assessee, being a non-resident Indian,— 

(a)   the  gross  total income  consists  only  of  investment  income  or  income  by  way  of  long-term 
capital gains or both, no deduction shall be allowed to the assessee 1[under Chapter VI-A and nothing 
contained  in  the  provisions  of  the  second  proviso  to  section  48  shall  apply  to  income  chargeable 
under the head “Capital gains”]; 

(b)  the gross total income includes any income referred to in clause (a), the gross total income 
shall  be  reduced  by  the  amount  of  such  income  and  the  deductions  under  Chapter  VIA  shall  be 
allowed as if the gross total income as so reduced were the gross total income of the assessee. 

2[115E.  Tax  on  investment  income  and  long-term  capital  gains.—Where  the  total  income  of  an 

assessee, being a non-resident Indian, includes— 

(a)  any income from investment or income from long-term capital gains of an asset other than a 

specified asset; 

(b)  income by way of long-term capital gains, 

the tax payable by him shall be the aggregate of— 

(i)  the amount of income-tax calculated on the income in respect of investment income referred 

to in clause (a), if any, included in the total income, at the rate of twenty per cent; 

(ii)   the  amount  of  income-tax  calculated  on  the  income  by  way  of  long-term  capital  gains 

referred to in clause (b), if any, included in the total income, at the rate of ten per cent; and 

(iii) the amount of income-tax with which he would have been chargeable had his total income 

been reduced by the amount of income referred to in clauses (a) and (b).] 

115F. Capital gains on transfer of foreign exchange assets not to be charged in certain cases.—
(1) Where, in the case of an assessee being a non-resident Indian, any long-term capital gains arise from 
the transfer of a foreign exchange asset (the asset so transferred being hereafter in this section referred to 
as the original asset), and the assessee has, within a period of six months after the date of such transfer, 
invested 3*** the whole or any part of the net consideration in any specified asset 4***, or in any savings 
certificates referred to in clause (4B) of section 10 (such specified asset 5***, or such savings certificates 
being  hereafter  in  this  section  referred  to  as  the  new  asset),  the  capital  gain  shall  be  dealt  with  in 
accordance with the following provisions of this section, that is to say,— 

(a)   if  the  cost  of  the  new  asset  is  not  less  than  the  net  consideration  in  respect  of  the  original 

asset, the whole of such capital gain shall not be charged under section 45; 

1. Subs. by Act 18 of 1992, s. 57, for “under sub-section (2) of section 48 or under Chapter VIA” (w.e.f. 1-4-1993). 
2. Subs. by Act 26 of 1997, s. 36, for section 115E (w.e.f. 1-4-1998). 
3. The words “or deposited” omitted by Act 26 of 1988, s. 32 (w.e.f. 1-4-1989). 
4.  The  words,  brackets,  figure  and  letter  “or  in  an  account  referred  to  in  clause  (4A)”  omitted  by  s.  32,  ibid.  (w.e.f.  1-4-

1989). 

5. The words “or such deposit in the account aforesaid” omitted by s. 32, ibid. (w.e.f. 1-4-1989). 

480 

                                                           
(b)  if the cost of the new asset is less than the net consideration in respect of the original asset, so 
much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of 
acquisition of the new asset bears to the net consideration shall not be charged under section 45. 

Explanation.—For the purposes of this sub-section,— 

(i)   “cost”,  in  relation  to  any  new  asset,  being  a  deposit  1***  referred  to  in  sub-clause  (iii),  or 

specified under sub-clause (v), of clause (f) of section 115C, means the amount of such deposit; 

(ii)  “net consideration”, in relation to the transfer of the original asset, means the full value of the 
consideration  received  or  accruing  as  a  result  of  the  transfer  of  such  asset  as  reduced  by  any 
expenditure incurred wholly and exclusively in connection with such transfer. 

(2) Where the new asset is transferred or converted (otherwise than by transfer) into money, within a 
period of three years from the date of its acquisition, the amount of capital gain arising from the transfer 
of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in 
clause (a) or, as the case may be, clause (b), of sub-section (1) shall be deemed to be income chargeable 
under  the  head  “Capital  gains”  relating  to  capital  assets  other  than  short-term  capital  assets  of  the 
previous year in which the new asset is transferred or converted (otherwise than by transfer) into money. 

115G. Return of income not to be filed in certain cases. It shall not be necessary for a non-resident 

Indian to furnish under sub-section (1) of section 139 a return of his income if— 

(a)  his total income in respect of which he is assessable under this Act during the previous year 

consisted only of investment income or income by way of long-term capital gains or both; and 

(b)  the tax deductible at source under the provisions of Chapter XVIIB has been deducted from 

such income. 

115H. Benefit  under  Chapter  to  be  available  in  certain  cases  even  after  the  assessee  becomes 
resident.—Where  a  person,  who  is  a  non-resident  Indian  in  any  previous  year,  becomes  assessable  as 
resident in India in respect of the total income of any subsequent year, he may furnish to the  2[Assessing 
Officer] a declaration in writing along with his return of income under section 139 for the assessment year 
for which he is so assessable, to the effect that the provisions of this Chapter shall continue to apply to 
him in relation to the investment income derived from any foreign exchange asset being an asset of  the 
nature referred to in sub-clause (ii) or sub-clause (iii) or sub-clause (iv) or sub-clause (v) of clause (f) of 
section 115C; and if he does so, the provisions of this Chapter shall continue to apply to him in relation to 
such  income  for  that  assessment  year  and  for  every  subsequent  assessment  year  until  the  transfer  or 
conversion (otherwise than by transfer) into money of such assets. 

115-I. Chapter not to apply if the assessee so chooses.—A non-resident Indian may elect not to be 
governed by the provisions of this Chapter for any assessment year by furnishing his return of income for 
that assessment year under section 139 declaring therein that the provisions of this Chapter shall not apply 
to him for that assessment year and if he does so, the provisions of this Chapter shall not apply to him for 
that assessment year and his total income for that assessment year shall be computed and tax on such total 
income shall be charged in accordance with the other provisions of this Act.] 

1.  The  words,  brackets,  figures  and  letter  “referred  to  in  clause  (4A)  of  section  10  or”  omitted  by  Act  26  of  1988,  s.  32              

(w.e.f. 1-4-1989). 

2. Subs. by Act 4 of 1988, s. 2, for “Income-tax officer” (w.e.f. 1-4-1989). 

481 

                                                           
1[CHAPTER XII-B 

SPECIAL PROVISIONS RELATING TO CERTAIN COMPANIES 

115J. Special provisions relating to certain companies.—(1) Notwithstanding anything contained 
in  any  other  provision  of  this  Act,  where  in  the  case  of  an  assessee  being  a  company  2[(other  than  a 
company  engaged  in  the  business  of  generation  or  distribution  of  electricity)],  the  total  income,  as 
computed under this Act in respect of any previous year relevant to the assessment year commencing on 
or  after  the  1st  day  of  April,  1988  3[but  before  the  1st  day  of  April,  1991]  (hereafter  in  this  section 
referred to as the relevant previous year), is less than thirty per cent of its book profit, the total income of 
such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to 
thirty per cent of such book profit. 

4[(1A) Every assessee, being a company, shall, for the purposes of this section, prepare its profit and 
loss  account  for  the  relevant  previous  year  in  accordance  with  the  provisions  of  Parts  II  and  III  of 
Schedule VI to the Companies Act, 1956 (1 of 1956).] 

Explanation.—For  the  purposes  of  this  section,  “book  profit”  means  the  net  profit  as  shown  in the 
profit  and  loss  account  for  the  relevant  previous  year  5[prepared  under  sub-section  (1A)],  as  increased 
by— 

(a)  the amount of income-tax paid or payable, and the provision therefor; or 

(b)   the  amounts  carried  to  any  reserves  2[(other  than  the  reserves  specified  in  section  80HHD   

6[or sub-section (1) of section 33AC])], by whatever name called; or 

(c)   the  amount  or  amounts  set  aside  to  provisions  made  for  meeting  liabilities,  other  than 

ascertained liabilities; or 

(d)  the amount by way of provision for losses of subsidiary companies; or 

(e)  the amount or amounts of dividends paid or proposed; or 

(f)  the amount or amounts of expenditure relatable to any income to which any of the provisions 

of Chapter III 7[applies; or] 

2[(g)  the amount withdrawn from the reserve account under section 80HHD, where it has been 

utilised for any purpose other than those referred to in sub-section (4) of that section; or 

(h) the amount credited to the reserve account under section 80HHD, to the extent that amount 

has not been utilised within the period specified in sub-section (4) of that section;] 

6[(ha) the amount deemed to be the profits under sub-section (3) of section 33AC,] 

8[if any amount referred to in clauses (a) to (f) is debited or, as the case may be, the amount referred to in 
clauses (g) and (h) is not credited] to the profit and loss account, and as reduced by,— 

 (i)  the amount withdrawn from reserves 2[(other than the reserves specified in section 80HHD)] 

or provisions, if any such amount is credited to the 9[profit and loss account: 

1. Ins. by Act 11 of 1987, s. 43 (w.e.f. 1-4-1988). 
2. Ins. by Act 3 of 1989, s. 19 (w.e.f. 1-4-1989). 
3. Ins. by Act 12 of 1990, s. 32 (w.e.f. 1-4-1990). 
4. Ins. by Act 13 of 1989, s. 19 (w.e.f. 1-4-1989). 
5.  Subs.  by  s.  19,  ibid.,  for  “prepared  in  accordance  with  the  provisions  of  Parts  II  and  III  of  the  Sixth  Schedule  to  the 

Companies Act, 1956 (1 of 1956)” (w.e.f. 1-4-1989). 

6. Ins. by Act 36 of 1989, s. 12 (w.e.f. 1-4-1990). 
7. Subs. by Act 3 of 1989, s. 19, for “applies,” (w.e.f. 1-4-1989). 
8. Subs. by s. 19, ibid., for “if any such amount is debited” (w.e.f. 1-4-1989). 
9. Subs. by Act 13 of 1989, s. 19, for “profit and loss account; or” (w.e.f. 1-4-1988). 

482 

                                                           
Provided that, where this section is applicable to an assessee in any previous year (including the 
relevant  previous  year),  the  amount  withdrawn  from  reserves  created  or  provisions  made  in  a 
previous year relevant to the assessment year commencing on or after the 1st day of April, 1988 shall 
not be reduced from the book profit unless the book profit of such year has been increased by those 
reserves or provisions (out of which the said amount was withdrawn) under this Explanation; or] 

(ii)   the  amount  of  income  to  which  any  of  the  provisions  of  Chapter  III  applies,  if  any  such 

amount is credited to the profit and loss account; or 

1[(iii)  the  amounts  [as  arrived  at  after  increasing  the  net  profit  by  the  amounts  referred  to  in 
clauses  (a)  to  (f)  and  reducing  the  net  profit  by  the  amounts  referred  to  in  clauses  (i)  and  (ii)] 
attributable to the business, the profits from which are eligible for deduction under section 80HHC or 
section  80HHD;  so,  however,  that  such  amounts  are  computed  in  the  manner  specified  in  
sub-section  (3)  or  sub-section  (3A)  of  section  80HHC  or  sub-section  (3)  of  section  80HHD,  as  the 
case may be; or] 

2[(iv)] the amount of the loss or the amount of depreciation which would be required to be set off 
against the profit of the relevant previous year as if the provisions of clause (b) of the first proviso to 
sub-section (1) of section 205 of the Companies Act, 1956 (1 of 1956), are applicable. 

(2) Nothing contained in sub-section (1) shall affect the determination of the amounts in relation to 
the relevant previous year to be carried forward to the subsequent  year or years under the provisions of 
sub-section (2) of section 32 or sub-section (3) of section 32A or clause (ii) of sub-section (1) of section 
72 or section 73 or section 74 or sub-section (3) of section 74A or sub-section (3) of section 80J.] 

3[115JA. Deemed income relating to certain companies.—(1) Notwithstanding anything contained 
in any other provisions of this Act, where in the case of an assessee, being a company, the total income, 
as computed under this Act in respect of any previous year relevant to the assessment year commencing 
on or after the 1st day of April, 1997  4[but before the 1st day of April, 2001] (hereafter in this section 
referred to as the relevant previous year) is less than thirty per cent of its book profit, the total income of 
such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to 
thirty per cent of such book profit. 

(2) Every assessee, being a company, shall, for the purposes of this section prepare its profit and loss 
account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI 
to the Companies Act, 1956 (1 of 1956): 

Provided that while preparing profit and loss account, the depreciation shall be calculated on the same 
method and rates which have been adopted for calculating the depreciation for the purpose of preparing 
the profit and loss account laid before the company at its annual general meeting in accordance with the 
provisions of section 210 of the Companies Act, 1956 (1 of 1956): 

Provided further that where a company has adopted or adopts the financial year under the Companies 
Act, 1956 (1 of 1956), which is different from the previous year under the Act, the method and rates for 
calculation  of  depreciation  shall  correspond  to  the  method  and  rates  which  have  been  adopted  for 
calculating  the  depreciation  for  such  financial  year  or  part  of  such  financial  year  falling  within  the 
relevant previous year. 

1. Ins. by Act 3 of 1989, s. 19 (w.e.f. 1-4-1989). 
2. Clause (iii) renumbered as clause (iv) by s. 19, ibid. (w.e.f. 1-4-1989). 
3. Ins. by Act 33 of 1996, s. 39 (w.e.f. 1-4-1997). 
4. Ins. by Act 10 of 2000, s. 50 (w.e.f. 1-4-2001). 

483 

                                                           
Explanation.—For  the  purposes  of  this  section,  “book  profit”  means  the  net  profit  as  shown  in the 

profit and loss account for the relevant previous year prepared under sub-section (2), as increased by— 

(a)  the amount of income-tax paid or payable, and the provision therefor; or 

(b)  the amounts carried to any reserves by whatever name called; or 

(c)   the  amount  or  amounts  set  aside  to  provisions  made  for  meeting  liabilities,  other  than 

ascertained liabilities; or 

(d)  the amount by way of provision for losses of subsidiary companies; or 

(e)  the amount or amounts of dividends paid or proposed; or 

(f)  the amount or amounts of expenditure relatable to any income to which any of the provisions 

of Chapter III applies; 

1[(g)  the amount or amounts set aside as provision for diminution in the value of any asset, 

if any  amount  referred  to  in  clauses (a) to (g)  is  debited to the  profit and loss  account,  and  as  reduced 
by,—] 

(i)  the amount withdrawn from any reserves or provisions if any such amount is credited to the 

profit and loss account: 

Provided that, where this section is applicable to an assessee in any previous year (including the 
relevant  previous  year),  the  amount  withdrawn  from  reserves  created  or  provisions  made  in  a 
previous year relevant to the assessment year commencing on or after the 1st day of April, 1997 2[but 
ending before the 1st day of April, 2001] shall not be reduced from the book profit unless the book 
profit of such year has been increased by those reserves or provisions (out of which the said amount 
was withdrawn) under this Explanation; or 

(ii)   the  amount  of  income  to  which  any  of  the  provisions  of  Chapter  III  applies,  if  any  such 

amount is credited to the profit and loss account; or 

3[(iii)  the amount of loss brought forward or unabsorbed depreciation, whichever is less as per 

books of account. 

Explanation.—For the purposes of this clause,— 

(a)  the loss shall not include depreciation; 

(b)   the  provisions  of  this  clause  shall  not  apply  if  the  amount  of  loss  brought  forward  or 

unabsorbed depreciation is nil; or] 

(iv) the amount of profits derived by an industrial undertaking from the business of generation or 

generation and distribution of power; or 

1. Subs. by Act 33 of 2009, s. 44, for “if any amount referred to in clauses (a) to (f) is debited to the profit and loss account, 

and as reduced by, —” (w.e.f. 1-4-1998). 

2. Ins. by Act 10 of 2000, s. 50 (w.e.f. 1-4-2001). 

3. Subs. by Act 20 of 2002, s. 51, for “clause (iii) and the Explanation thereto” (w.e.f. 1-4-1997). 

484 

                                                           
(v)  the amount of profits derived by an industrial undertaking located in an industrially backward 
State  or  district  as  referred  to  in  1[sub-section  (4)  and  sub-section  (5)  of  section  80-IB],  for  the 
assessment years such industrial undertaking is eligible to claim a deduction of hundred per cent of 
the 2[profits and gains under sub-section (4) or sub-section (5) of section 80-IB]; or 

(vi) the amount of profits derived by an industrial undertaking from the business of developing, 
maintaining and operating any infrastructure facility 3[as defined in the Explanation to sub-section (4) 
of section 80-IA and subject to fulfilling the conditions laid down in that sub-section]; or 

(vii) the amount of profits of sick industrial company for the assessment year commencing from 
the  assessment  year  relevant  to  the  previous  year  in  which  the  said  company  has  become  a  sick 
industrial  company  under  sub-section  (1)  of  section  17  of  the  Sick  Industrial  Companies  (Special 
Provisions) Act, 1985 (1 of 1986) and ending with the assessment year during which the entire net 
worth of such company becomes equal to or exceeds the accumulated losses. 

Explanation.—For the purposes of this clause, “net worth” shall have the meaning assigned to it 
in clause (ga) of sub-section (1) of section 3 of the Sick  Industrial Companies (Special Provisions) 
Act, 1985 (1 of 1986); 4[or] 

5[(viii) the amount of profits eligible for deduction under section 80HHC, computed under clause 
(a), (b) or (c) of sub-section (3) or sub-section (3A), as the case may be, of that section, and subject to 
the conditions specified in sub-sections (4) and (4A) of that section; 

(ix)  the  amount  of  profits  eligible  for  deduction  under  section  80HHE,  computed  under  

sub-section (3) of that section.] 

(3) Nothing contained in sub-section (1) shall affect the determination of the amounts in relation to 
the relevant previous year to be carried forward to the subsequent year or years under the provisions of 
sub-section  (2)  of  section  32  or  sub-section  (3)  of  section  32A  or  clause  (ii)  of  sub-section  (1)  of  
section 72 or section 73 or section 74 or sub-section (3) of section 74A. 

(4)  Save  as  otherwise  provided  in  this  section,  all  other  provisions  of  this  Act  shall  apply  to  every 

assessee, being a company, mentioned in this section.] 

6[115JAA. Tax credit in respect of tax paid on deemed income relating to certain companies.—(1) 
Where any amount of tax is paid under sub-section (1) of section 115JA by an assessee being a company 
for any assessment year, then, credit in respect of tax so paid shall be allowed to him in accordance with 
the provisions of this section. 

7[(1A) Where any amount of tax is paid under sub-section (1) of section 115JB by an assessee, being a 
company  for  the  assessment  year  commencing  on  the  1st  day  of  April,  2006  and  any  subsequent 
assessment  year,  then,  credit  in  respect  of  tax  so  paid  shall  be  allowed  to  him  in  accordance  with  the 
provisions of this section.] 

1. Subs. by Act 27 of 1999, s. 90, for “sub-clause (b) or sub-clause (c) of clause (iv) of sub-section (2) of section 80-IA”  

(w.e.f. 1-4-2000). 

2. Subs. by s. 90, ibid., for “profits and gains under sub-section (5) of section 80-IA” (w.e.f. 1-4-2000). 
3. Subs. by s. 90,  ibid., for “under sub-section (12) of section 80-IA, and subject to fulfilling the conditions laid down in 

sub-section (4A) of section 80-IA” (w.e.f. 1-4-2000). 

4. Ins. by Act 26 of 1997, s. 37 (w.e.f. 1-4-1997). 
5. Ins. by s. 37, ibid. (w.e.f. 1-4-1998). 
6. Ins. by Act 26 of 1997, s. 38 (w.e.f. 1-4-1997). 
7. Ins. by Act 18 of 2005, s. 35 (w.e.f. 1-4-2006). 

485 

                                                           
1[(2) The tax credit to be allowed under sub-section (1) shall be the difference of the tax paid for any 
assessment year under sub-section (1) of section 115JA and the amount of tax payable by the assessee on 
his total income computed in accordance with the other provisions of this Act: 

Provided that no interest shall be payable on the tax credit allowed under sub-section (1). 

(2A) The tax credit to be allowed under sub-section (1A) shall be the difference of the tax paid for any 
assessment year under sub-section (1) of section 115JB and the amount of tax payable by the assessee on 
his total income computed in accordance with the other provisions of this Act: 

Provided that no interest shall be payable on the tax credit allowed under sub-section (1A): 

2[Provided further that where the amount of tax credit in respect of any income-tax paid in any country or 
specified  territory  outside  India,  under  section  90  or  section  90A  or  section  91,  allowed  against  the  tax 
payable  under  the  provisions  of  sub-section  (1)  of  section  115JB  exceeds  the  amount  of  such  tax  credit 
admissible against the tax payable by the assessee on its income in accordance with the other provisions of 
this  Act,  then,  while  computing  the  amount  of  credit  under  this  sub-section,  such  excess  amount  shall  be 
ignored.] 

(3) The amount of tax credit determined under sub-section (2) shall be carried forward and set off in 
accordance  with the  provisions of sub-sections (4)  and  (5)  but  such  carry  forward  shall  not  be  allowed 
beyond  the  fifth  assessment  year  immediately  succeeding  the  assessment  year  in  which  tax  credit 
becomes allowable under sub-section (1). 

(3A) The amount of tax credit determined under sub-section (2A) shall be carried forward and set off 
in accordance with the provisions of sub-sections (4) and (5) but such carry forward shall not be allowed 
beyond the  3[fifteenth assessment year] immediately succeeding the assessment year in which tax credit 
becomes allowable under sub-section (1A).] 

(4) The tax credit shall be allowed set-off in a year when tax becomes payable on the total income 
computed in accordance with the provisions of this Act other than section 115JA 4[or section 115JB, as 
the case may be]. 

(5) Set off in respect of brought forward tax credit shall be allowed for any assessment year to the 
extent of the difference between the tax on his total income and the tax which would have been payable 
under the provisions of sub-section (1) of section 115JA 4[or section 115JB, as the case may be] for that 
assessment year. 

(6)  Where  as  a  result  of  an  order  under  sub-section  (1)  or  sub-section  (3)  of section  143,                     

section  144, section  147, section  154, section  155,  sub-section  (4)  of section  245D, section  250,                 
section  254, section  260, section  262, section  263 or section  264,  the  amount  of  tax  payable  under  this 
Act is reduced or increased, as the case may be, the amount of tax credit allowed under this section shall 
also be increased or reduced accordingly. 

5[(7) In case of conversion of a private company or unlisted public company into a limited liability 
partnership under the Limited Liability Partnership Act, 2008 (6 of 2009), the provisions of this section 
shall not apply to the successor limited liability partnership. 

Explanation.—For  the  purposes  of  this  section,  the  expressions  “private  company”  and  “unlisted 
public  company”  shall  have  the  meanings  respectively  assigned  to  them  in  the  Limited  Liability 
Partnership Act, 2008 (6 of 2009).]] 

1. Subs. by Act 21 of 2006, s. 23, for sub-sections (2) and (3) (w.e.f. 1-4-2007). 
2. Ins. by Act 7 of 2017, s. 46 (w.e.f. 1-4-2018). 
3. Subs. by, s. 46, ibid., for “tenth assessment year” (w.e.f. 1-4-2018). 
4. Ins. by Act 10 of 2000, s. 51 (w.e.f. 1-4-2001). 
5. Ins. by Act 14 of 2010, s. 29 (w.e.f. 1-4-2011). 

486 

                                                           
1[115JB.  Special  provision  for  payment  of  tax  by  certain  companies.—(1)  Notwithstanding 
anything contained in any other provision of this Act, where in the case of an assessee, being a company, 
the income-tax, payable on the total income as computed under this Act in respect of any previous year 
relevant  to  the  assessment  year  commencing  on  or  after  2[the  1st  day  of  April,  2012],  is  less  than 
3[eighteen  and  one-half  per  cent.]  of  its  book  profit,  4[such  book  profit  shall  be  deemed  to  be  the  total 
income of the assessee and the tax payable by the assessee on such total income shall be the amount of 
income-tax at the rate of 3[eighteen and one-half per cent.]]. 

(2) 5[Every assessee,— 

(a) being a company, other than a company referred to in clause (b), shall, for the purposes of this 
section, prepare its  6[statement of profit and loss] for the relevant previous year in accordance with 
the provisions of 7[Schedule III] to 8[the Companies Act, 2013 (18 of 2013)]; or 

(b)  being  a  company,  to  which  the  9[second  proviso  to  sub-section  (1)  of  section  129]  of  8[the 
Companies Act, 2013 (18 of 2013)] is applicable, shall, for the purposes of this section, prepare its 
6[statement of profit and loss] for the relevant previous year in accordance with the provisions of the 
Act governing such company:] 

Provided that while preparing the annual accounts including 6[statement of profit and loss],— 

(i)  the accounting policies; 

(ii)   the  accounting  standards  adopted  for  preparing  such  accounts  including  6[statement  of 

profit and loss; 

(iii) the method and rates adopted for calculating the depreciation, 

shall  be  the  same  as  have  been  adopted  for  the  purpose  of  preparing  such  accounts  including 
6[statement  of  profit  and  loss]  and  laid  before  the  company  at  its  annual  general  meeting  in 
accordance with the provisions of 10[section 210] of 8[the Companies Act, 2013 (18 of 2013)]: 

Provided  further that  where  the  company  has  adopted  or  adopts  the  financial  year  under  8[the 

Companies Act, 2013 (18 of 2013)], which is different from the previous year under this Act,— 

(i)  the accounting policies; 

(ii)   the  accounting  standards  adopted  for  preparing  such  accounts  including  6[statement  of 

profit and loss]; 

(iii) the method and rates adopted for calculating the depreciation, 

1. Ins. by Act 10 of 2000, s. 52 (w.e.f. 1-4-2001). 

2. Subs. by Act 8 of 2011, s. 18, for “the 1st day of April, 2011” (w.e.f. 1-4-2012). 

3. Subs. by s. 18, ibid., for “eighteen per cent.” (w.e.f. 1-4-2012). 

4. Subs. by Act 20 of 2002, s. 52, for “the tax payable for the relevant previous year shall be deemed to be seven and one-

half per cent. of such book profit” (w.e.f. 1-4-2001). 

5. Subs. by Act 23 of 2012, s. 48, for the portion beginning with the words “Every assessee,” and ending with the words and 

figures “the Companies Act, 1956 (1 of 1956):” (w.e.f. 1-4-2013). 

6. Subs. by Act 7 of 2017, s. 47, for “profit and loss account” (w.e.f. 1-4-2017). 

7. Subs. by s. 47, ibid., for “Part II of Schedule VI” (w.e.f. 1-4-2017). 

8. Subs. by s. 47, ibid., for “the Companies Act, 1956 (1 of 1956)” (w.e.f. 1-4-2017). 

9. Subs. by s. 47, ibid., for “proviso to sub-section (2) of section 211” (w.e.f. 1-4-2017). 

10. Subs. by s. 47, ibid., for “section 210” (w.e.f. 1-4-2017). 

487 

                                                           
shall  correspond  to  the  accounting  policies,  accounting  standards  and  the  method  and  rates  for 
calculating  the  depreciation  which  have  been  adopted  for  preparing  such  accounts  including 
1[statement of profit and loss] for such financial year or part of such financial year falling within the 
relevant previous year. 

Explanation 2[1].—For the purposes of this section, “book profit” means the 3[profit] as shown in the 
1[statement of profit and loss] for the relevant previous year prepared under sub-section (2), as increased 
by— 

(a) the amount of income-tax paid or payable, and the provision therefor; or 

(b) the amounts carried to any reserves, by whatever name called 4[, other than a reserve specified 

under section 33AC]; or 

(c)  the  amount  or  amounts  set  aside  to  provisions  made  for  meeting  liabilities,  other  than 

ascertained liabilities; or 

(d) the amount by way of provision for losses of subsidiary companies; or 

(e) the amount or amounts of dividends paid or proposed; or 

(f)  the  amount  or  amounts  of  expenditure  relatable  to  any  income  to  which 5[section  10 (other 

than the provisions contained in clause (38) thereof) or 6*** section 11 or section 12 apply; or] 

7[(fa) the amount or amounts of expenditure relatable to income, being share of the assessee in the 
income  of  an  association  of  persons  or  body  of  individuals,  on  which  no  income-tax  is  payable  in 
accordance with the provisions of section 86; or 

(fb) the amount or amounts of expenditure relatable to income accruing or arising to an assessee, 

being a foreign company, from,— 

(A) the capital gains arising on transactions in securities; or 

(B)  the  interest,  royalty  or  fees  for  technical  services  chargeable  to  tax  at  the  rate  or  rates 

specified in Chapter XII, 

if  the  income-tax  payable  thereon  in  accordance  with  the  provisions  of  this  Act,  other  than  the 
provisions of this Chapter, is at a rate less than the rate specified in sub-section (1); or 

(fc) the amount representing notional loss on transfer of a capital asset, being share of a special 
purpose  vehicle,  to  a  business  trust  in  exchange  of  units  allotted  by  the  trust  referred  to  in  
clause  (xvii)  of section  47 or  the  amount  representing  notional  loss  resulting  from  any  change  in 
carrying  amount  of  said  units  or  the  amount  of  loss  on  transfer  of  units  referred  to  in 
clause (xvii) of section 47; or] 

 8[(fd) the amount or amounts of expenditure relatable to income by way of royalty in respect of 

patent chargeable to tax under section 115BBF; or] 

9[(g) the amount of depreciation,] 

1. Subs. by Act 7 of 2017, s. 47, for “profit and loss account” (w.e.f. 1-4-2017). 
2. The Explanation numbered as Explanation 1 by Act 18 of 2008, s. 23 (w.e.f. 1-4-2001). 
3. Subs. by Act 7 of 2017, s. 47, for “net profit” (w.e.f. 1-4-2017). 
4. Ins. by Act 20 of 2002, s. 52 (w.e.f. 1-4-2003). 
5. Subs. by Act 21 of 2006, s. 24, for “section 10 (other than the provisions contained in clause (23G) thereof) or section 

10A or section 10B or section 11 or section 12 apply,” (w.e.f. 1-4-2007). 

6. The words, figures and letters “section 10A or section 10B or” omitted by Act 22 of 2007, s. 34 (w.e.f. 1-4-2008). 
7. Ins. by Act 20 of 2015, s. 30 (w.e.f. 1-4-2016). 
8. Ins. by Act 28 of 2016, s. 55 (w.e.f. 1-4-2017). 
9. Ins. by Act 21 of 2006, s. 24 (w.e.f. 1-4-2007). 

488 

                                                           
1[(h)  the amount of deferred tax and the provision therefor, 

2[(i)  the amount or amounts set aside as provision for diminution in the value of any asset, 

3[(j)   the  amount  standing  in  revaluation  reserve  relating  to  revalued  asset  on  the  retirement  or 

disposal of such asset, 

4[(k)  the amount of gain on transfer of units referred to in clause (xvii) of section 47 computed by 
taking into account the cost of the shares exchanged with units referred to in the said clause or the 
carrying amount of the shares at the time of exchange where such shares are carried at a value other 
than the cost through 5[statement of profit and loss], as the case may be;] 

if  any  amount  referred  to  in  clauses  (a)  to  (i)  is  debited  to  the  5[statement  of  profit  and  loss]  or                   
if any amount referred to in clause (j) is not credited to the 5[statement of profit and loss], and as reduced 
by,—]]] 

6[(i) the amount withdrawn from any reserve or provision (excluding a reserve created before the 
1st day of April, 1997 otherwise than by way of a debit to the  5[statement of profit and loss]), if any 
such amount is credited to the 5[statement of profit and loss]: 

Provided that  where  this  section  is  applicable  to  an  assessee  in  any  previous  year,  the  amount 
withdrawn  from  reserves  created  or  provisions  made  in  a  previous  year  relevant  to  the  assessment 
year  commencing  on  or  after  the  1st  day  of  April,  1997  shall  not  be  reduced  from  the  book  profit 
unless the book profit of such year has been increased by those reserves or provisions (out of which 
the  said  amount  was  withdrawn)  under  this Explanation or Explanation below  the  second  proviso 
to section 115JA, as the case may be; or] 

(ii) the amount of income to which any of the provisions of 7[section 10 (other than the provisions 
contained  in  clause  (38)  thereof)]  or  8*** section  11 or section  12 apply,  if  any  such  amount  is 
credited to the 5[statement of profit and loss]; or 

9[(iia)  the  amount  of  depreciation  debited  to  the  5[statement  of  profit  and  loss]  (excluding  the 

depreciation on account of revaluation of assets); or 

(iib) the amount withdrawn from revaluation reserve and credited to the  5[statement of profit and 
loss], to the extent it does not exceed the amount of depreciation on account of revaluation of assets 
referred to in clause (iia); or] 

10[(iic) the amount of income, being the share of the assessee in the income of an association of 
persons or body of individuals, on which no income-tax is payable in accordance with the provisions 
of section 86, if any, such amount is credited to the 5[statement of profit and loss]; or 

(iid)  the amount of income accruing or arising to an assessee, being a foreign company, from,— 

(A) the capital gains arising on transactions in securities; or 

(B) the  interest,  royalty  or  fees  for  technical  services  chargeable  to  tax  at  the  rate  or  rates 

specified in Chapter XII, 

1. Subs. by Act 18 of 2008, s. 23, for the portion beginning with the words “if any amount referred” and ending with the 

words “as reduced by—” (w.e.f. 1-4-2001). 

2. Subs. by Act 33 of 2009, s. 46, for “if any amount referred to in clauses (a) to (h) is debited to the profit and loss account, 

and as reduced by—“ (1-4-2001) 

3. Subs. by Act 23 of 2012, s. 48, for “if any amount referred to in clauses (a) to (i) is debited to the profit and loss account, 

and as reduced by, —” (w.e.f. 1-4-2013). 

4. Ins. by Act 20 of 2015, s. 30 (w.e.f. 1-4-2016).  
5. Subs. by Act 7 of 2017, s. 47, for “profit or loss account” (w.e.f. 1-4-2017). 
6. Subs. by Act 20 of 2002, s. 52, for clause (i) and the proviso (w.e.f. 1-4-2001). 
7.  Subs.  by  Act  21  of  2006,  s.  24,  for  “section  10  (other  than  the  provisions  contained  in  clause  (23G)  thereof)”                      

(w.e.f. 1-4-2007). 

8. The words, figures and letters “section 10A or section 10B or” omitted by Act 22 of 2007, s. 34 (w.e.f. 1-4-2008). 
9. Ins. by Act 21 of 2006, s. 24 (w.e.f. 1-4-2007). 
10. Ins. by Act 20 of 2015, s. 30 (w.e.f. 1-4-2016). 

489 

                                                           
if  such  income  is  credited  to  the  1[statement  of  profit  and  loss]  and  the  income-tax  payable  thereon  in 
accordance with the provisions of this Act, other than the provisions of this Chapter, is at a rate less than 
the rate specified in sub-section (1); or 

(iie) the amount representing,— 

(A) notional gain on transfer of a capital asset, being share of a special purpose vehicle to a 
business trust in exchange of units allotted by that trust referred to in clause (xvii) of section 47; 
or 

(B) notional gain resulting from any change in carrying amount of said units; or 

(C) gain on transfer of units referred to in clause (xvii) of section 47, 

if any, credited to the 1[statement of profit and loss]; or 

(iif) the amount of loss on transfer of units referred to in clause (xvii) of section 47 computed by 
taking into account the cost of the shares exchanged with units referred to in the said clause or the 
carrying amount of the shares at the time of exchange where such shares are carried at a value other 
than the cost through profit or loss account, as the case may be; or] 

2[(iig)  the  amount  of  income  by  way  of  royalty  in  respect  of  patent  chargeable  to  tax  under  

section 115BBF;] or 

3[(iih)  the  aggregate  amount  of  unabsorbed  depreciation  and  loss  brought  forward  in  case  of  a 
company against whom an application for corporate insolvency resolution process has been admitted 
by  the  Adjudicating  Authority  under  section  7  or  section  9  or  section  10  of  the  Insolvency  and 
Bankruptcy Code, 2016. 

Explanation.––For  the  purposes  of  this  clause,  the  expression  “Adjudicating  Authority”  shall 
have  the  meaning  assigned  to it  in  clause (1)  of  section  5  of the  Insolvency  and  Bankruptcy  Code, 
2016 and the loss shall not include depreciation; or;] 

4[(iii)  the  amount  of  loss  brought  forward  or  unabsorbed  depreciation,  whichever  is  less  as  per 

books of account 3[in case of a company other than the company referred to in clause (iih)]. 

Explanation.—For the purposes of this clause,— 

(a) the loss shall not include depreciation; 

(b)  the  provisions  of  this  clause  shall  not  apply  if  the  amount  of  loss  brought  forward  or 

unabsorbed depreciation is nil; or] 

5* 

* 

* 

* 

* 

(vii) the amount of profits of sick industrial company for the assessment year commencing on and 
from the assessment year relevant to the previous year in which the said company has become a sick 
industrial  company  under  sub-section  (1)  of  section  17  of  the  Sick  Industrial  Companies  (Special 
Provisions) Act, 1985 (1 of 1986) and ending with the assessment year during which the entire net 
worth of such company becomes equal to or exceeds the accumulated losses. 

Explanation.—For the purposes of this clause, “net worth” shall have the meaning assigned to it 
in clause (ga) of sub-section (1) of section 3 of the Sick  Industrial Companies (Special Provisions) 
Act, 1985 (1 of 1986); or 

6[(viii) the amount of deferred tax, if any such amount is credited to the  1[statement of profit and 

loss].] 

1. Subs. by Act 7 of 2017, s. 47, for “profit and loss account” (w.e.f. 1-4-2017). 
2. Ins. by Act 28 of 2016, s. 55 (w.e.f. 1-4-2017). 
3. Ins. by Act 13 of 2018, s. 37 (w.e.f. 1-4-2018). 
4. Subs. by Act 20 of 2002, s. 52, for clause (iii) and the Explanation (w.e.f. 1-4-2001). 
5. Clause (iv), clause (v) and clause (vi) omitted by Act 8 of 2011, s. 18 (w.e.f. 1-4-2005). 
6. Ins. by Act 18 of 2008, s. 23 (w.e.f. 1-4-2001). 

490 

 
 
 
 
 
 
 
                                                           
1[Explanation  2.—For  the  purposes  of  clause  (a)  of Explanation  1,  the  amount  of  income-tax  shall 

include— 

 (i) any  tax  on  distributed  profits  under section  115-O or  on  distributed  income  under                 

 section 115R; 

(ii)  any interest charged under this Act; 

(iii) surcharge, if any, as levied by the Central Acts from time to time; 

(iv) Education Cess on income-tax, if any, as levied by the Central Acts from time to time; and 

(v) Secondary  and  Higher  Education  Cess  on  income-tax,  if  any,  as  levied  by  the  Central  Acts 

from time to time.] 
2[Explanation  3.—For  the  removal  of  doubts,  it  is  hereby  clarified  that  for  the  purposes  of  this 
section, the assessee, being a company to which the 3[second proviso to sub-section (1) of section 129 of 
the  Companies  Act,  2013  (18  of  2013)]  is  applicable,  has,  for  an  assessment  year  commencing  on  or 
before the 1st day of April, 2012, an option to prepare its  4[statement of profit and loss] for the relevant 
previous year either in accordance with the provisions of  5[Schedule III to the Companies Act, 2013 (18 
of 2013)] or in accordance with the provisions of the Act governing such company. 

6[Explanation 4.—For the removal of doubts, it is hereby clarified that the provisions of this section 
shall not be applicable and shall be deemed never to have been applicable to an assessee, being a foreign 
company, if— 

(i)   the  assessee  is  a  resident  of  a  country  or  a  specified  territory  with  which  India  has  an 
agreement  referred  to  in  sub-section  (1)  of section  90 or  the  Central  Government  has  adopted  any 
agreement  under  sub-section  (1)  of section  90A and  the  assessee  does  not  have  a  permanent 
establishment in India in accordance with the provisions of such agreement; or 

(ii)  the assessee is a resident of a country with which India does not have an agreement of the 
nature referred to in clause (i) and the assessee is not required to seek registration under any law for 
the time being in force relating to companies.] 
7[Explanation 4A.—For the removal of doubts, it is hereby clarified that the provisions of this section 
shall not be applicable and shall be deemed never to have been applicable to an assessee, being a foreign 
company, where its total income comprises solely of profits and gains from business referred to in section 
44B or section 44BB or section 44BBA or section 44BBB and such income has been offered to tax at the 
rates specified in those sections.] 

 8[9[Explanation 5].—For the purposes of sub-section (2), the  expression “securities” shall have the 
same  meaning  as  assigned  to  it  in  clause  (h)  of  section  2  of  the  Securities  Contracts  (Regulation)  Act, 
1956 (42 of 1956).] 

10[(2A)  For  a  company  whose  financial  statements  are  drawn  up  in  compliance  to  the  Indian 
Accounting  Standards  specified  in  Annexure  to  the  Companies  (Indian  Accounting  Standards)  Rules, 
2015, the book profit as computed in accordance with Explanation 1 to sub-section (2) shall be further–– 

(a) increased  by  all  amounts  credited to  other  comprehensive income  in  the  statement  of  profit 

and loss under the head “Items that will not be re-classified to profit or loss; 

1. Ins. by Act 18 of 2008, s. 23 (w.e.f. 1-4-2001). 
2. Ins. by Act 23 of 2012, s. 48 (w.e.f. 1-4-2013). 
3. Subs. by  Act 7 of 2017, s. 47, for “proviso to sub-section (2) of section 211 of the Companies Act, 1956 (1 of 1956)”  

(w.e.f. 1-4-2017). 

4. Subs. by s. 47, ibid., for “profit and loss account” (w.e.f. 1-4-2017). 
5. Subs. by s. 47, ibid., for “Part II and Part III of Schedule VI to the Companies Act, 1956 (1 of 1956)” (w.e.f. 1-4-2017). 
6. Ins. by Act 28 of 2016, s. 55 (w.e.f. 1-4-2001). 
7. Ins. by Act 13 of 2018, s. 37 (w.e.f. 1-4-2001). 
8. Ins. by Act 20 of 2015, s. 30 (w.e.f. 1-4-2016). 
9. Explanation 4 renumbered as Explanation 5 thereof by Act 28 of 2016, s. 55 (w.e.f. 1-4-2001). 
10. Ins. by Act 7 of 2017, s. 47 (w.e.f. 1-4-2018). 

491 

                                                           
(b)  decreased  by  all  amounts  debited  to  other  comprehensive  income  in  the  statement  of  profit 

and loss under the head “Items that will not be re-classified to profit or loss; 

(c) increased by amounts or aggregate of the amounts debited to the statement of profit and loss 
on distribution of non-cash assets to shareholders in a demerger in accordance with Appendix A of 
the Indian Accounting Standards 10; 

(d) decreased by all amounts or aggregate of the amounts credited to the statement of profit and 
loss on distribution of non-cash assets to shareholders in a demerger in accordance with Appendix A 
of the Indian Accounting Standards 10: 

Provided that nothing contained in clause (a) or clause (b) shall apply to the amount credited or 
debited to other comprehensive income under the head “Items that will not be re-classified to profit or 
loss” in respect of— 

(i)  revaluation  surplus  for  assets  in  accordance  with  the  Indian  Accounting  Standards  16  and 

Indian Accounting Standards 38; or 

(ii) gains  or  losses  from  investments  in  equity  instruments  designated  at  fair  value  through 

other comprehensive income in accordance with the Indian Accounting Standards 109: 

Provided  further  that  the  book  profit  of  the  previous  year  in  which  the  asset  or  investment 
referred  to  in  the  first  proviso  is  retired,  disposed,  realised  or  otherwise  transferred  shall  be 
increased  or  decreased,  as  the  case  may  be,  by  the  amount  or  the  aggregate  of  the  amounts 
referred to in the first proviso for the previous year or any of the preceding previous years and 
relatable to such asset or investment. 

(2B) In the case of a resulting company, where the property and the liabilities of the undertaking or 
undertakings being received by it are recorded at values different from values appearing in the books of 
account of the demerged company immediately before the demerger, any change in such value shall be 
ignored for the purpose of computation of book profit of the resulting company under this section. 

(2C) For a company referred to in sub-section (2A), the book profit of the year of convergence and 
each of the following four previous years, shall be further increased or decreased, as the case may be, by 
one-fifth of the transition amount: 

Provided  that  the  book  profit  of  the  previous  year  in  which  the  asset  or  investment  referred  to  in  
sub-clauses  (B)  to  (E)  of  clause  (iii)  of  the  Explanation  is  retired,  disposed,  realised  or  otherwise 
transferred, shall  be increased  or  decreased,  as the case  may  be,  by  the amount or  the aggregate  of the 
amounts referred to in the said sub-clauses relatable to such asset or investment: 

Provided further that the book profit of the previous year in which the foreign operation referred to in 
sub-clause (F) of clause (iii) of the Explanation is disposed or otherwise transferred, shall be increased or 
decreased,  as  the  case  may  be,  by  the  amount  or  the  aggregate  of  the  amounts  referred  to  in  the  said  
sub-clauses relatable to such foreign operations. 

Explanation.––For the purposes of this sub-section, the expression–– 

(i) “year of convergence” means the previous year within which the convergence date falls; 

(ii)  “convergence  date”  means  the  first  day  of  the  first  Indian  Accounting  Standards  reporting 

period as defined in the Indian Accounting Standards 101; 

(iii) “transition amount” means the amount or the aggregate of the amounts adjusted in the other 
equity  (excluding  capital  reserve  and  securities  premium  reserve)  on  the  convergence  date  but  not 
including the following:–– 

(A) amount or aggregate of the amounts adjusted in the other comprehensive income on the 

convergence date which shall be subsequently re-classified to the profit or loss; 

(B) revaluation surplus for assets in accordance with the Indian Accounting Standards 16 and 

Indian Accounting Standards 38 adjusted on the convergence date; 

492 

(C)  gains  or  losses from  investments  in  equity  instruments  designated  at  fair  value through 
other  comprehensive income  in  accordance  with the  Indian  Accounting  Standards  109  adjusted 
on the convergence date; 

(D)  adjustments  relating  to  items  of  property,  plant  and  equipment  and  intangible  assets 
recorded  at  fair  value  as  deemed  cost  in  accordance  with  paragraphs  D5  and  D7  of  the  Indian 
Accounting Standards 101 on the convergence date; 

(E) adjustments relating to investments in subsidiaries, joint ventures and associates recorded 
at  fair  value  as  deemed  cost  in  accordance  with  paragraph  D15  of  the  Indian  Accounting 
Standards 101 on the convergence date; and 

(F)  adjustments  relating  to  cumulative  translation  differences  of  a  foreign  operation  in 

accordance with paragraph D13 of the Indian Accounting Standards 101 on the convergence date.] 

(3) Nothing contained in sub-section (1) shall affect the determination of the amounts in relation to 
the relevant previous year to be carried forward to the subsequent year or years under the provisions of 
sub-section  (2)  of section  32 or  sub-section  (3)  of section  32A or  clause  (ii)  of  sub-section  (1)  of  
section 72 or section 73 or section 74 or sub-section (3) of section 74A. 

(4) Every company to which this section applies, shall furnish a report in the prescribed form from an 
accountant  as  defined  in  the Explanation below  sub-section  (2)  of section  288,  certifying  that  the  book 
profit  has  been  computed  in  accordance  with  the  provisions  of  this  section  along  with  the  return  of 
income filed under sub-section (1) of section 139 or along with the return of income furnished in response 
to a notice under clause (i) of sub-section (1) of section 142. 

(5)  Save  as  otherwise  provided  in  this  section,  all  other  provisions  of  this  Act  shall  apply  to  every 

assessee, being a company, mentioned in this section.] 

1[(5A) The provisions of this section shall not apply to any income accruing or arising to a company 

from life insurance business referred to in section 115B.] 

2[(6) The provisions of this section shall not apply to the income accrued or arising on or after the 1st 
day of April, 2005 from any business carried on, or services rendered, by an entrepreneur or a Developer, 
in a Unit or Special Economic Zone, as the case may be:] 

3[Provided that the provisions of this sub-section shall cease to have effect in respect of any previous 

year relevant to the assessment year commencing on or after the 1st day of April, 2012.] 

 4[(7) Notwithstanding anything contained in sub-section (1), where the assessee referred to therein, is 
a unit located in an International Financial Services Centre and derives its income solely in convertible 
foreign exchange, the provisions of sub-section (1) shall have the effect as if for the words “eighteen and 
one-half per cent” wherever occurring in that sub-section, the words “nine per cent” had been substituted. 

Explanation.—For the purposes of this sub-section,— 

(a)  “International  Financial  Services  Centre” shall  have  the  same  meaning  as  assigned  to  it  in  

clause (q) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005); 

(b) “unit” means a unit established in an International Financial Services Centre; 

(c) “convertible foreign exchange” means a foreign exchange which is for the time being treated 
by  the  Reserve  Bank  of  India  as  convertible  foreign  exchange  for  the  purposes  of  the  Foreign 
Exchange Management Act, 1999 (42 of 1999) and the rules made thereunder.] 

1. Ins. by Act 23 of 2012, s. 48 (w.e.f. 1-4-2001). 
2. Ins. by Act 28 of 2005, s. 27 and the Second Schedule (w.e.f. 10-2-2006). 
3. Ins. by Act 8 of 2011, s. 18 (w.e.f. 1-4-2012). 
4. Ins. by Act 28 of 2016, s. 55 (w.e.f. 1-4-2017). 

493 

                                                           
1[CHAPTER XIIBA 

SPECIAL PROVISIONS RELATING TO CERTAIN 2[PERSONS OTHER THAN A COMPANY] 

3[115JC. Special provisions for payment of tax by certain persons other than a company.—(1) 
Notwithstanding anything contained in this Act, where the regular income-tax payable for a previous year 
by a person, other than a company, is less than the alternate minimum tax payable for such previous year, 
the adjusted total income shall be deemed to be the total income of that person for such previous year and 
he shall be liable to pay income-tax on such total income at the rate of eighteen and one-half per cent. 

(2) Adjusted total income referred to in sub-section (1) shall be the total income before giving effect 

to this Chapter as increased by— 

 (i)  deductions  claimed,  if  any,  under  any  section  (other  than section  80P)  included  in        

Chapter VIA under the heading ”C.—Deductions in respect of certain incomes”; 4*** 

(ii) deduction claimed, if any, 5[under section 10AA; and] 

6[(iii)  deduction  claimed,  if  any,  under section  35AD as  reduced  by  the  amount  of  depreciation 
allowable in accordance with the provisions of section 32 as if no deduction under section 35AD was 
allowed in respect of the assets on which the deduction under that section is claimed.] 

(3)  Every  person  to  whom  this  section  applies  shall  obtain  a  report,  in  such  form  as  may  be 
prescribed, from an accountant, certifying  that the adjusted total income and the alternate minimum tax 
have  been  computed  in  accordance  with  the  provisions  of  this  Chapter  and  furnish  such  report  on  or 
before the due date of furnishing of return of income under sub-section (1) of section 139.] 

7[(4) Notwithstanding anything contained in sub-section (1), where the person referred to therein, is a 
unit  located  in  an  International  Financial  Services  Centre  and  derives  its  income  solely  in  convertible 
foreign exchange, the provisions of sub-section (1) shall have effect as if for the words “eighteen and one-
half per cent.”, the words “nine per cent.” had been substituted.] 

115JD. Tax  credit  for  alternate  minimum  tax.—(1)  The  credit  for  tax  paid  by  8[a  person 

under section 115JC shall be allowed to him] in accordance with the provisions of this section. 

(2) The tax credit of an assessment year to be allowed under sub-section (1) shall be the excess of 

alternate minimum tax paid over the regular income-tax payable of that year. 

9[Provided  that  where  the  amount  of  tax  credit  in  respect  of  any  income-tax  paid  in  any  country  or 
specified territory outside India under section 90 or section 90A or section 91, allowed against the alternate 
minimum  tax  payable,  exceeds  the  amount  of  the  tax  credit  admissible  against  the  regular  income-tax 
payable by the assessee, then, while computing the amount of credit under this sub-section, such excess 
amount shall be ignored.] 

(3) No interest shall be payable on tax credit allowed under sub-section (1). 

1. Ins. by Act 8 of 2011, s. 19 (w.e.f. 1-4-2012). 
2. Subs. by Act 23 of 2012, s. 49, for “LIMITED LIABILITY PARTERSHIPS” (w.e.f. 1-4-2013). 
3. Subs. by s. 50, ibid., for section 115JC (w.e.f. 1-4-2013). 
4. The “word” omitted by Act 25 of 2014, s. 39 (w.e.f. 1-4-2015). 
5. Subs. by s. 39, ibid., for “under section 10AA” (w.e.f. 1-4-2015). 
6. Ins. by s. 39, ibid. (w.e.f. 1-4-2015). 
7. Ins. by Act 13 of 2018, s. 38 (w.e.f. 1-4-2019). 
8.  Subs.  by  Act  23  of  2012,  s.  51,  for  “a  limited  liability  partnership  under  section  115JC  shall  be  allowed  to  it”                      

(w.e.f. 1-4-2013). 

9. Ins. by Act 7 of 2017, s. 48 (w.e.f. 1-4-2018). 

494 

                                                           
(4) The amount of tax credit determined under sub-section (2) shall be carried forward and set off in 
accordance  with the  provisions of sub-sections (5)  and  (6)  but  such  carry  forward  shall  not  be  allowed 
beyond the 1[fifteenth assessment year] immediately succeeding the assessment year for which tax credit 
becomes allowable under sub-section (1). 

(5) In any assessment year in which the regular income-tax exceeds the alternate minimum tax, the 
tax credit shall be allowed to be set off to the extent of the excess of regular income-tax over the alternate 
minimum tax and the balance of the tax credit, if any, shall be carried forward. 

(6)  If  the  amount  of  regular  income-tax  or  the  alternate  minimum  tax  is  reduced  or  increased  as  a 
result of any order passed under this Act, the amount of tax credit allowed under this section shall also be 
varied accordingly. 

115JE. Application of other provisions of this Act.—Save as otherwise provided in this Chapter, 

all other provisions of this Act shall apply to a 2[person] referred to in this Chapter. 

3[115JEE. Application  of  this  Chapter  to  certain  persons.—(1)  The  provisions  of  this  Chapter 

shall apply to a person who has claimed any deduction under— 

(a)  any  section  (other  than section  80P)  included  in  Chapter  VI-A  under  the  heading ”C.—

Deductions in respect of certain incomes”; or 

4[(b) section 10AA; or 

(c) section 35AD.] 

(2) The provisions of this Chapter shall not apply to an individual or a Hindu undivided family or an 
association  of  persons  or  a  body  of  individuals,  whether  incorporated  or  not,  or  an  artificial  juridical 
person  referred  to  in  sub-clause  (vii)  of  clause  (31)  of section  2,  if  the  adjusted  total  income  of  such 
person does not exceed twenty lakh rupees.] 

5[(3) Notwithstanding anything contained in sub-section (1) or sub-section (2), the credit for tax paid 

under section 115JC shall be allowed in accordance with the provisions of section 115JD.] 

115JF. Interpretation in this Chapter.In this Chapter— 

(a)   “accountant”  shall  have  the  same  meaning  as  in  the Explanation below  sub-section  (2) 

of section 288; 

6[(b) “alternate minimum tax” means the amount of tax computed on adjusted total income,–– 

(i) in case of an assessee being a unit referred to in sub-section (4) of section 115JC, at a rate 

of nine per cent.; 

(ii) in any other case, at a rate of eighteen and one-half per cent.;] 

7[(ba)  “convertible  foreign  exchange”  means  a  foreign  exchange  which  is  for  the  time  being 
treated by the Reserve Bank of India as convertible foreign exchange for the purpose of the Foreign 
Exchange Management Act, 1999 and the rules made thereunder; 

(bb) “International Financial Services Centre” shall have the meaning assigned to it in clause (q) 

of section 2 of the Special Economic Zones Act, 2005;] 

8* 

* 

* 

* 

* 

1. Subs. by Act 7 of 2017, s. 48, for “tenth assessment year” (w.e.f. 1-4-2018). 
2. Subs. by Act 23 of 2012, s. 52, for “a limited liability partnership” (w.e.f. 1-4-2013). 
3. Ins. by s. 53, ibid. (w.e.f. 1-4-2013). 
4. Subs. by Act 25 of 2014, s. 40, for clause (b) (w.e.f. 1-4-2015). 
5. Ins. by s. 40, ibid. (w.e.f. 1-4-2015). 
6. Subs. by Act 13 of 2018, s. 39, for clause (b) (w.e.f.1-4-2019). 
7. Ins. by s. 39, ibid. (w.e.f. 1-4-2019). 
8. Clause (c) omitted by Act 23 of 2012, s. 54 (w.e.f. 1-4-2013). 

495 

 
 
 
 
 
 
 
                                                           
(d) “regular income-tax” means the income-tax payable for a previous year by  1[a person on his 
total income] in accordance with the provisions of this Act other than the provisions of this Chapter.] 

2[(e) “unit” means a unit established in an International Financial Services Centre.] 

3[CHAPTER XIIBB 

SPECIAL PROVISIONS RELATING TO CONVERSION OF INDIAN BRANCH OF A FOREIGN BANK INTO A 
SUBSIDIARY COMPANY 

115JG. Conversion  of  an  Indian  branch  of  foreign  company 

into  subsidiary  Indian             

company.—(1)  Where  a  foreign  company  is  engaged  in  the  business  of  banking  in  India  through  its 
branch situate in India and such branch is converted into a subsidiary company thereof, being an Indian 
company (hereafter referred to as an Indian subsidiary company) in accordance with the scheme framed 
by  the  Reserve  Bank  of  India,  then,  notwithstanding  anything  contained  in  the  Act  and  subject  to  the 
conditions as may be notified by the Central Government in this behalf,— 

(i)  the capital gains arising from such conversion shall not be chargeable to tax in the assessment 

year relevant to the previous year in which such conversion takes place; 

(ii)  the provisions of this Act relating to treatment of unabsorbed depreciation, set off or carry 
forward and set off of losses, tax credit in respect of tax paid on deemed income relating to certain 
companies and the computation of income in the case of the foreign company and Indian subsidiary 
company shall apply with such exceptions, modifications and adaptations as may be specified in that 
notification. 

(2)  In  case  of  failure  to  comply  with  any  of  the  conditions  specified  in  the  scheme  or  in  the 
notification issued under sub-section (1), all the provisions of this Act shall apply to the foreign company 
and the said Indian subsidiary company without any benefit, exemption or relief under sub-section (1). 

(3) Where, in a previous year, any benefit, exemption or relief has been claimed and granted to the 
foreign company or the Indian subsidiary company in accordance with the provisions of sub-section (1) 
and, subsequently, there is failure to comply with any of the conditions specified in the scheme or in the 
notification issued under sub-section (1), then,— 

 (i)  such benefit, exemption or relief shall be deemed to have been wrongly allowed; 

(ii)  the Assessing Officer may, notwithstanding anything contained in this Act, re-compute the 

total income of the assessee for the said previous year and make the necessary amendment; and 

(iii)  the  provisions  of section  154 shall,  so  far  as  may  be,  apply  thereto  and  the  period  of  four 
years specified in sub-section (7) of that section being reckoned from the end of the previous year in 
which the failure to comply with the condition referred to in sub-section (1) takes place. 

(4) Every notification issued under this section shall be laid before each House of Parliament.] 

4[CHAPTER XIIBC 

SPECIAL PROVISIONS RELATING TO FOREIGN COMPANY SAID TO BE RESIDENT IN INDIA 

115JH. Foreign company said to be resident in India.—(1) Where a foreign company is said to be 
resident in India in any previ- ous year and such foreign company has not been resident in India in any of 
the previous years preceding the said previous year, then, notwithstanding anything contained in this Act 
and subject to the conditions as may be notified by the Central Government in this behalf, the provisions 
of this Act relating to the computation of total income, treatment of unabsorbed depreciation, set off or 
carry forward and set off of losses, collection and recovery and special provisions relating to avoidance of 
tax  shall  apply  with  such  exceptions,  modifications  and  adaptations  as  may  be  specified  in  that 
notification for the said previous year: 

1. Subs. by Act 23 of 2012, s. 54, for “a limited liability partnership on its total income” (w.e.f. 1-4-2013). 
2. Ins. by Act 13 of 2018, s. 39 (w.e.f. 1-4-2018). 
3. Ins. by Act 23 of 2012, s. 55 (w.e.f. 1-4-2013). 
4. Ins. by Act 28 of 2016, s. 56 (w.e.f. 1-4-2017). 

496 

                                                           
Provided that  where  the  determination  regarding  foreign  company  to  be  resident  in  India  has  been 
made in the assessment proceedings relevant to any previous year, then, the provisions of this sub-section 
shall  also  apply  in  respect  of  any  other  previous  year,  succeeding  such  previous  year,  if  the  foreign 
company  is  resident  in  India  in  that  previous  year  and  the  previous  year  ends  on  or  before  the  date on 
which such assessment proceeding is completed. 

(2) Where, in a previous year, any benefit, exemption or relief has been  claimed and granted to the 
foreign company in accordance with the provisions of sub-section (1), and, subsequently, there is failure 
to comply with any of the conditions specified in the notification issued under sub-section (1), then,— 

(i) such benefit, exemption or relief shall be deemed to have been wrongly allowed; 

(ii)  the  Assessing  Officer  may,  notwithstanding  anything  contained  in  this  Act,  re-compute  the 
total income of the assessee for the said previous year and make the necessary amendment as if  the 
exceptions, modifications and adaptations referred to in sub-section (1) did not apply; and 

(iii)  the  provisions  of section  154 shall,  so  far  as  may  be,  apply  thereto  and  the  period  of  four 
years specified in sub-section (7) of that section being reckoned from the end of the previous year in 
which the failure to comply with the condition referred to in sub-section (1) takes place. 

(3) Every notification issued under this section shall be laid before each House of Parliament.] 

1* 

* 

* 

* 

* 

115K. [Special  provision for  computation  of income in  certain cases.]—Omitted  by  the  Finance           

Act 1997 (26 of 1997), s. 39 (w.e.f. 1-4-1998).  

115L. [Return  of  income  not  to  be  filed  in  certain  cases.]—Omitted  by  the  Finance                                 

Act, 1997 (26 of 1997), s. 39 (w.e.f. 1-4-1998). 

115M. [Special provision for disallowance of deductions and rebate of income-tax.]—Omitted by 

the Finance Act, 1997 (26 of 1997), s. 39, (w.e.f. 1-4-1998). 

115N. [Bar of proceedings in certain cases.]—Omitted by the Finance Act, 1997 (26 of 1997), s. 39, 

(w.e.f. 1-4-1998). 

2[CHAPTER XIID 

SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED PROFITS OF DOMESTIC COMPANIES 

115-O. Tax  on  distributed  profits  of  domestic  companies.—3[(1)  Notwithstanding  anything 
contained in any other provision of this Act and subject to the provisions of this section, in addition to the 
income-tax chargeable in respect of the total income of a domestic company for any assessment year, any 
amount  declared,  distributed  or  paid  by  such  company  by  way  of  dividends  (whether  interim  or 
otherwise) on or after the 1st day of April, 2003, whether out of current or accumulated profits shall be 
charged to additional income-tax (hereafter referred to as tax on distributed profits) 4[at the rate of fifteen 
per cent.]] 

5[Provided  that  in  respect  of  dividend  referred  to  in  sub-clause  (e)  of  clause  (22)  of  section  2,  this              

sub-section shall have effect as if for the words “fifteen per cent.”, the words “thirty per cent.” had been 
substituted;] 

1. Chapter XIIC consisting of sections 115K to 115N omitted by Act 26 of 1997, s. 39 (w.e.f. 1-4-1998). Earlier Chapter 

XIIC was inserted by the Act 18 of 1992, s. 58 (w.e.f. 1-4-1993). 

2. Ins. by s. 40, ibid. (w.e.f. 1-6-1997). 
3. Subs. by Act 32 of 2003, s. 55, for sub-section (1) (w.e.f. 1-4-2003). Earlier sub-section (1) was amended by Act 10 of 

2000,     s. 53 (w.e.f. 1-6-2000), Act 14 of 2001, s. 55 (w.e.f. 1-6-2001), and Act 20 of 2002, s. 53 (w.e.f. 1-4-2003). 

4. Subs. by Act 22 of 2007, s. 35, for “at the rate of twelve and one-half per cent.” (w.e.f. 1-4-2007). 
5. Ins. by Act 13 of 2018, s. 40 (w.e.f. 1-4-2018). 

497 

 
 
 
 
 
 
 
 
                                                           
1[(1A) The amount referred to in sub-section (1) shall be reduced by,— 

2[(i)  the amount of dividend, if any, received by the domestic company during the financial year, 

if such dividend is received from its subsidiary and,— 

(a)  where  such  subsidiary  is  a  domestic  company,  the  subsidiary  has  paid  the  tax  which  is 

payable under this section on such dividend; or 

(b)  where such subsidiary is a foreign company, the tax is payable by the domestic company 

under section 115BBD on such dividend: 

Provided that the same amount of dividend shall not be taken into account for reduction more 

than once;] 

(ii)  the  amount  of  dividend,  if  any,  paid  to  any  person  for,  or  on  behalf  of,  the  New  Pension 

System Trust referred to in clause (44) of section 10. 

Explanation.—For  the  purposes  of  this  sub-section,  a  company  shall  be  a  subsidiary  of  another 
company, if such other company, holds more than half in nominal value of the equity share capital of the 
company.] 

3[(1B) For the purposes of determining the tax on distributed profits payable in accordance with this 
section, any amount by way of dividends referred to in sub-section (1) as reduced by the amount referred 
to in sub-section (1A) [hereafter referred to as net distributed profits], shall be increased to such amount 
as would, after reduction of the tax on such increased amount at the rate specified in sub-section (1), be 
equal to the net distributed profits.] 

4[Provided that this sub-section shall not apply in respect of dividend referred to in sub-clause (e) of 

clause (22) of section 2.] 

(2)  Notwithstanding  that  no  income-tax  is  payable  by  a  domestic  company  on  its  total  income 

computed  in  accordance  with  the  provisions  of  this  Act,  the  tax  on  distributed  profits  under                          
sub-section (1) shall be payable by such company. 

(3) The principal officer of the domestic company and the company shall be liable to pay the tax on 

distributed profits to the credit of the Central Government within fourteen days from the date of— 

(a)  declaration of any dividend; or 

(b)  distribution of any dividend; or 

(c)  payment of any dividend, 

whichever is earliest. 

(4) The tax on distributed profits so paid by the company shall be treated as the final payment of tax 
in respect of the amount declared, distributed or paid as dividends and no further credit therefor shall be 
claimed by the company or by any other person in respect of the amount of tax so paid. 

(5)  No  deduction  under  any  other  provision  of  this  Act  shall  be  allowed  to  the  company  or  a 
shareholder  in  respect  of  the  amount  which  has  been  charged  to  tax  under  sub-section  (1)  or  the  tax 
thereon. 

5[(6)  Notwithstanding  anything  contained  in  this  section,  no  tax  on  distributed  profits  shall  be 
chargeable  in  respect  of  the  total  income  of  an  undertaking  or  enterprise  engaged  in  developing  or 
developing  and  operating  or  developing,  operating  and  maintaining  a  Special  Economic  Zone  for  any 
assessment year on any amount declared, distributed or paid by such Developer or enterprise, by  way of 
dividends (whether interim or otherwise) on or after the 1st day of April, 2005 out of its current income 
either in the hands of the Developer or enterprise or the person receiving such dividend 6*** ]: 

1.  Subs.  by  Act  33  of  2009,  s.  47,  for  sub-section  (1A)  (w.r.e.f.  (1-4-2009).  Earlier  sub-section  (1A)  was  inserted  by                             

Act 18 of 2008, s. 24 (w.e.f. 1-4-2008). 

2. Subs. by Act 17 of 2013, s. 30, for clause (i) (w.e.f. 1-6-2013). 
3. Ins. by Act 25 of 2014, s. 41 (w.e.f. 1-10-2014). 
4. Ins. by Act 13 of 2018, s. 40 (w.e.f. 1-4-2018). 
5. Ins. by Act 28 of 2005, s. 27 and the Second Schedule (w.e.f. 10-2-2006). 
6. The words “not falling under clause (23G)” omitted by Act 21 of 2006, s. 25 (w.e.f. 1-4-2007). 

498 

                                                           
1[Provided that the provisions of this sub-section shall cease to have effect from the 1st day of June, 

2011.] 

2[(7)  No  tax  on  distributed  profits  shall  be  chargeable  under  this  section  in  respect  of  any  amount 
declared, distributed or paid by the specified domestic company by way of dividends (whether interim or 
otherwise) to a business trust out of its current income on or after the specified date: 

Provided that  nothing  contained  in  this  sub-section  shall  apply  in  respect  of  any  amount  declared, 
distributed or paid, at any time, by the specified domestic company by way of dividends (whether interim 
or otherwise) out of its accumulated profits and current profits up to the specified date. 

Explanation.—For the purposes of this sub-section,— 

(a)  “specified  domestic  company”  means  a  domestic  company  in  which  a  business  trust  has 
become the holder of whole of the nominal value of equity share capital of the company (excluding 
the equity share capital required to be held mandatorily by any other person in accordance with any 
law for the time being in force or any directions of Government or any regulatory authority, or equity 
share capital held by any Government or Government body); 

(b)  “specified  date”  means  the  date  of  acquisition  by  the  business  trust  of  such  holding  as  is 

referred to in clause (a).] 

3[(8)  Notwithstanding  anything  contained  in  this  section,  no  tax  on  distributed  profits  shall  be 
chargeable in respect of the total income of a company, being a unit of an International Financial Services 
Centre, deriving income solely in convertible foreign exchange, for any assessment year on any amount 
declared, distributed or paid by such company, by way of dividends (whether interim or otherwise) on or 
after the 1st day of April, 2017, out of its current income, either in the hands of the company or the person 
receiving such dividend. 

Explanation.—For the purposes of this sub-section,— 

(a)   “International  Financial  Services  Centre”  shall  have  the  same  meaning  as  assigned  to  it  in 

clause (q) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005); 

(b)  “unit” means a unit established in an International Financial Services Centre, on or after the 

1st day of April, 2016; 

(c)  “convertible foreign exchange” means foreign exchange which is for the time being treated 
by  the  Reserve  Bank  of  India  as  convertible  foreign  exchange  for  the  purposes  of  the  Foreign 
Exchange Management Act, 1999 (42 of 1999) and the rules made thereunder.] 

115P. Interest  payable  for  non-payment  of  tax  by  domestic  companies.—Where  the  principal 
officer  of  a  domestic  company  and  the  company  fails  to  pay  the  whole  or  any  part  of  the  tax  on 
distributed  profits  referred  to  in  sub-section  (1)  of section  115-O,  within  the  time  allowed  under  sub-
section (3) of that section, he or it shall be liable to pay simple interest at the rate of 4[one per cent.] for 
every month or part thereof on the amount of such tax for the period beginning on the date immediately 
after the last date on which such tax was payable and ending with the date on which the tax is actually 
paid. 

115Q. When company is deemed to be in default.—If any principal officer of a domestic company 
and  the  company  does  not  pay  tax  on  distributed  profits  in  accordance  with  the  provisions  of section 
115O, then, he or it shall be deemed to be an assessee in default in respect of the amount of tax payable 
by him or it and all the provisions of this Act for the collection and recovery of income-tax shall apply. 

5* 

* 

* 

* 

*] 

1. Ins. by Act 8 of 2011, s. 20 (w.e.f. 1-6-2011). 
2. Ins. by Act 28 of 2016, s. 57 (w.e.f. 1-6-2016). 
3. Ins. by s. 57, ibid. (w.e.f. 1-4-2017). 
4.  Subs.  by  Act  54  of  2003,  s.  4,  for  “one  and  one-fourth  per  cent.”  (w.e.f.  8-9-2003).  Earlier  the  quoted  words  were 

amended by Act 10 of 2000, s. 54 (w.e.f. 1-6-2000). 

5. The Explanation omitted by Act 13 of 2018, s. 41 (w.e.f. 1-4-2018). 

499 

 
 
 
 
 
 
 
 
                                                           
1[CHAPTER XIIDA 

SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED INCOME OF DOMESTIC COMPANY FOR BUY-BACK 
OF SHARES 

115QA.  Tax  on  distributed  income  to  shareholders.—(1)  Notwithstanding  anything  contained  in 
any other provision of this Act, in addition to the income-tax chargeable in respect of the total income of 
a domestic company for any assessment year, any amount of distributed income by the company on buy-
back  of  shares  (not  being  shares  listed  on  a  recognised  stock  exchange)  from  a  shareholder  shall  be 
charged to  tax  and  such  company  shall  be liable to  pay  additional  income-tax  at the  rate  of  twenty  per 
cent on the distributed income. 

Explanation.—For the purposes of this section,— 

 (i)  ”buy-back”  means  purchase  by  a  company  of  its  own  shares  in  accordance  with  the 

provisions of 2[any law for the time being in force relating to companies]; 

(ii)  “distributed income” means the consideration paid by the company on buy-back of shares as 
reduced by 3[the amount, which was received by the company for issue of such shares, determined in 
the manner as may be prescribed]. 

(2)  Notwithstanding  that  no  income-tax  is  payable  by  a  domestic  company  on  its  total  income 
computed  in  accordance  with  the  provisions  of  this  Act,  the  tax  on  the  distributed  income  under  sub-
section (1) shall be payable by such company. 

(3) The principal officer of the domestic company and the company shall be liable to pay the tax to 
the credit of the Central Government within fourteen days from the date of payment of any consideration 
to the shareholder on buy-back of shares referred to in sub-section (1). 

(4) The tax on the distributed income by the company shall be treated as the final payment of tax in 
respect of the said income and no further credit therefor shall be claimed by the company or by any other 
person in respect of the amount of tax so paid. 

(5)  No  deduction  under  any  other  provision  of  this  Act  shall  be  allowed  to  the  company  or  a 
shareholder  in  respect  of  the  income  which  has  been  charged  to  tax  under  sub-section  (1)  or  the  tax 
thereon. 

115QB. Interest payable for non-payment of tax by company.—Where the principal officer of the 
domestic company and the company fails to pay the whole or any part of the tax on the distributed income 
referred  to  in  sub-section  (1)  of  section  115QA,  within  the  time  allowed  under  sub-section  (3)  of  that 
section, he or it shall be liable to pay simple interest at the rate of one per cent for every month or part 
thereof on the amount of such tax for the period beginning on the date immediately after the last date on 
which such tax was payable and ending with the date on which the tax is actually paid. 

1. Ins. by Act 17 of 2013, s. 31 (w.e.f. 1-6-2013). 

2. Subs. by Act 28 of 2016, s.  58, for “section 77A of the Companies Act, 1956 (1 of1956)” (w.e.f. 1-6-2016). 

3. Subs. by s. 58,  ibid., for “the amount, which was received by  the company  for issue of such shares, determined in the 

manner as may be prescribed” (1-6-2016). 

500 

                                                           
115QC. When  company  is  deemed  to  be  assessee  in  default.—If  any  principal  officer  of  a 
domestic  company  and  the  company  does  not  pay  tax  on  distributed  income  in  accordance  with  the 
provisions of section 115QA, then, he or it shall be deemed to be an assessee in default in respect of the 
amount of tax payable by him or it and all the provisions of this Act for the collection and recovery of 
income-tax shall apply.] 

1[CHAPTER XIIE 

SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED INCOME 

115R. Tax on distributed income to unit holders.—(1) Notwithstanding anything contained in any 
other  provisions  of  this  Act  and  section  32  of  the  Unit  Trust  of  India  Act,  1963  (52  of  1963),  2[any 
amount of income distributed on or before the 31st day of March, 2002 by the Unit Trust of India to its 
unit  holders]  shall  be  chargeable  to  tax  and  the  Unit  Trust  of  India  shall  be  liable  to  pay  additional 
income-tax on such distributed income at the rate of 3[ten per cent]: 

Provided that nothing contained in this sub-section shall apply in respect of any income distributed to 
a unit holder of open-ended equity oriented funds in respect of any distribution made from such fund for a 
period of three years commencing from the 1st day of April, 1999. 

4[(2) Notwithstanding anything contained in any other provision of this Act, any amount of income 
distributed by the specified company or a Mutual Fund to its unit holders shall be chargeable to tax and 
such specified company or Mutual Fund shall be liable to pay additional income-tax on such distributed 
income 5[at the rate of— 

6[(i)  twenty-five  per  cent.  on  income  distributed  to  any  person  being  an  individual  or  a  Hindu 

undivided family by a money market mutual fund or a liquid fund; 

(ii) thirty per cent. on income distributed to any other person by a money market mutual fund or a 

liquid fund; 

(iii) ten per cent. on income distributed to any person by an equity oriented fund; 

(iv)  twenty-five  per  cent.  on  income  distributed  to  any  person  being  an  individual  or  a  Hindu 
undivided  family  by  a  fund  other  than  a  money  market  mutual  fund  or  a  liquid  fund  or  an  equity 
oriented fund; and 

(v) thirty per cent. on income distributed to any other person by a fund other than a money market 

mutual fund or a liquid fund or an equity oriented fund:] 

1. Ins. by Act 27 of 1999, s. 61 (w.e.f. 1-6-1999). 
2. Subs. by Act 20 of 2002, s. 54, for “any amount of income distributed on or before the 31st day of March, 2002 by the 

Unit Trust of India to its unit holders” (w.e.f. 1-4-2003). 

3. Subs. by Act 14 of 2001, s. 57, for “twenty per cent.” (w.e.f. 1-6-2001), earlier substituted by Act 10 of 2000, s. 55 (w.e.f. 

1-6-2001). 

4. Subs. by Act 32 of 2003, s. 56, for sub-section (2) (w.e.f. 1-4-2003), Earlier amended by 20 of 2002, s. 54 (w.e.f. 1-4-

2003). 

5. Subs. by Act 23 of 2004, s. 29, for “at the rate of twelve and one-half per cent.” (w.e.f. 9-7-2004). 
6. Subs. by Act 13 of 2018, s. 42, for clause (i) to clause (iii) (w.e.f. 1-4-2018). Earlier it was amended by Act 17 of 2013,               

s. 32 (w.e.f. 1-6-2013), Act 8 of 2011, s. 21 (w.e.f. 1-6-2011) and Act 22 of 2007, s. 36 (w.e.f. 1-4-2007). 

501 

                                                           
1[Provided that where any income is distributed by a mutual fund under an infrastructure debt fund 
scheme to a non-resident (not being a company) or a foreign company, the mutual fund shall be liable to 
pay additional income-tax at the rate of five per cent on income so distributed:] 

2[Provided  further that]  nothing  contained  in  this  sub-section  shall  apply  in  respect  of  any  income 

distributed,— 

(a)  by the Administrator of the specified undertaking, to the unit holders; or 

3* 

* 

* 

* 

* 

4[Explanation.—For the purposes of this sub-section,— 

(i) “administrator” and “specified company” shall have the meanings respectively assigned to 

them in the Explanation to clause (35) of section 10; 

(ii) “infrastructure debt fund scheme” shall have the same meaning as assigned to it in clause 
(1) of regulation 49L of the Securities and Exchange Board of India (Mutual Funds) Regulations, 
1996 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992).] 

5[(2A)  For  the  purposes  of  determining  the  additional  income-tax  payable  in  accordance  with  sub-
section (2), the amount of distributed income referred therein shall be increased to such amount as would, 
after reduction of the additional income-tax on such increased amount at the rate specified in sub-section 
(2), be equal to the amount of income distributed by the Mutual Fund.] 

(3) The person responsible for making payment of the income distributed by the Unit Trust of India 
or a Mutual Fund and the Unit Trust of India or the Mutual Fund, as the case may be, shall be liable to 
pay  tax  to  the  credit  of  the  Central  Government  within  fourteen  days  from  the  date  of  distribution  or 
payment of such income, whichever is earlier. 

6* 

* 

* 

* 

(4) No deduction under any other provision of this Act shall be allowed to the Unit Trust of India or 

to  a  Mutual  Fund  in  respect  of  the  income  which  has  been  charged  to  tax  under  sub-section  (1)  or                 
sub-section (2). 

1. Ins. by Act 17 of 2013, s. 32 (w.e.f. 1-6-2013). 

2. Subs. by s. 32, ibid., for “Provided that” (w.e.f. 1-6-2013). 

3.  Clause  (b)  omitted  by  Act  13  of  2018,  s.  42  (w.e.f.  1-4-2018).  Earlier  it  was  amended  by  Act  21  of  2006,                                     

s. 26 (w.e.f. 1-6-2006). 

4. Subs. by Act 17 of 2013, s. 32, for the Explanation (w.e.f. 1-6-2013). 

5. Ins. by Act 25 of 2014, s. 42 (w.e.f. 1-10-2014). 

6. Sub-section (3A) omitted by s. 42, ibid. (w.e.f. 1-4-2015).Earlier inserted by Act 10 of 2000, s. 55 (w.e.f. 1-6-2000). 

502 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
115S.  Interest  payable  for  non-payment  of  tax.—Where  the  person  responsible  for  making 
payment of the income distributed by the 1[specified company as referred to in clause (h) of section 2 of 

the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002) or a Mutual Fund 

and the specified company] or the Mutual Fund, as the case may be, fails to pay the whole or any part of 

the tax referred to in sub-section (1) or sub-section (2) of section 115R, within the time allowed under  
sub-section (3) of that section, he or it shall be liable to pay simple interest at the rate of  2[one per cent.] 

every month or part thereof on the amount of such tax for the period beginning on the date immediately 

after the last date on which such tax was payable and ending with the date on which the tax is actually 

paid. 

115T. Unit Trust of India or Mutual Fund to be an assessee in default.—If any person responsible 
for making payment of the income distributed by the  1[specified company as referred to in clause (h) of 

section  2  of 

the  Unit  Trust  of  India  (Transfer  of  Undertaking  and  Repeal)  Act,  2002  

(58 of 2002) or a Mutual Fund and the specified company] or the Mutual Fund, as the case may be, does 

not pay tax, as is referred to in sub-section (1) or sub-section (2) of section 115R, then, he or it shall be 

deemed  to  be  an  assessee  in  default  in  respect  of  the  amount  of  tax  payable  by  him  or  it  and  all  the 

provisions of this Act for the collection and recovery of income-tax shall apply. 

Explanation.—For the purposes of this Chapter,— 

(a) “Mutual Fund” means a Mutual Fund specified under clause (23D) of section 10; 

3[(b)  “equity  oriented  fund”  means  a  fund  referred  to  in  clause  (a)  of  the  Explanation  to                

section 112A and the Unit Scheme, 1964 made by the Unit Trust of India;’] 

(c) “Unit Trust of India” means the Unit Trust of India established under the Unit Trust of India 

Act, 1963 (52 of 1963); 

 4[(d)  “money  market  mutual  fund”  means  a  money  market  mutual  fund  as  defined  in                

sub-clause  (p)  of  clause  (2)  of  the  Securities  and  Exchange  Board  of  India  (Mutual  Funds) 

Regulations, 1996; 

(e) “liquid fund” means a scheme or plan of a mutual fund which is classified by the Securities 

and Exchange Board of India as a liquid fund in accordance with the guidelines issued by it in this 

behalf under the Securities and Exchange Board of India Act, 1992 (15 of 1992) or regulations made 

thereunder.] 

1. Subs. by Act 32 of 2003, s. 57, for “Unit Trust of India or a Mutual Fund and the Unit Trust of India” (w.e.f. 1-4-2003). 

2. Subs. by Act 54 of 2003, s. 5, for “one and one-fourth per cent.” (w.e.f. 8-9-2003). 

3.  Subs.  by  Act  13  of  2018,  s.  43,  for  clause  (b)  (w.e.f.  1-4-2018).  Earlier  it  was  amended  by  Act  21  of  2006,  s.  27                    

(w.e.f. 1-6-2006). 

4. Ins. by Act 22 of 2007, s. 37 (w.e.f. 1-4-2007). 

503 

                                                           
1[CHAPTER XIIEA 

SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED  
INCOME BY SECURITISATION TRUSTS 

115TA.  Tax  on  distributed  income  to investors.—(1)  Notwithstanding  anything  contained  in  any 
other provisions of the Act, any amount of income distributed by the securitisation trust to its investors 
shall be chargeable to tax and such securitisation trust shall be liable to pay additional income-tax on such 
distributed income at the rate of— 

(i)   twenty-five  per  cent.  on  income  distributed  to  any  person  being  an  individual  or  a  Hindu 

undivided family; 

(ii)  thirty per cent. on income distributed to any other person: 

Provided that  nothing  contained  in  this  sub-section  shall  apply  in  respect  of  any  income 
distributed by the securitisation trust to any person in whose case income, irrespective of its nature 
and source, is not chargeable to tax under the Act. 

(2) The person responsible for making payment of the income distributed by the securitisation trust 
shall be liable to pay tax to the credit of the Central Government within fourteen days from the date of 
distribution or payment of such income, whichever is earlier. 

2* 

* 

* 

* 

* 

(4) No deduction under any other provisions of this Act shall be allowed to the securitisation trust in 

respect of the income which has been charged to tax under sub-section (1). 

3[(5)  Nothing  contained  in  this  section  shall  apply  in  respect  of  any  income  distributed  by  a 

securitisation trust to its investors on or after the 1st day of June, 2016.] 

115TB.  Interest  payable  for  non-payment  of  tax.—Where  the  person  responsible  for  making 
payment of the income distributed by the securitisation trust and the securitisation trust fails to pay the 
whole or any part of the tax referred to in sub-section (1) of section 115TA, within the time allowed under 
sub-section (2) of that section,  he or it shall be liable to pay simple interest at the rate of one per cent. 
every month or part thereof on the amount of such tax for the period beginning on the date immediately 
after the last date on which such tax was payable and ending with the date on which the tax is actually 
paid. 

115TC.  Securitisation  trust  to  be  assessee  in  default.—If  any  person  responsible  for  making 
payment of the income distributed by the securitisation trust and the securitisation trust does not pay tax, 
as  referred  to  in  sub-section  (1)  of  section  115TA,  then,  he  or  it  shall  be  deemed  to  be  an  assessee  in 
default  in  respect  of  the  amount  of  tax  payable  by  him  or  it  and  all  the  provisions  of  this  Act  for  the 
collection and recovery of income-tax shall apply. 

4[115TCA. Tax on income from securitisation trusts.—(1) Notwithstanding anything contained in 
this Act, any income accruing or arising to, or received by, a person, being an investor of a securitisation 
trust, out of investments made in the securitisation trust, shall be chargeable to income-tax in the same 
manner as if it were the income accruing or arising to, or received by, such person, had the investments 
by the securitisation trust been made directly by him. 

1. Ins. by Act 17 of 2013, s. 33 (w.e.f. 1-6-2013). 
2. Sub-section (3) omitted by Act 25 of 2014, s. 43 (w.e.f. 1-4-2015). 
3. Ins. by Act 28 of 2016, s. 59 (w.e.f. 1-6-2016). 
4. Ins. by s. 61, ibid. (w.e.f. 1-4-2017). 

504 

 
 
 
 
 
 
 
 
                                                           
(2) The income paid or credited by the securitisation trust shall be deemed to be of the same nature 
and  in  the  same  proportion  in  the  hands  of  the  person  referred  to  in  sub-section  (1),  as  if  it  had  been 
received by, or had accrued or arisen to, the securitisation trust during the previous year. 

(3) The income accruing or arising to, or received by, the securitisation trust, during a previous year, 
if not paid or credited to the person referred to in sub-section (1), shall be deemed to have been credited to 
the account of the said person on the last day of the previous year in the same proportion in which such 
person would have been entitled to receive the income had it been paid in the previous year. 

(4) The person responsible for crediting or making payment of the income on behalf of securitisation 
trust and the securitisation trust shall furnish, within such period, as may be prescribed, to the person who 
is liable to tax in respect of such income and to the prescribed income-tax authority, a statement in such 
form and verified in such manner, giving details of the nature of the income paid or credited during the 
previous year and such other relevant details, as may be prescribed. 

(5)  Any  income  which  has  been  included  in  the  total  income  of  the  person  referred  to  in  
sub-section (1), in a previous year, on account of it having accrued or arisen in the said previous year, 
shall  not  be  included  in  the  total  income  of  such  person  in  the  previous  year  in  which  such  income  is 
actually paid to him by the securitisation trust. 

Explanation.—For the purposes of this Chapter,— 

(a)  “investor” means a person who is holder of any securitised debt instrument or securities 1[or 

security receipt] issued by the securitisation trust; 

(b)  “securities” means debt securities issued by a Special Purpose Vehicle as referred to in the 

guidelines on securitisation of standard assets issued by the Reserve Bank of India; 

(c)  “securitised debt instrument” shall have the same meaning as assigned to it in clause (s) of 
sub-regulation  (1)  of  regulation  2 of the  Securities and  Exchange  Board  of  India (Public  Offer and 
Listing of Securitised Debt Instruments) Regulations, 2008 made under the Securities and Exchange 
Board  of  India  Act,  1992  (15  of  1992)  and  the  Securities  Contracts  (Regulation)  Act,  1956  
(42 of 1956); 

(d)  “securitisation trust” means a trust, being a— 

(i)   “special  purpose  distinct  entity”  as  defined  in  clause  (u)  of  sub-regulation  (1)  of 
regulation  2  of  the  Securities  and  Exchange  Board  of  India  (Public  Offer  and  Listing  of 
Securitised Debt Instruments) Regulations, 2008 made under the Securities and Exchange Board 
of India Act, 1992 (15 of 1992) and the Securities Contracts (Regulation) Act, 1956 (42 of 1956), 
and regulated under the said regulations; or 

(ii)   “Special  Purpose  Vehicle”  as  defined  in,  and  regulated  by,  the  guidelines  on 

securitisation of standard assets issued by the Reserve Bank of India; 1[or] 

1[(iii) trust  set-up  by  a  securitisation  company  or  a  reconstruction  company  formed,  for the 
purposes  of  the  Securitisation  and  Reconstruction  of  Financial  Assets  and  Enforcement  of 
Security Interest Act, 2002 (54 of 2002), or in pursuance of any guidelines or directions issued 
for the said purposes by the Reserve Bank of India,] 

which fulfils such conditions, as may be prescribed.] 

1[(e) “security receipt” shall have the same meaning as assigned to it in clause (zg) of sub-section 
(1)  of  section  2  of  the  Securitisation  and  Reconstruction  of  Financial  Assets  and  Enforcement  of 
Security Interest Act, 2002 (54 of 2002).] 

1. Ins. by Act 28 of 2016, s. 60 (w.e.f. 1-6-2016). 

505 

                                                           
1[CHAPTER XIIEB 

SPECIAL PROVISIONS RELATING TO TAX ON ACCRETED INCOME OF CERTAIN TRUSTS AND 
INSTITUTIONS 

115TD.Tax on accreted income.—(1) Notwithstanding anything contained in this Act, where in any 

previous year, a trust or institution registered under section 12AA has— 

(a)  converted into any form which is not eligible for grant of registration under section 12AA; 

(b)   merged  with  any  entity  other  than  an  entity  which  is  a  trust  or  institution  having  objects 

similar to it and registered under section 12AA; or 

(c)   failed  to  transfer  upon  dissolution  all  its  assets  to  any  other  trust  or  institution  registered 
under section  12AA or  to  any  fund  or  institution  or  trust  or  any  university  or  other  educational 
institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) 
or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, within a period of twelve months 
from the end of the month in which the dissolution takes place, 

then, in addition to the income-tax chargeable in respect of the total income of such  trust or institution, 
the accreted income of the trust or the institution as on the specified date shall be charged to tax and such 
trust or institution, as the case may be, shall be liable to pay additional income-tax (herein referred to as 
tax on accreted income) at the maximum marginal rate on the accreted income. 

(2) The accreted income for the purposes of sub-section (1) means the amount by which the aggregate 
fair market value of the total assets of the trust or the institution, as on the specified date, exceeds the total 
liability  of  such  trust  or  institution  computed  in  accordance  with  the  method  of  valuation  as  may  be 
prescribed: 

Provided that so much of the accreted income as is attributable to the following asset and liability, if 

any, related to such asset shall be ignored for the purposes of sub-section (1), namely:— 

(i)  any asset which is established to have been directly acquired by the trust or institution out of 

its income of the nature referred to in clause (1) of section 10; 

(ii)  any asset acquired by the trust or institution during the period beginning from the date of its 
creation  or  establishment  and  ending  on  the  date  from  which  the  registration  under  section 
12AA became  effective,  if  the  trust  or  institution  has  not  been  allowed  any  benefit  of section 
11 and 12 during the said period: 

Provided  further that  where  due  to  the  first  proviso  to  sub-section  (2)  of section  12A,  the  benefit 
of section  11 and 12 have been allowed to the trust  or  the institution in respect of  any  previous  year  or 
years beginning prior to the date from which the registration under section 12AA is effective, then, for the 
purposes of clause (ii) of the first proviso, the registration shall be deemed to have become effective from 
the first day of the earliest previous year: 

Provided also that while computing the accreted income in respect of a case referred to in clause (c) 
of sub-section (1), assets and liabilities, if any, related to such asset, which have been transferred to any 
other  trust  or  institution  registered  under section  12AA or  to  any  fund  or  institution  or  trust  or  any 
university or other educational institution or any hospital or other medical institution referred to in sub-
clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, within the 
period specified in the said clause, shall be ignored. 

1. Ins. by Act 28 of 2016, s. 62 (w.e.f. 1-6-2016). 

506 

                                                           
(3)  For  the  purposes  of  sub-section  (1),  a  trust  or  an  institution  shall  be  deemed  to  have  been 

converted into any form not eligible for registration under section 12AA in a previous year, if,— 

(i) the registration granted to it under section 12AA has been cancelled; or 

(ii)  it  has  adopted  or  undertaken  modification  of  its  objects  which  do  not  conform  to  the 

conditions of registration and it,— 

(a) has not applied for fresh registration under section 12AA in the said previous year; or 

(b) has filed application for fresh registration under section 12AA but the said application has 

been rejected. 

(4)  Notwithstanding  that  no  income-tax  is  payable  by  a  trust  or  the  institution  on  its  total  income 
computed in accordance with the provisions of this Act, the tax on the accreted income under sub-section 
(1) shall be payable by such trust or the institution. 

(5) The principal officer or the trustee of the trust or the institution, as the case may be, and the trust 
or  the  institution  shall  also  be  liable  to  pay  the  tax  on  accreted  income  to  the  credit  of  the  Central 
Government within fourteen days from,— 

(i)  the date on which,— 

(a)   the period for filing appeal under section 253 against the order cancelling the registration 

expires and no appeal has been filed by the trust or the institution; or 

(b)  the order in any appeal, confirming the cancellation of the registration, is received by the 

trust or institution, 

in a case referred to in clause (i) of sub-section (3); 

(ii)  the end of the previous year in a case referred to in sub-clause (a) of clause (ii) of sub-section 

(3); 

(iii) the date on which,— 

(a)  the period for filing appeal under section 253 against the order rejecting the application 

expires and no appeal has been filed by the trust or the institution; or 

(b)  the order in any appeal, confirming the cancellation of the application, is received by the 

trust or institution, 

in a case referred to in sub-clause (b) of clause (ii) of sub-section (3); 

(iv) the date of merger in a case referred to in clause (b) of sub-section (1); 

(v)   the  date  on  which  the  period  of  twelve  months  referred  to  in  clause  (c)  of  sub-section  (1) 

expires. 

(6) The tax on the accreted income by the trust or the institution shall be treated as the final payment 
of  tax  in  respect  of  the  said  income  and  no  further  credit  therefor  shall  be  claimed  by  the  trust  or  the 
institution or by any other person in respect of the amount of tax so paid. 

507 

(7) No deduction under any other provision of this Act shall be allowed to the trust or the institution 
or any other person in respect of the income which has been charged to tax under sub-section (1) or the 
tax thereon. 

Explanation.—For the purposes of this section,— 

(i)  “date of conversion” means,— 

 (a)  the date of the order cancelling the registration under section 12AA, in a case referred to 

in clause (i) of sub-section (3); or 

 (b)  the date of adoption or modification of any object, in a case referred to in clause (ii) of 

sub-section (3); 

(ii)  “specified date” means,— 

 (a)  the date of conversion in a case falling under clause (a) of sub-section (1); 

 (b)  the date of merger in a case falling under clause (b) of sub-section (1); and 

 (c)  the date of dissolution in a case falling under clause (c) of sub-section (1); 

(iii) registration under section 12AA shall include any registration obtained under section 12A as 

it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996). 

115TE. Interest  payable  for  non-payment  of  tax  by  trust  or  institution.—Where  the  principal 
officer or the trustee of the trust or the institution and the trust or the institution fails to pay the whole or 
any part of the tax on the accreted income referred to in sub-section (1) of section 115TD, within the time 
allowed under sub-section (5) of that section, he or it shall be liable to pay simple interest at the rate of 
one per cent for every month or part thereof on the amount of such tax for the period beginning on the 
date immediately after the last date on which such tax was payable and ending with the date on which the 
tax is actually paid. 

115TF.When trust or institution is deemed to be assessee in default.—(1) If any principal officer 
or  the  trustee  of  the  trust or  the  institution  and the trust or the  institution  does  not  pay  tax  on  accreted 
income  in  accordance  with  the  provisions  of  section  115TD,  then,  he  or  it  shall  be  deemed  to  be  an 
assessee in default in respect of the amount of tax payable by him or it and all the provisions of this Act 
for the collection and recovery of income-tax shall apply. 

(2) Notwithstanding anything contained in sub-section (1), in a case where the tax on accreted income 
is  payable  under  the  circumstances  referred  to  in  clause  (c)  of  sub-section  (1)  of  section  115TD,  the 
person  to  whom  any  asset  forming  part  of  the  computation  of  accreted  income  under  sub-section  (2) 
thereof  has  been  transferred,  shall  be  deemed  to  be  an  assessee  in  default  in  respect  of  such  tax  and 
interest  thereon  and  all  the  provisions  of  this  Act  for  the  collection  and  recovery  of  income-tax  shall 
apply: 

Provided that the liability of the person referred to in this sub-section shall be limited to the extent to 

which the asset received by him is capable of meeting the liability.] 

508 

1[CHAPTER XIIF 

SPECIAL PROVISIONS RELATING TO TAX ON INCOME RECEIVED FROM VENTURE CAPITAL COMPANIES AND 
VENTURE CAPITAL FUNDS 

115U. Tax  on  income  in  certain  cases.—(1)  Notwithstanding  anything  contained  in  any  other 
provisions  of  this  Act,any  2[income  accruing  or  arising  to  or  received]  by  a  person  out  of  investments 
made in a venture capital company or venture capital fund shall be chargeable to income-tax in the same 
manner  as  if  it  were  the  2[income  accruing  or  arising  to  or  received]  by  such  person  had  he  made 
investments directly in the venture capital undertaking. 

(2)  3[The person responsible for crediting or making] payment of the income on behalf of a venture 
capital company or a venture capital fund and the venture capital company or venture capital fund shall 
furnish,  within  such  time  as  may  be  prescribed,  4[to  the  person  who  is  liable  to  tax  in  respect  of  such 
income] and to the prescribed income-tax authority, a statement in the prescribed form and verified in the 
prescribed manner, giving details of the nature of the 5[income paid or credited] during the previous year 
and such other relevant details as may be prescribed. 

(3) 5[The income paid or credited] by the venture capital company and the venture capital fund shall 
be deemed to be of the same nature and in the same proportion in the hands of 6[the person referred to in 
sub-section (1) as it had been] received by, or 7[had accrued or arisen] to, the venture capital company or 
the venture capital fund, as the case may be, during the previous year. 

(4)  The  provisions  of  Chapter  XII-D  or  Chapter  XII-E  or  Chapter  XVIIB  shall  not  apply  to  the 

income paid by a venture capital company or venture capital fund under this Chapter. 

8[(5) The income accruing or arising to or received by the venture capital company or venture capital 
fund, during a previous year, from investments made in venture capital undertaking if not paid or credited 
to the person referred to in sub-section (1), shall be deemed to have been credited to the account of the 
said person on the last day of the previous year in the same proportion in which such person would have 
been entitled to receive the income had it been paid in the previous year.] 

9[(6)  Nothing  contained  in  this  Chapter  shall  apply  in  respect  of  any  income,  of  a  previous  year 
relevant to the assessment year beginning on or after the 1st day of April, 2016, accruing or arising to, or 
received by, a person from investments made in a venture capital company or venture capital fund, being 
an investment fund specified in clause (a) of the Explanation 1 to section 115UB.] 

Explanation  10[1].—For  the  purposes  of  this  Chapter,  “venture  capital  company”,  “venture  capital 
fund” and “venture capital undertaking” shall have the meanings respectively assigned to them in clause 
(23FB) of section 10. 

11[Explanation 2.—For the removal of doubts, it is hereby declared that any income which has been 
included in total income of the person referred to in sub-section (1) in a previous year, on account of it 
having accrued or arisen in the said previous year, shall not be included in the total income of such person 
in the previous year in which such income is actually paid to him by the venture capital company or the 
venture capital fund.] 

1. Ins. by 10 of 2000, s. 57 (w.e.f. 1-4-2001). 
2. Subs. by Act 23 of 2012, s. 57, for “income received” (w.e.f. 1-4-2013). 
3. Subs. by s. 57, ibid., for “The person responsible for making” (w.e.f. 1-4-2013). 
4. Subs. by s. 57, ibid., for “to the person receiving such income” (w.e.f. 1-4-2013). 
5. Subs. by s. 57, ibid., for “income paid” (w.e.f. 1-4-2013). 
6. Subs. by s. 57, ibid., for “the person receiving such income as it had been” (w.e.f. 1-4-2013). 
7. Subs. by s. 57, ibid., for “had accrued” (w.e.f. 1-4-2013). 
8. Ins. by s. 57, ibid. (w.e.f. 1-4-2013). 
9. Ins. by Act 20 of 2015, s. 31 (w.e.f. 1-4-2016). 
10. The Explanation renumbered as Explanation 1 thereof by Act 23 of 2012, s. 57 (w.e.f. 1-7-2012).  
11. Ins. by s. 57, ibid. (w.e.f. 1-7-2012). 

509 

                                                           
1[CHAPTER XIIFA 

SPECIAL PROVISIONS RELATING TO BUSINESS TRUSTS 

115UA.  Tax  on  income  of  unit  holder  and  business  trust.—(1)  Notwithstanding  anything 
contained in any other provisions of this Act, any income distributed by a business trust to its unit holders 
shall be deemed to be of the same nature and in the same proportion in the hands of the unit holder as it 
had been received by, or accrued to, the business trust. 

(2)  Subject  to  the  provisions  of section  111A and section  112,  the  total  income  of  a  business  trust 

shall be charged to tax at the maximum marginal rate. 

(3) If in any previous year, the distributed income or any part thereof, received by a unit holder from 
the business trust is of the nature as referred to 2[in sub-clause (a) of clause (23FC)] 3[or clause (23FCA)] 
of section  10,  then,  such  distributed  income  or  part  thereof  shall  be  deemed  to  be  income  of  such  unit 
holder and shall be charged to tax as income of the previous year. 

(4)  Any  person  responsible  for  making  payment  of  the  income  distributed  on  behalf  of  a  business 
trust to a unit holder shall furnish a statement to the unit holder and the prescribed authority, within such 
time and in such form and manner as may be prescribed, giving the details of the nature of the income 
paid during the previous year and such other details as may be prescribed.] 

4[CHAPTER XIIFB 

SPECIAL PROVISIONS RELATING TO TAX ON INCOME OF INVESTMENT FUNDS AND INCOME RECEIVED FROM 
SUCH FUNDS 

115UB. Tax  on  income  of  investment  fund  and  its  unit  holders.—(1)  Notwithstanding  anything 
contained in any other provisions  of this Act and subject to the provisions of this Chapter, any income 
accruing  or  arising  to,  or  received  by,  a  person,  being  a  unit  holder  of  an  investment  fund,  out  of 
investments made in the investment fund, shall be chargeable to income-tax in the same manner as if it 
were  the  income  accruing  or  arising  to,  or  received  by,  such  person  had  the  investments  made  by  the 
investment fund been made directly by him. 

(2) Where in any previous year, the net result of computation of total income of the investment fund 
[without  giving  effect  to  the  provisions  of  clause  (23FBA)  of section  10]  is  a  loss  under  any  head  of 
income and such loss cannot be or is not wholly set-off against income under any other head of income of 
the said previous year, then,— 

 (i)  such loss shall be allowed to be carried forward and it shall be set-off by the investment fund 

in accordance with the provisions of Chapter VI; and 

(ii)  such loss shall be ignored for the purposes of sub-section (1). 

(3) The income paid or credited by the investment fund shall be deemed to be of the same nature and 
in the same proportion in the hands of the person referred to in sub-section (1), as if it had been received 
by, or had accrued or arisen to, the investment fund during the previous year subject to the provisions of 
sub-section (2). 

1. Ins. by Act 25 of 2014, s. 44 (w.e.f. 1-4-2015). 

2. Subs. by Act 28 of 2016, s. 63, for “in clause (23FC)” (w.e.f. 1-4-2017). 

3. Ins. by Act 20 of 2015, s. 32 (w.e.f. 1-4-2016). 

4. Ins. by s. 33, ibid. (w.e.f. 1-4-2016). 

510 

                                                           
(4) The total income of the investment fund shall be charged to tax— 

 (i)  at the rate or rates as specified in the Finance Act of the relevant year, where such fund is a 

company or a firm; or 

(ii)  at maximum marginal rate in any other case. 

(5)  The  provisions  of  Chapter  XIID  or  Chapter  XIIE  shall  not  apply  to  the  income  paid  by  an 

investment fund under this Chapter. 

(6) The income accruing or arising to, or received by, the investment fund, during a previous year, if 
not  paid  or  credited  to  the  person  referred  to  in  sub-section  (1),  shall  subject  to  the  provisions  of  sub-
section  (2),  be  deemed  to  have  been  credited  to  the  account  of  the  said  person  on  the  last  day  of  the 
previous year in the same proportion in which such person would have been entitled to receive the income 
had it been paid in the previous year. 

(7) The person responsible for crediting or making payment of the income on behalf of an investment 
fund and the investment fund shall furnish, within such time as may be prescribed2, to the person who is 
liable  to  tax  in  respect  of  such  income  and  to  the  prescribed  income-tax  authority,  a  statement  in  the 
prescribed form and verified in such manner, giving details of the nature of the income paid or credited 
during the previous year and such other relevant details, as may be prescribed. 

Explanation 1.—For the purposes of this Chapter,— 

(a)  “investment fund” means any fund established or incorporated in India in the form of a trust 
or  a  company  or  a  limited  liability  partnership  or  a  body  corporate  which  has  been  granted  a 
certificate  of  registration  as  a  Category  I  or  a  Category  II  Alternative  Investment  Fund  and  is 
regulated  under  the  Securities  and  Exchange  Board  of  India  (Alternative  Investment  Fund) 
Regulations, 2012, made under the Securities and Exchange Board of India Act, 1992 (15 of 1992); 

(b)  “trust” means a trust established under the Indian Trusts Act, 1882 (2 of 1882) or under any 

other law for the time being in force; 

(c)   “unit”  means  beneficial  interest  of  an  investor  in  the  investment  fund  or  a  scheme  of  the 

investment fund and shall include shares or partnership interests. 

Explanation  2.—For  the  removal  of  doubts,  it  is  hereby  declared  that  any  income  which  has  been 
included in total income of the person referred to in sub-section (1) in a previous year, on account of it 
having accrued or arisen in the said previous year, shall not be included in the total income of such person 
in the previous year in which such income is actually paid to him by the investment fund.] 

1[CHAPTER XIIG 

SPECIAL PROVISIONS RELATING TO INCOME OF SHIPPING COMPANIES 

A.—Meaning of certain expressions 

115V. Definitions.—In this Chapter, unless the context otherwise requires,— 

(a)   “bareboat  charter”  means  hiring  of  a  ship  for  a  stipulated  period  on  terms  which  give  the 

charterer possession and control of the ship, including the right to appoint the master and crew; 

(b)  “bareboat charter-cum-demise” means a bareboat charter where the ownership of the ship is 

intended to be transferred after a specified period to the company to whom it has been chartered; 

(c)   “Director-General  of  Shipping”  means  the  Director-General  of  Shipping  appointed                   
by  the  Central  Government  under  sub-section  (1)  of  section  7  of  the  Merchant  Shipping                         
Act, 1958 (44 of 1958); 

1. Ins. by Act 23 of 2004, s. 30 (w.e.f. 1-4-2005). 

511 

                                                           
(d)  “factory ship” includes a vessel providing processing services in respect of processing of the 

fishing produce; 

(e)   “fishing  vessel”  shall  have  the  meaning  assigned  to  it  in  clause  (12)  of  section  3  of  the 

Merchant Shipping Act, 1958 (44 of 1958); 

(f)   “pleasure  craft”  means  a  ship  of  a  kind  whose  primary  use  is  for  the  purposes  of  sport  or 

recreation; 

(g)  “qualifying company” means a company referred to in section 115VC; 

(h)  “qualifying ship” means a ship referred to in section 115VD; 

(i)   “seagoing  ship”  means  a  ship  if  it  is  certified  as  such  by  the  competent  authority  of  any 

country; 

(j)  “tonnage income” means the income of a tonnage tax company computed in accordance with 

the provisions of this Chapter; 

(k)  “tonnage tax activities” means the activities referred to in sub-sections (2) and (5) of section 

115V-I; 

(l)  “tonnage tax company” means a qualifying company in relation to which tonnage tax option 

is in force; 

(m)  “tonnage tax scheme” means a scheme for computation of profits and gains of business of 

operating qualifying ships under the provisions of this Chapter. 

B.—Computation of tonnage income from business of operating qualifying ships 

115VA. Computation  of  profits  and  gains  from  the  business  of  operating  qualifying  ships.—
Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of a company, the 
income  from  the  business of  operating  qualifying  ships,  may,  at  its  option,  be  computed  in  accordance 
with the provisions of this Chapter and such income shall be deemed to be the profits and gains of such 
business chargeable to tax under the head “Profits and gains of business or profession”. 

115VB. Operating  ships.—For  the  purposes  of  this  Chapter,  a  company  shall  be  regarded  as 
operating a ship if it operates any ship whether owned or chartered by it and includes a case where even a 
part of the ship has been chartered in by it in an arrangement such as slot charter, space charter or joint 
charter: 

Provided that a company shall not be regarded as the operator of a ship which has been chartered out 
by  it  on  bareboat  charter-cum-demise  terms  or  on  bareboat  charter  terms  for  a  period  exceeding  three 
years. 

115VC. Qualifying  company.—For  the  purposes  of  this  Chapter,  a  company  is  a  qualifying 

company if— 

(a)  it is an Indian company; 

(b)  the place of effective management of the company is in India; 

(c)  it owns at least one qualifying ship; and 

(d)  the main object of the company is to carry on the business of operating ships. 

Explanation.—For  the  purposes  of  this  section,  “place  of  effective  management  of  the  company” 

means— 

(A)  the place where the board of directors of the company or its executive directors, as the case 

may be, make their decisions; or 

512 

(B)   in  a  case  where  the  board  of  directors  routinely  approve  the  commercial  and  strategic 
decisions made by the executive directors or officers of the company, the place where such executive 
directors or officers of the company perform their functions. 

115VD. Qualifying ship.—For the purposes of this Chapter, a ship is a qualifying ship if— 

(a)  it is a sea going ship or vessel of fifteen net tonnage or more; 

(b)   it  is  a  ship  registered  under  the  Merchant  Shipping  Act,  1958  (44  of  1958),  or  a  ship 
registered  outside  India  in  respect  of  which  a  licence  has  been  issued  by  the  Director-General  of 
Shipping under section 406 or section 407 of the Merchant Shipping Act, 1958 (44 of 1958); and 

(c)  a valid certificate in respect of such ship indicating its net tonnage is in force, 

but does not include— 

 (i)   a  sea  going  ship  or  vessel  if  the  main  purpose  for  which  it  is  used  is  the  provision  of 

goods or services of a kind normally provided on land; 

(ii)  fishing vessels; 

(iii) factory ships; 

(iv) pleasure crafts; 

(v)  harbour and river ferries; 

(vi) offshore installations; 

1* 

* 

* 

* 

(viii) a qualifying ship which is used as a fishing vessel for a period of more than thirty days 

during a previous year. 

115VE. Manner  of  computation  of  income  under  tonnage  tax  scheme.—(1)  A  tonnage  tax 
company  engaged  in  the  business  of  operating  qualifying  ships  shall  compute  the  profits  from  such 
business under the tonnage tax scheme. 

(2)  The  business  of  operating  qualifying  ships  giving  rise  to  income  referred  to  in  sub-section  (1) 
of section 115V-I shall be considered as a separate business (hereafter in this Chapter referred to as the 
tonnage tax business) distinct from all other activities or business carried on by the company. 

(3) The profits referred to in sub-section (1) shall be computed separately from the profits and gains 

from any other business. 

(4) The tonnage tax scheme shall apply only if an option to that effect is made in accordance with the 

provisions of section 115VP. 

(5) Where a company engaged in the business of operating qualifying ships is not covered under the 
tonnage tax scheme or, has not made an option to that effect, as the case may be, the profits and gains of 
such company from such business shall be computed in accordance with the other provisions of this Act. 

115VF. Tonnage income.—Subject to the other provisions of this Chapter, the tonnage income shall 
be computed in accordance with section 115VG and the income so computed shall be deemed to be the 
profits chargeable under the head “Profits and gains of business or profession” and the relevant shipping 
income referred to in sub-section (1) of section 115V-I shall not be chargeable to tax. 

1. Clause (vii) omitted by Act 18 of 2005, s. 36 (w.e.f 1-4-2006). 

513 

 
 
 
 
 
 
 
 
                                                           
115VG. Computation of tonnage income.—(1) The tonnage income of a tonnage tax company for a 
previous  year  shall  be  the  aggregate  of  the  tonnage  income  of  each  qualifying  ship  computed  in 
accordance with the provisions of sub-sections (2) and (3). 

(2) For the purposes of sub-section (1), the tonnage income of each qualifying ship shall be the daily 

tonnage income of each such ship multiplied by— 

(a)  the number of days in the previous year; or 

(b)  the number of days in part of the previous year in case the ship is operated by the company as 

a qualifying ship for only part of the previous year, as the case may be. 

(3) For the purposes of sub-section (2), the daily tonnage income of a qualifying ship having tonnage 
referred to in column (1) of the Table below shall be the amount specified in the corresponding entry in 
column (2) of the Table: 

1[TABLE 

Qualifying ship having net tonnage 

Amount of daily tonnage income 

(1) 

(2) 

up to 1,000 

Rs. 70 for each 100 tons 

exceeding 1,000 but not more than 10,000 

Rs. 700 plus Rs. 53 for each 100 tons exceeding 
1,000 tons 

exceeding 10,000 but not more than 25,000 

Rs. 5,470 plus Rs. 42 for each 100 tons exceeding 
10,000 tons 

exceeding 25,000 

Rs. 11,770 plus Rs. 29 for each 100 tons exceeding 
25,000 tons.] 

(4)  For the purposes  of  this  Chapter,  the  tonnage  shall  mean  the tonnage  of  a  ship indicated in the 
certificate  referred  to  in  section  115VX  and  includes  the  deemed  tonnage  computed  in  the  prescribed 
manner. 

Explanation.—For the purposes of this sub-section, “deemed tonnage” shall be the tonnage in respect 

of an arrangement of purchase of slots, slot charter and an arrangement of sharing of break-bulk vessel. 

(5) The tonnage shall be rounded off to the nearest multiple of hundred tons and for this purpose any 
tonnage  consisting  of  kilograms  shall  be  ignored  and  thereafter  if  such  tonnage  is  not  a  multiple  of 
hundred, then, if the last figure in that amount is fifty tons or more, the tonnage shall be increased to the 
next higher tonnage which is a multiple of hundred and if the last figure is less than fifty tons, the tonnage 
shall be reduced to the next lower tonnage which is a multiple of hundred; and the tonnage so rounded off 
shall be the tonnage of the ship for the purposes of this section. 

(6)  Notwithstanding  anything  contained  in  any  other  provision  of  this  Act,  no  deduction  or  set  off 

shall be allowed in computing the tonnage income under this Chapter. 

115VH. Calculation in case of joint operation, etc.—(1) Where a qualifying ship is operated by two 
or more companies by way of joint interest in the ship or by way of an agreement for the use of the ship 
and their respective shares are definite and ascertainable, the tonnage income of each such company shall 
be an amount equal to a share of income proportionate to its share of that interest. 

1. Subs. by Act 23 of 2012, s. 58, for the Table (w.e.f. 1-4-2013). 

514 

                                                           
(2)  Subject  to  the  provisions  of  sub-section  (1),  where  two  or  more  companies  are  operators  of  a 
qualifying  ship,  the  tonnage  income  of  each  company  shall  be  computed  as  if  each  had  been  the  only 
operator. 

115VI.  Relevant  shipping  income.—(1)  For  the  purposes  of  this  Chapter,  the  relevant  shipping 

income of a tonnage tax company means— 

(i)  its profits from core activities referred to in sub-section (2); 

(ii)  its profits from incidental activities referred to in sub-section (5): 

Provided that  where  the  aggregate  of  all  such  incomes  specified  in  clause  (ii)  exceeds  
one-fourth per cent of the turnover from core activities referred to in sub-section (2), such excess shall not 
form part of the relevant shipping income for the purposes of this Chapter and shall be taxable under the 
other provisions of this Act. 

(2) The core activities of a tonnage tax company shall be— 

(i)  its activities from operating qualifying ships; and 

(ii)  other ship-related activities mentioned as under:— 

(A)  shipping contracts in respect of— 

 (i)  earning from pooling arrangements; 

 (ii)  contracts of affreightment. 

Explanation.—For the purposes of this sub-clause,— 

(a)  “pooling arrangement” means an agreement between two or more persons for providing 
services through a pool or operating one or more ships and sharing earnings or operating profits 
on the basis of mutually agreed terms; 

(b)  “contract of affreightment” means a service contract under which a tonnage tax company 
agrees  to  transport  a  specified  quantity  of  specified  products  at  a  specified  rate,  between 
designated loading and discharging ports over a specified period; 

(B)  specific shipping trades, being— 

(i)  on-board or on-shore activities of passenger ships comprising of fares and food and 

beverages consumed on board; 

(ii)  slot charters, space charters, joint charters, feeder services, container box leasing of 

container shipping. 

(3) The Central Government, if it considers necessary or expedient so to do, may, by notification in 
the Official Gazette, exclude any activity referred to in clause (ii) of sub-section (2) or prescribe the limit 
up to which such activities shall be included in the core activities for the purposes of this section. 

(4)  Every  notification  issued  under  this  Chapter  shall  be  laid,  as  soon  as  may  be  after  it  is  issued, 
before  each  House  of  Parliament,  while  it  is  in  session  for  a  total  period  of  thirty  days  which  may  be 
comprised in one session or in two or more successive sessions, and if, before the expiry of the session 
immediately following the session or the successive sessions aforesaid, both Houses agree in making any 
modification  in  the  notification,  or  both  Houses  agree  that  the  notification  should  not  be  issued,  the 
notification shall thereafter have effect only in such modified form or be of no effect, as the case may be; 
so,  however,  that  any  such  modification  or  annulment  shall  be  without  prejudice  to  the  validity  of 
anything previously done under that notification. 

515 

(5) The incidental activities shall be the activities which are incidental to the core activities and which 

may be prescribed for the purpose. 

(6)  Where  a  tonnage  tax  company  operates  any  ship,  which  is  not  a  qualifying  ship,  the  income 
attributable  to  operating  such  non-qualifying  ship  shall  be  computed  in  accordance  with  the  other 
provisions of this Act. 

(7) Where any goods or services held for the purposes of tonnage tax business are transferred to any 
other business carried on by a tonnage tax company, or where any goods or services held for the purposes 
of any other business carried on by such tonnage tax company are transferred to the tonnage tax business 
and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the tonnage 
tax  business  does  not  correspond  to  the  market  value  of  such  goods  or  services  as  on  the  date  of  the 
transfer,  then,  the  relevant  shipping  income  under  this  section  shall  be  computed  as  if  the  transfer,  in 
either case, had been made at the market value of such goods or services as on that date: 

Provided that where, in the opinion of the Assessing Officer, the computation of the relevant shipping 
income in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may 
compute such income on such reasonable basis as he may deem fit. 

Explanation.—For  the  purposes  of  this  sub-section,  “market  value”,  in  relation  to  any  goods  or 

services, means the price that such goods or services would ordinarily fetch on sale in the open market. 

(8) Where it appears to the Assessing Officer that, owing to the close connection between the tonnage 
tax  company  and  any  other  person,  or  for  any  other reason,  the  course of  business  between them  is  so 
arranged that the business transacted between them produces to the tonnage tax company more than the 
ordinary profits which might be expected to arise in the tonnage tax business, the Assessing Officer shall, 
in computing the relevant shipping income of the tonnage tax company for the purposes of this Chapter, 
take the amount of income as may reasonably be deemed to have been derived therefrom. 

Explanation.—For the purposes of this Chapter, in case the relevant shipping income of a tonnage tax 

company is a loss, then, such loss shall be ignored for the purposes of computing tonnage income. 

115VJ.  Treatment  of  common  costs.—(1)  Where  a  tonnage  tax  company  also  carries  on  any 
business  or  activity  other  than  the  tonnage  tax  business,  common  costs  attributable  to  the  tonnage  tax 
business shall be determined on a reasonable basis. 

(2) Where any asset, other than a qualifying ship, is not exclusively used for the tonnage tax business 
by  the  tonnage  tax  company,  depreciation  on  such  asset  shall  be  allocated  between  its  tonnage  tax 
business and other business on a fair proportion to be determined by the Assessing Officer, having regard 
to the use of such asset for the purpose of the tonnage tax business and for the other business. 

115VK. Depreciation.—(1)  For  the  purposes  of  computing  depreciation  under  clause  (iv)  of  
section 115VL,  the  depreciation  for  the first previous  year  of the tonnage  tax scheme  (hereafter in this 
section  referred  to  as  the  first  previous  year)  shall  be  computed  on  the  written  down  value  of  the 
qualifying ships as specified under sub-section (2). 

(2) The written down value of the block of assets, being ships, as on the first day of the first previous 
year, shall be divided in the ratio of the book written down value of the qualifying ships (hereafter in this 
section referred to as the qualifying assets) and the book written down value of the non-qualifying ships 
(hereafter in this section referred to as the other assets). 

(3)  The  block  of  qualifying  assets  as  determined  under  sub-section  (2)  shall  constitute  a  separate 

block of assets for the purposes of this Chapter. 

516 

(4) For the purposes of sub-section (2), the book written down value of the block of qualifying assets 

and the block of other assets shall be computed in the following manner, namely:— 

(a)  the book written down value of each qualifying asset and each other asset as on the first day 
of the previous year and which form part of the block of assets to be divided shall be determined by 
taking the book written down value of each asset appearing in the books of account as on the last day 
of the preceding previous year: 

Provided that any change in the value of the assets consequent to their revaluation after the date 

on which the Finance (No. 2) Act, 2004 receives the assent of the President shall be ignored; 

(b)  the book written down value of all the qualifying assets and other assets shall be aggregated; 

and 

(c)  the ratio of the aggregate book written down value of the qualifying assets to the aggregate 

book written down value of the other assets shall be determined. 

(5) Where an asset forming part of a block of qualifying assets begins to be used for purposes other 
than the tonnage  tax business,  an  appropriate portion  of  the  written down  value  allocable to  such asset 
shall be reduced from the written down value of that block and shall be added to the block of other assets. 

Explanation.—For  the  purposes  of  this  sub-section,  appropriate  portion  of  the  written  down  value 
allocable to the asset, which begins to be used for purposes other than the tonnage tax business, shall be 
an amount which bears the same proportion to the written down value of the block of qualifying assets as 
on the first day of the previous year as the book written down value of the asset beginning to be used for 
purposes other than tonnage tax business bears to the book written down value of all the assets forming 
the block of qualifying asset. 

(6) Where an asset forming part of a block of other assets begins to be used for tonnage tax business, 
an appropriate portion of the written down value allocable to such asset shall be reduced from the written 
down value of the block of other assets and shall be added to the block of qualifying asset. 

Explanation.—For  the  purposes  of  this  sub-section,  appropriate  portion  of  written  down  value 
allocable to the asset which begins to be used for the tonnage tax business shall be an amount which bears 
the  same  proportion  to  the  written  down  value  of  the  block  of  other  assets  as  on  the  first  day  of  the 
previous year as the book written down value of the asset beginning to be used for tonnage tax business 
bears to the total book written down value of all the assets forming the block of other assets. 

(7) For the purposes of computing depreciation under clause (iv) of section 115VL in respect of an 
asset  mentioned  in  sub-sections  (5)  and  (6),  depreciation  computed  for  the  previous  year  shall  be 
allocated in the ratio of the number of days for which the asset was used for the tonnage tax business and 
for purposes other than tonnage tax business. 

Explanation  1.—For  the  removal  of  doubts,  it  is  hereby  declared  that  for  the  purposes  of  this  Act, 
depreciation on the block of qualifying assets and block of other assets so created shall be allowed as if 
such  written  down  value  referred  to  in  sub-section  (2)  had  been  brought  forward  from  the  preceding 
previous year. 

Explanation 2.—For the purposes of this section, “book written down value” means the written down 

value as appearing in the books of account. 

517 

115VL. General exclusion of deduction and set off, etc.—Notwithstanding anything contained in 
any  other  provision  of  this  Act,  in  computing  the  tonnage  income  of  a  tonnage  tax  company  for  any 
previous  year  (hereafter  in  this  section  referred  to  as  the  “relevant  previous  year”)  in  which  it  is 
chargeable to tax in accordance with this Chapter— 

(i)   sections 30 to 43B shall apply as if every loss, allowance or deduction referred to therein and 
relating to or allowable for any of the relevant previous years, had been given full effect to for that 
previous year itself; 

(ii)   no  loss  referred  to  in  sub-sections  (1)  and  (3)  of  section  70  or  sub-sections  (1)  and  (2)  of 
section 71 or sub-section (1) of section 72 or sub-section (1) of section 72A, in so far as such loss 
relates to the business of operating qualifying ships of the company, shall be carried forward or set off 
where  such  loss  relates  to  any  of  the  previous  years  when  the  company  is  under  the  tonnage  tax 
scheme; 

(iii) no deduction shall be allowed under Chapter VIA in relation to the profits and gains from the 

business of operating qualifying ships; and 

(iv)  in  computing  the  depreciation  allowance  under  section  32,  the  written  down  value  of  any 
asset  used  for  the  purposes  of  the  tonnage  tax  business  shall  be  computed  as  if  the  company  has 
claimed  and  has  been  actually  allowed  the  deduction  in  respect  of  depreciation  for  the  relevant 
previous years. 

115VM. Exclusion of loss.—(1) Section 72 shall apply in respect of any losses that have accrued to a 
company before its option for tonnage tax scheme and which are attributable to its tonnage tax business, 
as if such losses had been set off against the relevant shipping income in any of the previous years when 
the company is under the tonnage tax scheme. 

(2) The losses referred to in sub-section (1) shall not be available for set off against any income other 
than relevant shipping income in any previous year beginning on or after the company exercises its option 
under section 115VP. 

(3) Any apportionment necessary to determine the losses referred to in sub-section (1) shall be made 

on a reasonable basis. 

115VN. Chargeable gains from transfer of tonnage tax assets.—Any profits or gains arising from 
the  transfer  of  a  capital  asset  being  an  asset  forming  part  of  the  block  of  qualifying  assets  shall  be 
chargeable to income-tax in accordance with the provisions of section 45, read with section 50, and the 
capital gains so arising shall be computed in accordance with the provisions of sections 45 to 51: 

Provided that  for 

the  provisions  of  
section  50  shall  have  effect  as  if for  the  words  “written  down  value  of  the  block  of  assets”,  the  words 
“written down value of the block of qualifying assets” had been substituted. 

the  purpose  of  computing  such  profits  or  gains, 

Explanation.—For  the  purposes  of  this  Chapter,  “written  down  value  of  the  block  of  qualifying 
assets” means the written down value computed in accordance with the provisions of sub-section (2) of 
section 115VK. 

115V-O.  Exclusion from provisions  of  section 115JB.—The  book  profit  or loss  derived  from  the 
activities of a tonnage tax company, referred to in sub-section (1) of  section 115V-I, shall be excluded 
from the book profit of the company for the purposes of section 115JB. 

C.—Procedure for option of tonnage tax scheme 

115VP. Method and time of opting for tonnage tax scheme.—(1) A qualifying company may opt 
for the tonnage tax scheme by making an application to the Joint Commissioner having jurisdiction over 
the company in the form and manner as may be prescribed, for such scheme. 

518 

(2) The  application  under sub-section  (1)  may  be  made  by  any  existing  qualifying  company  at  any 
time after the 30th day of September, 2004 but before the 1st day of January, 2005 (hereafter referred to 
as the “initial period”): 

Provided that— 

(i)  a company incorporated after the initial period; or 

(ii)  a qualifying company incorporated before the initial period but which becomes a qualifying 

company for the first time after the initial period, 

may  make  an  application  within  three  months  of  the  date  of  its  incorporation  or  the  date  on  which  it 
became a qualifying company, as the case may be. 

(3)  On  receipt  of  an  application  for  option  for  tonnage  tax  scheme  under  sub-section  (1),  the  Joint 
Commissioner may call for such information or documents from the company as he thinks necessary in 
order  to  satisfy  himself  about  the  eligibility  of  the  company  and  after  satisfying  himself  about  such 
eligibility of the company to make such option for tonnage tax scheme, he— 

(i)  shall pass an order in writing approving the option for tonnage tax scheme; or 

(ii)   shall,  if  he  is  not  so  satisfied,  pass  an  order  in  writing  refusing  to  approve  the  option  for 

tonnage tax scheme, 

and a copy of such order shall be sent to the applicant: 

Provided that  no  order  under  clause  (ii)  shall  be  passed  unless  the  applicant  has  been  given  a 

reasonable opportunity of being heard. 

(4)  Every  order  granting  or  refusing  the  approval  of  the  option  for  tonnage  tax  scheme  under  
clause (i) or clause (ii), as the case may be, of sub-section (3) shall be passed before the expiry of one 
month from the end of the month in which the application was received under sub-section (1). 

(5) Where an order granting approval is passed under sub-section (3), the provisions of this Chapter 
shall  apply  from  the  assessment  year  relevant  to  the previous  year in  which  the  option for tonnage  tax 
scheme is exercised. 

115VQ. Period for which tonnage tax option to remain in force.—(1) An option for tonnage tax 
scheme,  after  it  has  been  approved  under  sub-section  (3)  of  section  115VP,  shall  remain  in  force for a 
period of ten years from the date on which such option has been exercised and shall be taken into account 
from the assessment year relevant to the previous year in which such option is exercised. 

(2) An option for tonnage tax scheme shall cease to have effect from the assessment year relevant to 

the previous year in which— 

(a)  the qualifying company ceases to be a qualifying company; 

(b)   a  default  is  made  in  complying  with  the  provisions  contained  in  section  115VT  or         

section 115VU or  section 115VV;   

(c)  the tonnage tax company is excluded from the tonnage tax scheme under  section 115VZC;   

(d)   the  qualifying  company  furnishes  to  the  Assessing  Officer,  a  declaration  in  writing  to  the 

effect that the provisions of this Chapter may not be made applicable to it, 

and  the  profits  and  gains  of  the  company  from  the  business  of  operating  qualifying  ships  shall  be 
computed in accordance with the other provisions of this Act. 

115VR.  Renewal  of  tonnage  tax  scheme.—(1)  An option for tonnage  tax  scheme  approved  under 
sub-section (3) of section 115VP may be renewed within one year from the end of the previous year in 
which the option ceases to have effect. 

(2) The provisions of sections 115VP and 115VQ shall apply in relation to a renewal of the option for 
tonnage tax scheme in the same manner as they apply in relation to the approval of option for tonnage tax 
scheme. 

519 

115VS.  Prohibition  to  opt  for  tonnage  tax  scheme  in  certain  cases.—A  qualifying  company, 
which,  on  its  own,  opts  out  of  the  tonnage  tax  scheme  or  makes  a  default  in  complying  with  the 
provisions  of  section  115VT  or  section  115VU  or  section  115VV  or  whose  option  has  been  excluded 
from tonnage tax scheme in pursuance of an order made under sub-section (1) of section 115VZC, shall 
not  be  eligible  to  opt  for  tonnage  tax  scheme  for  a  period  of  ten  years  from  the  date  of  opting  out  or 
default or order, as the case may be. 

D.—Conditions for applicability of tonnage tax scheme 

115VT. Transfer of profits to Tonnage Tax Reserve Account.—(1) A tonnage tax company shall, 
subject to and in accordance with the provisions of this section, be required to credit to a reserve account 
(hereafter in this section referred to as the Tonnage Tax Reserve Account) an amount not less than twenty 
per cent of the book profit derived from the activities referred to in clauses (i) and (ii) of sub-section (1) 
of section 115V-I in each previous year to be utilised in the manner laid down in sub-section (3): 

Provided that  a  tonnage  tax  company  may  transfer  a  sum  in  excess  of  twenty  per  cent  of  the  book 

profit and such excess sum transferred shall also be utilised in the manner laid down in sub-section (3). 

Explanation.—For  the  purposes  of  this  section,  “book  profit”  shall  have  the  same  meaning  as  in 
the Explanation to  sub-section  (2)  of  section  115JB  so  far  as  it  relates  to  the  income  derived  from  the 
activities referred to in clauses (i) and (ii) of sub-section (1) of section 115V-I. 

(2) Where the company has book profit from the business of operating qualifying ships and book loss 
from any other sources, and consequently, the company is not in a position to create the full or any part of 
the  reserves  under  sub-section  (1),  the  company  shall  create  the  reserves  to  the  extent  possible  in  that 
previous year and the shortfall, if any, shall be added to the amount of the reserves required to be created 
for the following previous year and such shortfall shall be deemed to be part of the reserve requirement of 
that following previous year: 

Provided that  to  the  extent  the  shortfall  in  creation  of  reserves  during  a  particular  previous  year  is 
carried forward to the following previous year under this sub-section, the company shall be considered as 
having created sufficient reserves for the first mentioned previous year: 

Provided further that nothing contained in the first proviso shall apply in respect of the second year in 

case the shortfall in creation of reserves continues for two consecutive previous years. 

(3) The amount credited to the Tonnage Tax Reserve Account under sub-section (1) shall be utilised 
by the company before the expiry of a period of eight years next following the previous year in which the 
amount was credited— 

(a)  for acquiring a new ship for the purposes of the business of the company; and 

(b)  until the acquisition of a new ship, for the purposes of the business of operating qualifying 
ships  other  than  for  distribution  by  way  of  dividends  or  profits  or  for  remittance  outside  India  as 
profits or for the creation of any asset outside India. 

(4) Where any amount credited to the Tonnage Tax Reserve Account under sub-section (1),— 

(a)   has  been  utilised  for  any  purpose  other  than  that  referred  to  in  clause  (a)  or  clause  (b)  of  

sub-section (3); or 

(b)  has not been utilised for the purpose specified in clause (a) of sub-section (3); or 

(c)   has  been  utilised  for  the  purpose  of  acquiring  a  new  ship  as  specified  in  clause  (a)  of  
sub-section (3), but such ship is sold or otherwise transferred, other than in any scheme of demerger 
by  the  company  to  any  person  at  any  time  before  the  expiry  of  three  years  from  the  end  of  the 
previous year in which it was acquired, 

an  amount  which  bears the  same  proportion  to  the  total  relevant  shipping  income  of  the  year  in  which 
such reserve was created, as the amount out of such reserve so utilised or not utilised bears to the total 
reserve created during that year under sub-section (1) shall be taxable under the other provisions of this 
Act— 

(i)  in a case referred to in clause (a), in the year in which the amount was so utilised; or 

520 

(ii)  in a case referred to in clause (b), in the year immediately following the period of eight years 

specified in sub-section (3); or 

(iii) in a case referred to in clause (c), in the year in which the sale or transfer took place: 

Provided that  the  income  so  taxable  under  the  other  provisions  of  this  Act  shall  be  reduced  by  the 

proportionate tonnage income charged to tax in the year of creation of such reserves. 

(5)  Notwithstanding  anything  contained  in  any  other  provision  of  this  Chapter,  where  the  amount 
credited  to  the  Tonnage  Tax  Reserve  Account  in  accordance  with  sub-section  (1)  is  less  than  the 
minimum  amount  required  to  be  credited  under  sub-section  (1),  an  amount  which  bears  the  same 
proportion  to  the  total  relevant  shipping  income,  as  the  shortfall  in  credit  to  the  reserves  bears  to  the 
minimum reserve required to be credited under sub-section (1) shall not be taxable under the tonnage tax 
scheme and shall be taxable under the other provisions of this Act. 

(6) If the reserve required to be created under sub-section (1) is not created for any two consecutive 
previous  years,  the  option  of  the  company  for  tonnage  tax  scheme  shall  cease  to  have  effect  from  the 
beginning  of  the  previous  year  following  the  second  consecutive  previous  year  in  which  the  failure  to 
create the reserve under sub-section (1) had occurred. 

Explanation.—For the purposes of this section, “new ship” includes a qualifying ship which, before 
the date of acquisition by the qualifying company was used by any other person, if it was not at any time 
previous to the date of such acquisition owned by any person resident in India. 

115VU. Minimum training requirement for tonnage tax company.—(1) A tonnage tax company, 
after  its  option  has  been  approved  under  sub-section  (3)  of    section  115VP,  shall  comply  with  the 
minimum training requirement in respect of trainee officers in accordance with the guidelines framed by 
the Director-General of Shipping and notified in the Official Gazette by the Central Government. 

(2)  The  tonnage  tax  company  shall  be  required  to  furnish  a  copy  of  the  certificate  issued  by  the 
Director-General  of  Shipping  along  with  the  return  of  income  under section  139  to  the  effect that  such 
company has complied with the minimum training requirement in accordance with the guidelines referred 
to in sub-section (1) for the previous year. 

(3) If the minimum training requirement is not complied with for any five consecutive previous years, 
the option of the company for tonnage tax scheme shall cease to have effect from the beginning of the 
previous  year  following  the  fifth  consecutive  previous  year  in  which  the  failure  to  comply  with  the 
minimum training requirement under sub-section (1) had occurred. 

115VV.  Limit for charter  in  of tonnage.—(1)  In  the  case  of every  company  which  has  opted for 
tonnage tax scheme, not more than forty-nine per cent of the net tonnage of the qualifying ships operated 
by it during any previous year shall be chartered in. 

(2) The proportion of net tonnage referred to in sub-section (1) in respect of a previous year shall be 

calculated based on the average of net tonnage during that previous year. 

(3) For the purposes of sub-section (2), the average of net tonnage shall be computed in such manner 

as may be prescribed in consultation with the Director-General of Shipping. 

(4) Where the  net tonnage  of  ships chartered in exceeds  the  limit  under sub-section (1)  during  any 
previous year, the total income of such company in relation to that previous year shall be computed as if 
the option for tonnage tax scheme does not have effect for that previous year. 

(5)  Where  the limit under sub-section  (1) had exceeded  in  any two  consecutive previous  years,  the 
option  for  tonnage  tax  scheme  shall  cease  to  have  effect  from  the  beginning  of  the  previous  year 
following the second consecutive previous year in which the limit had exceeded. 

Explanation.—For the purposes of this section, the term “chartered in” shall exclude a ship chartered 

in by the company on bareboat charter-cum-demise terms. 

521 

115VW. Maintenance and audit of accounts.—An option for tonnage tax scheme by a tonnage tax 

company shall not have effect in relation to a previous year unless such company— 

(i)  maintains separate books of account in respect of the business of operating qualifying ships; 

and 

(ii)  furnishes, along with the return of income for that previous year, the report of an accountant, 

in the prescribed form duly signed and verified by such accountant. 

Explanation.—For  the  purposes  of  this  section,  “accountant”  shall  have  the  same  meaning  as  in 

the Explanation below sub-section (2) of section 288. 

115VX. Determination of tonnage.—(1) For the purposes of this Chapter,— 

(a)  the tonnage of a ship shall be determined in accordance with the valid certificate indicating 

its tonnage; 

(b)  “valid certificate” means,— 

(i)  in case of ships registered in India— 

(a)   having  a  length  of  less  than  twenty-four  metres,  a  certificate  issued  under  the 
Merchant Shipping (Tonnage Measurement of Ship) Rules, 1987 made under the Merchant 
Shipping Act, 1958 (44 of 1958); 

(b)   having  a  length  of  twenty-four  metres  or  more,  an  international  tonnage  certificate 
issued under the provisions of the Convention on Tonnage Measurement of Ships, 1969, as 
specified in the Merchant Shipping (Tonnage Measurement of Ship) Rules, 1987 made under 
the Merchant Shipping Act, 1958 (44 of 1958); 

(ii)   in  case  of  ships  registered  outside  India,  a  licence  issued  by  the  Director-General  of 
Shipping  under  section  406  or  section  407  of  the  Merchant  Shipping  Act,  1958  (44  of  1958) 
specifying  the  net  tonnage  on  the  basis  of  Tonnage  Certificate  issued  by  the  Flag  State 
Administration  where  the  ship  is  registered  or  any  other  evidence  acceptable  to  the  Director-
General of Shipping produced by the ship owner while seeking permission for chartering in the 
ship. 

E.—Amalgamation and demerger of shipping companies 

115VY. Amalgamation.—Where  there  has  been  an  amalgamation  of  a  company  with  another 
company or companies, then, subject to the other provisions of this section, the provisions relating to the 
tonnage  tax  scheme  shall,  as  far  as  may  be,  apply  to  the  amalgamated  company  if  it  is  a  qualifying 
company: 

Provided that  where  the  amalgamated  company  is  not  a  tonnage  tax  company,  it  shall  exercise  an 
option for tonnage tax scheme under sub-section (1) of section 115VP within three months from the date 
of the approval of the scheme of amalgamation: 

Provided further that where the amalgamating companies are tonnage tax companies, the provisions 
of this Chapter shall, as far as may be, apply to the amalgamated company for such period as the option 
for tonnage tax scheme which has the longest unexpired period continues to be in force: 

Provided also that where one of the amalgamating companies is a qualifying company as  on the 1st 
day  of  October,  2004  and which  has  not exercised the  option for  tonnage  tax  scheme  within the initial 
period, the provisions of this Chapter shall not apply to the amalgamated company and the income of the 
amalgamated company from the business of operating qualifying ships shall be computed in accordance 
with the other provisions of this Act. 

115VZ. Demerger.—Where in a scheme of demerger, the demerged company transfers its business 
to the resulting company before the expiry of the option for tonnage tax scheme, then, subject to the other 
provisions of this Chapter, the tonnage tax scheme shall, as far as may be, apply to the resulting company 
for the unexpired period if it is a qualifying company: 

522 

Provided that the option for tonnage tax scheme in respect of the demerged company shall remain in 

force for the unexpired period of the tonnage tax scheme if it continues to be a qualifying company. 

F.—Miscellaneous 

115VZA.Effect of temporarily ceasing to operate qualifying ships.—(1) A temporary cessation (as 
against permanent cessation) of operating any qualifying ship by a company shall not be considered as a 
cessation  of  operating  of  such  qualifying  ship  and  the  company  shall  be  deemed  to  be  operating  such 
qualifying ship for the purposes of this Chapter. 

(2)  Where  a  qualifying  company  continues  to  operate  a  ship,  which  temporarily  ceases  to  be  a 

qualifying ship, such ship shall not be considered as a qualifying ship for the purposes of this Chapter. 

G.—Provisions of this Chapter not to apply in certain cases 

115VZB. Avoidance of tax.—(1) Subject to the provisions of this Chapter, the tonnage tax scheme 
shall not apply where a tonnage tax company is a party to any transaction or arrangement which amounts 
to an abuse of the tonnage tax scheme. 

(2) For the purposes of sub-section (1), a transaction or arrangement shall be considered an abuse if 
the  entering  into  or  the  application  of  such  transaction  or  arrangement  results,  or  would  but  for  this 
section have resulted, in a tax advantage being obtained for— 

 (i)  a person other than a tonnage tax company; or 

(ii)  a tonnage tax company in respect of its non-tonnage tax activities. 

Explanation.—For the purposes of this section, “tax advantage” include,— 

 (i)  the determination of the allowance for any  expense or interest, or the determination of any 
cost or expense allocated or apportioned, or, as the case may be, which has the effect of reducing the 
income  or  increasing  the  loss,  as  the  case  may  be,  from  activities  other  than  tonnage  tax  activities 
chargeable  to  tax,  computed  on  the  basis  of entries  made  in the  books  of  account  in respect  of the 
previous year in which the transaction was entered into; or 

(ii)  a transaction or arrangement which produces to the tonnage tax company more than ordinary 

profits which might be expected to arise from tonnage tax activities. 

115VZC. Exclusion from tonnage tax scheme.—(1) Where a tonnage tax company is a party to any 
transaction or arrangement referred to in sub-section (1) of section 115VZB, the Assessing Officer shall, 
by an order in writing, exclude such company from the tonnage tax scheme: 

Provided that an opportunity shall be given by the Assessing Officer by serving a notice calling upon 
such  company  to  show  cause,  on  a  date  and  time  to  be  specified  in  the  notice,  why  it  should  not  be 
excluded from the tonnage tax scheme: 

Provided further that no order under this sub-section shall be passed without the previous approval of 

the 1[Principal Chief Commissioner or Chief Commissioner]. 

(2) The provisions of this section shall not apply where the company shows to the satisfaction of the 
Assessing Officer that the transaction or arrangement was a bona fide commercial transaction and had not 
been entered into for the purpose of obtaining tax advantage under this Chapter. 

(3)  Where  an  order  has  been  passed  under  sub-section  (1)  by  the  Assessing  Officer  excluding  the 
tonnage tax company from the tonnage tax scheme, the option for tonnage tax scheme shall cease to be in 
force from the first day of the previous year in which the transaction or arrangement was entered into.] 

1. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). 

523 

                                                           
1[CHAPTER XIIH 

INCOME-TAX ON FRINGE BENEFITS 

A.—Meaning of certain expressions 

115W. Definitions.—In this Chapter, unless the context otherwise requires,— 

(a)  “employer” means,— 

 (i)  a company; 

 (ii)  a firm; 

2[(iii) an association of persons or a body of individuals, whether incorporated or not;] 

(iv)  a local authority; and 

(v)  every artificial juridical person, not falling within any of the preceding sub-clauses: 

3[Provided that  any  person  eligible  for  exemption  under  clause  (23C)  of  section  10  or 
registered  under  section  12AA  or  a  political  party  registered  under  section  29A  of  the 
Representation of the People Act, 1951 (43 of 1951) shall not be deemed to be an employer for 
the purposes of this Chapter;] 

(b)  “fringe benefit tax” or “tax” means the tax chargeable under section 115WA. 

B.—Basis of charge 

115WA. Charge  of  fringe  benefit  tax.—(1)  In  addition  to  the  income-tax  charged  under  this  Act, 
there  shall  be  charged  for  every  assessment  year  commencing  on  or  after  the  1st  day  of  April,  2006, 
additional  income-tax  (in  this  Act  referred  to  as  fringe  benefit  tax)  in  respect  of  the  fringe  benefits 
provided or deemed to have been provided by an employer to his employees during the previous year at 
the rate of thirty per cent on the value of such fringe benefits. 

(2) Notwithstanding that no income-tax is payable by an employer on his total income computed in 

accordance with the provisions of this Act, the tax on fringe benefits shall be payable by such employer. 

115WB.  Fringe  benefits.—(1)  For  the  purposes  of  this  Chapter,  “fringe  benefits”  means  any 

consideration for employment provided by way of— 

(a)   any  privilege,  service,  facility  or  amenity,  directly  or  indirectly,  provided  by  an  employer, 
whether  by  way  of  reimbursement  or  otherwise,  to  his  employees  (including  former  employee  or 
employees); 

(b)   any  free  or  concessional  ticket  provided  by  the  employer  for  private  journeys  of  his 

employees or their family members; 4*** 

(c)  any contribution by the employer to an approved superannuation fund for 5[employees; and] 

5[(d)  anyspecified security or sweat equity shares allotted or transferred, directly or indirectly, by 
the  employer  free  of  cost  or  at  concessional  rate  to  his  employees  (including  former  employee  or 
employees). 

1. Ins. by Act 18 of 2005, s. 37 (w.e.f. 1-4-2006). 
2. Subs. by Act 55 of 2005, s. 6, for Clause (iii) (w.e.f. 1-4-2006).Earlier substituted by Act 18 of 2005, s. 37 (w.e.f. 1-4-

2006). 

3. Ins. by s. 6, ibid. (w.e.f. 1-4-2006). 
4. The word “and” omitted by Act 22 of 2007, s. 38 (w.e.f. 1-4-2008). 
5. Ins. by s. 38, ibid. (w.e.f. 1-4-2008). 

524 

                                                           
Explanation.—For the purposes of this clause,— 

(i)   “specified  security”  means  the  securities  as  defined  in  clause  (h)  of  section  2  of  the 
Securities  Contracts  (Regulation)  Act,  1956  (42  of  1956)  1[and,  where  employees'  stock  option 
has  been  granted  under any  plan  or scheme  therefor,  includes  the  securities  offered  under  such 
plan or scheme]; 

(ii)   “sweat  equity  shares”  means  equity  shares  issued  by  a  company  to  its  employees  or 
directors  at  a  discount  or  for  consideration  other  than  cash  for  providing  know-how  or  making 
available rights in the nature of intellectual property rights or value additions, by whatever name 
called.] 

(2) The fringe benefits shall be deemed to have been provided by the employer to his employees, if 
the employer has, in the course of his business or profession (including any activity whether or not such 
activity  is  carried  on  with  the  object  of  deriving  income,  profits  or  gains)  incurred  any  expense  on,  or 
made any payment for, the following purposes, namely:— 

(A)  entertainment; 

(B)   provision  of  hospitality  of  every  kind  by  the  employer  to  any  person,  whether  by  way  of 
provision of food or beverages or in any other manner whatsoever and whether or not such provision 
is  made  by  reason  of  any  express  or  implied  contract  or  custom  or  usage  of  trade  but  does  not 
include— 

(i)  any expenditure on, or payment for, food or beverages provided by the employer to his 

employees in office or factory; 

(ii)   any  expenditure  on  or  payment  through  paid  vouchers  which  are  not  transferable  and 

usable only at eating joints or outlets; 

2[(iii)  any expenditure on or payment through non-transferable pre-paid electronic meal card 
usable  only  at  eating  joints  or  outlets  and  which  fulfils  such  other  conditions  as  may  be 
prescribed;] 

(C) conference (other than fee for participation by the employees in any conference). 

Explanation.—For  the  purposes  of  this  clause,  any  expenditure  on  conveyance,  tour  and  travel 
(including foreign travel), on hotel, or boarding and lodging in connection with any conference shall be 
deemed to be expenditure incurred for the purposes of conference; 

(D)  sales promotion including publicity: 

Provided that any expenditure on advertisement,— 

 (i)   being  the  expenditure  (including  rental)  on  advertisement  of  any  form  in  any  print 

(including journals, catalogues or price lists) or electronic media or transport system; 

 (ii)  being the expenditure on the holding of, or the participation in, any press conference or 

business convention, fair or exhibition; 

(iii)  being the expenditure on sponsorship of any sports event or any other event organised 

by any Government agency or trade association or body; 

(iv) being the expenditure on the publication in any print or electronic media of any notice 

required to be published by or under any law or by an order of a court or tribunal; 

(v)   being  the  expenditure  on  advertisement  by  way  of  signs,  art  work,  painting,  banners, 
awnings, direct mail, electric spectaculars, kiosks, hoardings,3[bill boards, display of products] or 
by way of such other medium of advertisement; 4*** 

1. Subs. by Act 18 of 2008, s. 25, for “and includes employees’ stock option” (w.e.f. 1-4-2008). 
2. Ins. by s. 25, ibid. (w.e.f. 1-4-2009). 
3. Subs. by Act 22 of 2007, s. 38, for “bill boards” (w.e.f. 1-4-2008). 
4. The word “and” omitted by Act 21 of 2006, s. 28 (w.e.f. 1-4-2007). 

525 

                                                           
(vi)  being the expenditure by way of payment to any advertising agency for the purposes of 

clauses (i) to (v) above; 

1[2[(vii) being the expenditure on distribution of samples either free of cost or at concessional 

rate; and] 

(viii) being the expenditure by way of payment to any person of repute for promoting the sale 

of goods or services of the business of the employer,] 

shall not be considered as expenditure on sales promotion including publicity; 

(E)  employees’ welfare. 

3[Explanation.—For the purposes of this clause, any expenditure incurred or payment made to— 

 (i)  fulfil any statutory obligation; or 

 (ii)  mitigate occupational hazards; or 

(iii)  provide first aid facilities in the hospital or dispensary run by the employer; or 

(iv)  provide creche facility for the children of the employee; or 

(v)  sponsor a sportsman, being an employee; or 

(vi)  organise sports events for employees, 

shall not be considered as expenditure for employees’ welfare;] 

(F)  conveyance;4*** 

(G) use of hotel, boarding and lodging facilities; 

(H)  repair, running (including fuel), maintenance of motor cars and the amount of depreciation 

thereon; 

(I)  repair, running (including fuel) and maintenance of aircrafts and the amount of depreciation 

thereon; 

(J)  use of telephone (including mobile phone) other than expenditure on leased telephone lines; 

* 

* 

5* 

* 

(L)  festival celebrations; 

(M) use of health club and similar facilities; 

(N) use of any other club facilities; 

(O) gifts; and 

(P) scholarships; 

6[(Q) tour and travel (including foreign travel).] 

1. Ins. by Act 21 of 2006, s. 28 (w.e.f. 1-4-2007). 
2. Subs. by Act 22 of 2007, s. 38, for clause (vii) (w.e.f. 1-4-2008). 
3. Subs. by Act 18 of 2008, s. 25, for the Explanation (w.e.f. 1-4-2009). 
4. The words and brackets “, tour and travel (including foreign travel)” omitted by Act 21 of 2006, s. 28 (w.e.f. 1-4-2007). 
5. Clause (k) omitted by Act 18 of 2008, s. 25 (w.e.f. 1-4-2009). 
6. Ins. by Act 21 of 2006, s. 28 (w.e.f. 1-4-2007). 

526 

 
 
 
 
 
 
 
 
                                                           
(3)  For  the  purposes  of  sub-section  (1),  the  privilege,  service,  facility  or  amenity  does  not  include 
perquisites in respect of which tax is paid or payable by the employee  1[or any benefit or amenity in the 
nature of free or subsidised transport or any such allowance provided by the employer  to his employees 
for journeys by the employees from their residence to the place of work or such place of work to the place 
of residence.] 

115WC. Value of fringe benefits.—(1) For the purposes of this Chapter, the value of fringe benefits 

shall be the aggregate of the following, namely:— 

(a)   cost  at  which  the  benefits  referred  to  in clause  (b)  of  sub-section  (1)  of section  115WB,  is 
provided  by  the  employer  to  the  general  public  as  reduced  by  the  amount,  if  any,  paid  by,  or 
recovered from, his employee or employees: 

Provided that  in  a  case  where  the  expenses  of  the  nature  referred  to  in  clause  (b)  of                           

sub-section  (1)  of section  115WB are  included  in  any  other  clause  of  sub-section  (2)  of  the  said 
section,  the  total  expenses  included  under  such  other  clause  shall  be  reduced  by  the  amount  of 
expenditure referred to in the said clause (b) for computing the value of fringe benefits; 

2[(b)  the amount of contribution, referred to in clause (c) of sub-section (1) of section 115WB, 

which exceeds one lakh rupees in respect of each employee;] 

3[(ba) the fair market value of the specified security or sweat equity shares referred to in clause 
(d) of sub-section (1) of section 115WB, on the date on which the option vests with the employee as 
reduced by the amount actually paid by, or recovered from, the employee in respect of such security 
or shares. 

Explanation.—For the purposes of this clause,— 

(i)  “fair market value” means the value determined in accordance with the method as may be 

prescribed by the Board; 

(ii) “option”  means  a  right  but  not  an  obligation  granted  to  an  employee  to  apply  for  the 

specified security or sweat equity shares at a predetermined price;] 

(c)   twenty  per  cent  of  the  expenses  referred  to  in  4[clauses  (A)  to  (L)]  of  sub-section  (2) 

of section 115WB; 

(d)   fifty  per  cent  of  the  expenses  referred  to  in  5[clauses  (M)  to  (P)]  of  sub-section  (2)  of  

section 115WB; 

6[(e)  five per cent. of the expenses referred to in clause (Q) of sub-section (2) of section 115WB.] 

(2) Notwithstanding anything contained in sub-section (1),— 

(a)  in the case of an employer engaged in the business of hotel, the value of fringe benefits for 
the purposes  referred to in  clause  (B)  of sub-section (2)  of section  115WB shall  be “five  per  cent.” 
instead of “twenty per cent.” referred to in clause (c) of sub-section (1); 

6[(aa) in the case of an employer engaged in the business of carriage of passengers or goods by 
aircraft,  the  value  of  fringe  benefits  for  the  purposes  referred  to  in  clause  (B)  of  sub-section  (2) 
of section  115WB shall  be  “five  per  cent”  instead  of  “twenty  per  cent”  referred  to  in  clause  (c)  of  
sub-section (1); 

1. Ins. by Act 21 of 2006, s. 28. (w.e.f. 1-4-2007). 
2. Subs. by s. 29, ibid., for clause (b) (w.e.f. 1-4-2007). 
3. Ins. by Act 22 of 2007, s. 39 (w.e.f. 1-4-2008). 
4. Subs. by Act 18 of 2008, s. 26, for “clauses (A) to (K)” (w.e.f. 1-4-2009). 
5. Subs. by s. 26, ibid., for “clauses (L) to (P)” (w.e.f. 1-4-2009). 
6. Ins. by Act 21 of 2006, s. 29 (w.e.f. 1-4-2007). 

527 

                                                           
(ab) in  the case  of  an  employer  engaged  in  the  business  of  carriage  of  passengers  or  goods  by 
ship,  the  value  of  fringe  benefits  for  the  purposes  referred  to  in  clause  (B)  of  sub-section  (2)  of  
section  115WB shall  be  “five  per  cent”  instead  of  “twenty  per  cent.”  referred  to  in  clause  (c)  of  
sub-section (1);] 

(b)   in  the  case  of  an  employer  engaged  in  the  business  of  construction,  the  value  of  fringe 
benefits for the purposes referred to in clause (F) of sub-section (2) of section 115WB shall be “five 
per cent” instead of “twenty per cent” referred to in clause (c) of sub-section (1); 

(c)   in  the  case  of  an  employer  engaged  in  the  business  of  manufacture  or  production  of 
pharmaceuticals,  the  value  of  fringe  benefits  for  the  purposes  referred  to  in  clauses  (F)  and  (G)  of 
sub-section (2) of section 115WB shall be “five per cent” instead of “twenty per cent” referred to in 
clause (c) of sub-section (1); 

(d)  in the case of an employer engaged in the business of manufacture or production of computer 
software, the value of fringe benefits for the purposes referred to in clauses (F) and (G) of sub-section 
(2) of section 115WB shall be “five per cent” instead of “twenty per cent” referred to in clause (c) of 
sub-section (1); 

1[(da) in the case of an employer engaged in the business of carriage of passengers or goods by 
aircraft,  the  value  of  fringe  benefits  for  the  purposes  referred  to  in  clause  (G)  of  sub-section  (2) 
of section  115WB shall  be  “five  per  cent”  instead  of  “twenty  per  cent”  referred  to  in  clause  (c)  of   
sub-section (1); 

(db) in  the case  of  an  employer  engaged  in  the  business  of  carriage  of  passengers  or  goods  by 
ship,  the  value  of  fringe  benefits  for  the  purposes  referred  to  in  clause  (G)  of  sub-section  (2) 
of section  115WB shall  be  “five  per  cent”  instead  of  “twenty  per  cent”  referred  to  in  clause  (c)  of  
sub-section (1);] 

(e)   in  the  case  of  an  employer  engaged  in  the  business  of  carriage  of  passengers  or  goods  by 
motor  car,  the  value  of fringe  benefits  for  the  purposes  referred  to  in  clause (H)  of  sub-section  (2) 
of section  115WB shall  be  “five  per  cent”  instead  of  “twenty  per  cent”  referred  to  in  clause  (c)  of   
sub-section (1); 

(f)   in  the  case  of  an  employer  engaged  in  the  business  of  carriage  of  passengers  or  goods  by 
aircraft,  the  value  of  fringe  benefits  for  the  purposes  referred  to  in  clause  (1)  of  sub-section  (2) 
of section 115WB shall be taken as Nil. 

C.—Procedure for filing of return in respect of fringe benefits, assessment and payment of tax in respect 
thereof 

115WD. Return  of  fringe  benefits.—(1)  Without  prejudice  to  the  provisions  contained  in section 
139,  every  employer  who  during  a  previous  year  has  paid  or  made  provision  for  payment  of  fringe 
benefits to his  employees, shall, on  or  before  the  due  date, furnish  or  cause to be  furnished  a  return  of 
fringe benefits to the Assessing Officer in the prescribed form and verified in the prescribed manner and 
setting forth such other particulars as may be prescribed, in respect of the previous year. 

Explanation.—In this sub-section, “due date” means,— 

(a)  where the employer is— 

 (i)  a company; or 

 (ii)  a person (other than a company) whose accounts are required to be audited under this 

Act or under any other law for the time being in force, 

the 2[30th day of September] of the assessment year; 

1. Ins. by Act 21 of 2006, s. 29 (w.e.f. 1-4-2007). 
2. Subs. by Act 18 of 2008, s. 27, for “31st day of October” (w.e.f. 1-4-2008). 

528 

                                                           
(b)  in the case of any other employer, the 31st day of July of the assessment year. 

(2) In the case of any employer who, in the opinion of the Assessing Officer, is responsible for paying 
fringe benefit tax under this Act and who has not furnished a return under sub-section (1), the Assessing 
Officer  may,  after  the  due  date,  issue  a  notice  to  him  and  serve  the  same  upon  him,  requiring  him  to 
furnish  within  thirty  days  from  the  date  of  service  of  the  notice,  the  return  in  the  prescribed  form  and 
verified in the prescribed manner and setting forth such other particulars as may be prescribed. 

(3) Any employer responsible for paying fringe benefit tax who has not furnished a return within the 
time allowed under sub-section (1) or within the time allowed under a notice issued under sub-section (2), 
may furnish the return for any previous year, at any time before the expiry of one year from the end of the 
relevant assessment year or before the completion of the assessment, whichever is earlier. 

(4)  If  any  employer,  having  furnished  a  return  under  sub-section  (1),  or  in  pursuance  of  a  notice 
issued  under  sub-section  (2),  discovers any  omission  or  any  wrong  statement therein, he  may  furnish a 
revised return at any time before the expiry of one year from the end of the relevant assessment year or 
before the completion of the assessment, whichever is earlier. 

115WE. Assessment.—1[(1) Where a return has been made under section 115WD, such return shall 

be processed in the following manner, namely:— 

(a)   the  value  of  fringe  benefits  shall  be  computed  after  making  the  following  adjustments, 

namely:— 

(i)  any arithmetical error in the return; or 

(ii)  an incorrect claim, if such incorrect claim is apparent from any information in the return; 

(b)   the  tax  and  interest,  if  any,  shall  be  computed  on  the  basis  of  the  value  of  fringe  benefits 

computed under clause (a); 

(c)  the sum payable by, or the amount of refund due to, the assessee shall be determined after 
adjustment of the tax and interest, if any, computed under clause (b) by any advance tax paid, any tax 
paid on self-assessment and any amount paid otherwise by way of tax or interest; 

(d)   an  intimation  shall  be  prepared  or  generated  and  sent  to  the  assessee  specifying  the  sum 

determined to be payable by, or the amount of refund due to, the assessee under clause (c); and 

(e)  the amount of refund due to the assessee in pursuance of the determination under clause (c) 

shall be granted to the assessee: 

Provided that no intimation under this sub-section shall be sent after the expiry of one year from 

the end of the financial year in which the return is made. 

Explanation.—For the purposes of this sub-section,— 

(a)  “an incorrect claim apparent from any information in the return” shall mean a claim, on the 

basis of an entry, in the return,— 

 (i)  of an item, which is inconsistent with another entry of the same or some  other item in 

such return; 

 (ii)  in respect of which the information required to be furnished to substantiate such entry 

has not been so furnished under this Act; or 

(iii)   in  respect  of  a  deduction  or  value  of  fringe  benefits,  where  such  deduction  or  value 
exceeds  specified  statutory  limit  which  may  have  been  expressed  as  monetary  amount  or 
percentage or ratio or fraction; 

1. Subs. by Act 18 of 2008, s. 28, for sub-section (1) (w.e.f. 1-4-2008). 

529 

                                                           
(b)  the acknowledgement of the return shall be deemed to be the intimation in a case where no 
sum is payable by, or refundable to, the assessee under clause (c), and where no adjustment has been 
made under clause (a). 

(1A) For the purposes of processing of returns under sub-section (1), the Board may make a scheme 
for centralised processing of returns with a view to expeditiously determining the tax payable by, or the 
refund due to, the assessee as required under that sub-section. 

(1B) Save as otherwise expressly provided, for the purpose of giving effect to the scheme made under 
sub-section (1A), the Central Government may, by notification in the Official Gazette, direct that any of 
the  provisions  of  this  Act  relating  to  processing  of  returns  shall  not  apply  or  shall  apply  with  such 
exceptions, modifications and adaptations as may be specified in that notification; so, however, that no 
direction shall be issued 1[after the 31st day of March, 2011]. 

(1C)  Every  notification  issued  under  sub-section  (1B),  along  with  the  scheme  made  under               

sub-section (1A), shall, as soon as may be after the notification is issued, be laid before each House of 
Parliament.] 

(2)  Where  a  return  has  been  furnished  under section  115WD,  the  Assessing  Officer  shall,  if  he 
considers  it  necessary  or  expedient  to  ensure  that  the  assessee  has  not  understated  the  value  of  fringe 
benefits or has not underpaid the tax in any manner, serve on the assessee a notice requiring him on a date 
to be specified therein, either to attend his office or to produce, or cause to be produced, any evidence on 
which the assessee may rely in support of the return: 

Provided that no notice under this sub-section shall be served on the assessee after the expiry of 2[six 

months from the end of the financial year] in which the return is furnished. 

(3) On the day specified in the notice issued under sub-section (2), or as soon afterwards as may be, 
after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer 
may require on specified points, and after taking into account all relevant material which he has gathered, 
the Assessing Officer shall, by an order in writing, make an assessment of the value of the fringe benefits 
paid or payable by the assessee, and determine the sum payable by him or refund of any amount due  to 
him on the basis of such assessment. 

(4) Where a regular assessment under sub-section (3) or section 115WF is made,— 

(a)  any tax or interest paid by the assessee under sub-section (1) shall be deemed to have been 

paid towards such regular assessment; 

(b)   if  no  refund  is  due  on  regular  assessment  or  the  amount  refunded  under  sub-section  (1) 
exceeds the amount refundable on regular assessment, the whole or the excess amount so refunded 
shall  be  deemed  to  be  tax  payable  by  the  assessee  and  the  provisions  of  this  Act  shall  apply 
accordingly. 

115WF. Best judgment assessment.—If any person, being an employer— 

(a)  fails to make the return required under sub-section (1) of section 115WD and has not made a 

return under sub-section (3) or a revised return under sub-section (4) of that section, or 

(b)   fails  to  comply  with  all  the  terms  of  a  notice  issued  under  sub-section  (2)  of                  

section 115WD or fails to comply with a direction issued under sub-section (2A) of section 142, or 

(c)   having  made  a  return,  fails  to  comply  with  all  the  terms  of  a  notice issued  under            sub-

section (2) of section 115WE, 

the  Assessing  Officer,  after  taking  into  account  all  relevant  material  which  the  Assessing  Officer  has 
gathered, shall, after giving the assessee an opportunity of being heard, make the assessment of the fringe 
benefits to the best of his judgment and determine the sum payable by the assessee on the basis of such 
assessment: 

1. Subs. by Act 14 of 2010, s. 31, for “after the 31st day of March, 2010” (w.e.f. 1-4-2010). Earlier substituted by Act 33 of 

2009, s. 48 (w.e.f. 1-4-2009). 

2. Subs. by Act 18 of 2008, s. 28, for “twelve months from the end of the month” (w.e.f. 1-4-2008). 

530 

                                                           
Provided that  such  opportunity  shall  be  given  by  the  Assessing  Officer  by  serving  a  notice  calling 
upon the assessee to show cause, on a date and time to be specified in the notice as to why the assessment 
should not be completed to the best of his judgment: 

Provided further that it shall not be necessary to give such opportunity in a case where a notice under 
sub-section (2) of section 115WD has been issued prior to the making of an assessment under this section. 

115WG. Fringe benefits escaping assessment.—If the Assessing Officer has reason to believe that 
any fringe benefits chargeable to tax have escaped assessment for any assessment year, he may, subject to 
the provisions of section 115WH, 150 and 153, assess or reassess such fringe benefits and also any other 
fringe  benefits  chargeable  to  tax  which  have  escaped  assessment  and  which  come  to  his  notice 
subsequently  in  the  course  of  the  proceedings  under  this  section,  for  the  assessment  year  concerned 
(hereafter referred to as the relevant assessment year). 

Explanation.—For the purposes of this section, the following shall also be deemed to be cases where 

fringe benefits chargeable to tax have escaped assessment, namely:— 

(a)  where no return of fringe benefits has been furnished by the assessee; 

(b)  where a return of fringe benefits has been furnished by the assessee but no assessment has 
been made and it is noticed by the Assessing Officer that the assessee has understated the value of 
fringe benefits in the return; 

(c)   where  an  assessment  has  been  made,  but  the  fringe  benefits  chargeable  to  tax  have  been 

under-assessed. 

115WH. Issue of notice where fringe benefits have escaped assessment.—(1) Before making the 
assessment  or  reassessment  under section  115WG,  the  Assessing  Officer  shall  serve  on  the  assessee  a 
notice requiring him to furnish within such period as may be specified in the notice, a return of the fringe 
benefits in respect of which he is assessable under this Chapter during the previous year corresponding to 
the  relevant  assessment  year,  in  the  prescribed  form  and  verified  in  the  prescribed  manner  and  setting 
forth such other particulars as may be prescribed, and the provisions of this Chapter shall, so far as may 
be, apply accordingly as if such return were a return required to be furnished under section 115WD. 

(2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for 

doing so. 

(3) No notice under sub-section (1) shall be issued for the relevant assessment year after the expiry of 

six years from the end of the relevant assessment year. 

Explanation.—In  determining  fringe  benefits  chargeable  to  tax  which  have  escaped  assessment  for 
the purposes of this sub-section, the provisions of the Explanation to section 115WG shall apply as they 
apply for the purposes of that section. 

(4)  In  a  case  where  an  assessment  under  sub-section  (3)  of  section  115WE or  section  115WG has 
been  made  for  the  relevant  assessment  year,  no  notice  shall  be  issued  under  sub-section  (1)  by  an 
Assessing Officer, after the expiry of four years from the end of the relevant assessment year, unless the 
1[Principal Chief Commissioner or Chief Commissioner] or  2[Principal Commissioner or Commissioner] 
is  satisfied,  on  the  reasons  recorded  by  the  Assessing  Officer,  that  it  is  a  fit  case  for  the  issue  of  such 
notice. 

115WI. Payment of fringe benefit tax.—Notwithstanding that the regular assessment in respect of 
any  fringe  benefits  is  to  be  made  in  a  later  assessment  year,  the  tax  on  such  fringe  benefits  shall  be 
payable  in  advance  during  any  financial  year,  in  accordance  with  the  provisions  of section  115WJ,  in 
respect  of  the  fringe  benefits  which  would  be  chargeable  to  tax  for  the  assessment  year  immediately 
following  that  financial  year,  such  fringe  benefits  being  hereafter  in  this  Chapter  referred  to  as  the 
“current fringe benefits”. 

1. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.r.e.f. 1-6-2013). 
2. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 

531 

                                                           
115WJ. Advance  tax  in  respect  of  fringe  benefits.—(1)  Every  assessee  who  is  liable  to  pay 
advance tax under section 115WI, shall on his own accord, pay advance tax on his current fringe benefits 
calculated in the manner laid down in sub-section (2). 

1[(2) Advance tax on the current fringe benefits shall be payable by— 

(a)  all  the  companies,  who  are liable  to pay  the same  in  four instalments  during  each financial 
year and the due date of each instalment and the amount of such instalment shall be as specified in 
Table I below: 

Due date of instalment 

Amount payable 

TABLE I 

On or before the 15th June 

Not less than fifteen per cent of such advance tax. 

On  or  before 
September 

the  15th 

On  or  before 
December 

the  15th 

On or before the 15th March 

Not  less  than  forty-five  per  cent  of  such  advance  tax 
as  reduced  by  the  amount,  if  any,  paid  in  the 
earlier instalment. 

Not  less  than  seventy-five  per  cent  of  such  advance 
tax as reduced by the amount or amounts, if any, 
paid in the earlier instalment or instalments. 

The whole amount of such advance tax as reduced by 
the amount or amounts, if any, paid in the earlier 
instalment or instalments; 

(b) all the assessees (other than companies), who are liable to pay the same in three instalments 
during  each  financial  year  and  the  due  date  of  each  instalment  and  the  amount  of  such  instalment 
shall be as specified in Table II below: 

Due date of instalment 

Amount payable 

TABLE II 

On or before the 15th September 

Not  less  than  thirty  per  cent  of  such  advance 

On or before the 15th December 

On or before the 15th March 

tax. 

Not  less  than  sixty  per  cent  of  such  advance 
tax as reduced by the amount, if any, paid 
in the earlier instalment. 

The  whole  amount  of  such  advance  tax  as 
reduced by the amount or amounts, if any, 
instalment  or 
earlier 
paid 
instalments. 

the 

in 

(3)  Where  an  assessee,  being  a  company,  has  failed  to  pay  the  advance  tax  payable  by  him  on  or 
before  the  due  date  for  any  instalment  or  where  the  advance  tax  paid  by  him  is  less  than  the  amount 
payable by the due date, he shall be liable to pay simple interest calculated at the rate of— 

(i)  one per cent per month, for three months on an amount by which the advance tax paid on or 

before the 15th June of the financial year falls short of fifteen per cent of the advance tax payable; 

(ii)  one per cent per month, for three months on an amount by which the advance tax paid on or 
before the 15th September of the financial year falls short of forty-five per cent of the advance tax 
payable; 

1. Subs. by Act 22 of 2007, s. 40, for sub-sections (2) and (3) (w.e.f. 1-6-2007). 

532 

 
 
                                                           
(iii) one per cent. per month, for three months on an amount by which the advance tax paid on or 
before the 15th December of the financial year falls short of seventy-five per cent. of the advance tax 
payable; and 

(iv) one per cent. on an amount by which the advance tax paid on or before the 15th March of the 

financial year falls short of hundred per cent. of the advance tax payable. 

(4)  Where  an  assessee,  being  a  person  other  than  a  company,  has  failed  to  pay  the  advance  tax 
payable by him on or before the due date for any instalment or where the advance tax paid by him is less 
than the amount payable by the due date, he shall be liable to pay simple interest calculated at the rate 
of— 

(i)  one per cent. per month, for three months on an amount by which the advance tax paid on or 
before  the  15th  September  of  the  financial  year  falls  short  of  thirty  per  cent.  of  the  advance  tax 
payable; 

(ii)  one per cent. per month, for three months on an amount by which the advance tax paid on or 
before the 15th December of the financial year falls short of sixty per cent of the advance tax payable; 
and 

(iii) one per cent. on an amount by which the advance tax paid on or before the 15th March of the 

financial year falls short of hundred per cent. of the advance tax payable. 

(5) Where  an assessee  has  failed to  pay  the  advance tax  payable  by  him  during  a  financial  year  or 
where the advance tax paid by him is less than ninety per cent. of the tax assessed under section 115WE 
or  section 115WF or section 115WG, the assessee shall be liable to pay simple interest at the rate of one 
per cent. per month, for every month or part of a month comprised in the period from the 1st day of April 
next  following  such  financial  year  to  the  date  of  assessment  of  tax  under  section  115WE  or  section 
115WF or section 115WG.]  

115WK.  Interest  for  default  in  furnishing  return  of  fringe  benefits.—(1)  Where  the  return  of 
fringe benefits for any assessment year under sub-section (1) or sub-section (3) of section 115WD or in 
response  to  a  notice  under  sub-section  (2)  of  that  section,  is  furnished  after  the  due  date,  or  is  not 
furnished, the employer shall be liable to pay simple interest at the rate of one per cent. for every month 
or part of a month comprised in the period commencing on the date immediately following the due date, 
and,— 

(a)  where the return is furnished after the due date, ending on the date of furnishing of the return; 

or 

(b)  where no return has been furnished, ending on the date of completion of the assessment under 

section 115WF,   

on the amount of the tax on the value of fringe benefits as determined under sub-section (1) of  section 
115WE or regular assessment as reduced by the advance tax paid under section 115WJ.  

Explanation  1.—In  this  section,  “due  date”  means  the  date  specified  in  the Explanation to  

sub-section (1) of section 115WD as applicable in the case of the employer. 

Explanation  2.—Where,  in  relation  to  an  assessment  year,  an  assessment  is  made  for  the  first  time 
under section 115WG, the assessment so made shall be regarded as a regular assessment for the purposes 
of this section. 

(2) The provisions contained in sub-sections (2) to (4) of section 234A shall, so far as may be, apply 

to this section. 

533 

1[115WKA.  Recovery  of  fringe  benefit  tax  by  the  employer  from  the  employee.—
Notwithstanding anything contained in any agreement or scheme under which any specified security or 
sweat  equity  shares  referred  to  in  clause  (d)  of  sub-section  (1)  of  section  115WB  has  been  allotted  or 
transferred, directly or indirectly, by the employer on or after the 1st day of April, 2007, it shall be lawful 
for the employer to vary the agreement or scheme under which such specified security or sweat equity 
shares  has  been allotted or  transferred  so as  to recover  from  the  employee  the fringe  benefit  tax to  the 
extent  to  which  such  employer  is  liable  to  pay  the  fringe  benefit  tax  in  relation  to  the  value  of  fringe 
benefits  provided  to  the  employee  and  determined  under  clause  (ba)  of  sub-section  (1)  of  section 
115WC.]  

2[115WKB.  Deemed  payment  of  tax  by  employee.—(1)  Where  an  employer  has  paid  any  fringe 
benefit tax with respect to allotment or transfer of specified security or sweat equity shares, referred to in 
clause  (d)  of  sub-section  (1)  of  section  115WB,  and  has  recovered  such  tax  subsequently  from  an 
employee, it shall be deemed that the fringe benefit tax so recovered is the tax paid by such employee in 
relation to the value of the fringe benefit provided to him only to the extent to which the amount thereof 
relates to the value of the fringe benefit provided to such employee, as determined under clause (ba) of 
sub-section (1) of section 115WC.  

(2) Notwithstanding anything contained in any other provisions of this Act, where the fringe benefit 
tax recovered from the employee is deemed to be the tax  paid by such employee under sub-section (1), 
such employee shall, under this Act, not be entitled to claim— 

(i)  any refund out of such payment of tax; or 

(ii)  any credit of such payment of tax against tax liability on other income or against any other 

tax liability.] 

115WL. Application of other provisions of this Act.—Save as otherwise provided in this Chapter, 

all other provisions of this Act shall, as far as may be, apply in relation to fringe benefits also. 

3[115WM. Chapter XII-H not to apply after a certain date.—Nothing contained in this Chapter 
shall  apply,  in respect  of any  assessment for the assessment  year  commencing  on  the  1st  day  of  April, 
2010 or any subsequent assessment year.] 

CHAPTER XIII 

INCOME-TAX AUTHORITIES 

A.—Appointment and control 

4[116.  Income-tax  authorities.—There  shall  be the following  classes  of income-tax  authorities for 

the purposes of this Act, namely:— 

(a)  the Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963 

(54 of 1963),  

5[(aa)  Principal  Directors  General  of  Income-tax  or  Principal  Chief  Commissioners  of  

Income-tax,] 

(b) Directors-General of Income-tax or Chief Commissioners of Income-tax, 

5[(ba) Principal Directors of Income-tax or Principal Commissioners of Income-tax,] 

1. Ins. by Act 22 of 2007, s. 41 (w.e.f. 1-4-2007). 
2. Ins. by Act 18 of 2008, s. 29 (w.e.f. 1-4-2008). 
3. Ins. by Act 33 of 2009, s. 49 (w.e.f. 1-4-2009). 
4. Subs. by Act 4 of 1988, s. 30, for sections 116, 117 and 118 (w.e.f. 1-4-1988). 
5. Ins. by Act 25 of 2014, s. 45 (w.e.f. 1-6-2013). 

534 

                                                           
(c)   Directors  of  Income-tax  or  Commissioners  of  Income-tax  or  Commissioners  of  Income-tax 

(Appeals), 

1(cc)  Additional  Directors  of  Income-tax  or  Additional  Commissioners  of  Income-tax  or 

Additional Commissioners of Income-tax (Appeals), 

2[(cca) Joint Directors of Income-tax or Joint Commissioners of Income-tax,] 

(d)   Deputy  Directors  of  Income-tax  or  Deputy  Commissioners  of  Income-tax  or  Deputy 

Commissioners of Income-tax (Appeals), 

(e)  Assistant Directors of Income-tax or Assistant Commissioners of Income-tax, 

(f)  Income-tax Officers, 

(g)  Tax Recovery Officers, 

(h)  Inspectors of Income-tax. 

117.  Appointment  of  income-tax  authorities.—(1)  The  Central  Government  may  appoint  such 

persons as it thinks fit to be income-tax authorities. 

(2) Without prejudice to the provisions of sub-section (1), and subject to the rules and orders of the 
Central  Government  regulating  the  conditions  of  service  of  persons  in  public  services  and  posts,  the 
Central Government may authorise the Board, or a  3[Principal Director General or Director-General], a 
4[Principal  Chief  Commissioner  or  Chief  Commissioner]  or  a  5[Principal  Director  or  Director]  or  a 
6[Principal  Commissioner  or  Commissioner]  to  appoint  income-tax  authorities  below  the  rank  of  an 
7[Assistant Commissioner or Deputy Commissioner]. 

(3) Subject to the rules and orders of the Central Government regulating the conditions of service of 
persons in public services and posts, an income-tax authority authorised in this behalf by the Board may 
appoint  such  executive  or  ministerial  staff  as  may  be  necessary  to  assist  it  in  the  execution  of  its 
functions. 

118.  Control  of  income-tax  authorities.—The  Board  may,  by  notification  in the  Official  Gazette, 
direct that any income-tax authority or authorities specified in the notification shall be subordinate to such 
other income-tax authority or authorities as may be specified in such notification.] 

8[119. Instructions to subordinate authorities.—(1) The Board may, from time to time, issue such 
orders,  instructions  and  directions  to  other  income-tax  authorities  as  it  may  deem  fit  for  the  proper 
administration of this Act, and such authorities and all other persons employed in the execution of this 
Act shall observe and follow such orders, instructions and directions of the Board: 

Provided that no such orders, instructions or directions shall be issued— 

(a)  so as to require any income-tax authority to make a particular assessment or to dispose of a 

particular case in a particular manner; or 

1. Ins. by Act 32 of 1994, s. 35 (w.e.f. 1-6-1994). 
2. Ins. by Act 21 of 1998, s. 39 (w.e.f. 1-10-1998). 
3. Subs. by Act 25 of 2014, s. 4, for “Director General” (w.e.f. 1-6-2013). 
4. Subs. by s. 4, ibid., for “Chief Commissioner” (w.e.f. 1-6-2013). 
5. Subs. by s. 4, ibid., for “Director” (w.e.f. 1-6-2013). 
6. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 
7. Subs. by Act 21 of 1998, s. 3, for “Assistant Commissioner” (w.e.f. 1-10-1998). 
8. Subs. by Act 42 of 1970, s. 25, for section 119 (w.e.f. 1-4-1971). 

535 

                                                           
(b)  so as to interfere with the discretion of the 1*** 2[Commissioner (Appeals)] in the exercise of 

his appellate functions. 

(2) Without prejudice to the generality of the foregoing power,— 

(a) the Board may, if it considers it necessary or expedient so to do, for the purpose of proper and 
efficient management of the work of assessment and collection of revenue, issue, from time to time 
(whether by way of relaxation of any of the provisions of sections  3[115P, 115S, 115WD, 115WE, 
4[139,]  143,  144,  147,  148,  154,  155  
115WF,  115WG,  115WH,  115WJ,  115WK,] 
5[,  158BFA],  6[sub-section  (1A)  of  section  201,  sections  210,  211,  234A,  234B,  234C  7[,  234E]], 
8[270A,] 271  9[, 271C, 271CA] and 273 or otherwise), general or special orders in respect of  10[any 
class of incomes or fringe benefits] or class of cases, setting forth directions or instructions (not being 
prejudicial to assessees) as to the guidelines, principles or procedures to be followed by other income-
tax  authorities  in  the  work  relating  to  assessment  or  collection  of  revenue  or  the  initiation  of 
proceedings for the imposition of penalties and any such order may, if the Board is of opinion that it 
is necessary in the public interest so to do, be published and circulated in the prescribed manner for 
general information; 

(b)  the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship 
in any case or class of cases, by general or special order, authorise  11[any income-tax authority, not 
being  a  12***  Commissioner  (Appeals)]  to  admit  an  application  or  claim  for  any  exemption, 
deduction, refund or any other relief under this Act after the expiry of the period specified by or under 
this Act for making such application or claim and deal with the same on merits in accordance with 
law; 

13[(c) the  Board  may,  if  it  considers  it  desirable  or  expedient  so  to  do  for  avoiding  genuine 
hardship in any case or class of cases, by general or special order for reasons to be specified therein, 
relax any requirement contained in any of the provisions of Chapter IV or Chapter VI-A, where the 
assessee has failed to comply with any requirement specified in such provision for claiming deduction 
thereunder, subject to the following conditions, namely:— 

(i)   the  default  in  complying  with  such  requirement  was  due  to  circumstances  beyond  the 

control of the assessee; and 

(ii)  the assessee has complied with such requirement before the completion of assessment in 

relation to the previous year in which such deduction is claimed: 

Provided that the Central Government shall cause every order issued under this clause to be 

laid before each House of Parliament.] 

14*   

* 

* 

* 

* 

1. The words and brackets “Deputy Commissioner (Appeals) or the” omitted by Act 21 of 1998, s. 65 (w.e.f. 1-10-1998). 
Earlier  amended by  Act 29 of 1977, s. 39 and The Fifth Schedule (w.e.f. 10-7-1978) and 4 of 1988, s. 65 (w.e.f. 1-4-
1988). 

2. Ins. by Act 29 of 1977, s. 39 and The Fifth Schedule (w.e.f. 10-7-1978). 
3. Subs. by Act 18 of 2005, s. 38, for “sections 115P, 115S” (w.e.f. 1-4-2006). 
4. Ins. by Act 12 of 1990, s. 33 (w.e.f. 1-4-1990). 
5. Ins. by Act 20 of 2002, s. 55 (w.e.f. 1-6-2002). 
6. Subs. by Act 49 of 1991, s. 42, for “210, 234A, 234B” (w.e.f. 1-4-1991). 
7. Ins. by Act 25 of 2014, s. 46 (w.e.f. 1-10-2014). 
8. Ins. by Act 28 of 2016, s. 64 (w.e.f. 1-4-2017). 
9. Ins. by Act 7 of 2017, s. 49 (w.e.f. 1-4-2017). 
10. Subs. by Act 18 of 2005, s. 38, for “any class of incomes” (w.e.f. 1-4-2006). 
11. Subs. by Act 4 of 1988, s. 31, for “the Commissioner or the Income-tax Officer” (w.e.f. 1-4-1988). 
12. The words and brackets “Deputy Commissioner (Appeals) or the” omitted by Act 21 of 1998, s. 65 (w.e.f. 1-10-1998). 
13. Ins. by Act 49 of 1991, s. 42 (w.e.f. 1-10-1991). 
14. Sub-section (3) omitted by Act 4 of 1988, s. 31 (w.e.f. 1-4-1988). 

536 

 
 
 
 
 
 
 
                                                           
1[120. Jurisdiction of income-tax authorities.—(1) Income-tax authorities shall exercise all or any 
of the powers and perform all or any of the functions conferred on, or, as the case may be, assigned to 
such authorities by or under this Act in accordance with such directions as the Board may issue for the 
exercise of the powers and performance of the functions by all or any of those authorities. 

2[Explanation.—For the removal of doubts, it is hereby declared that any income-tax authority, being 
an  authority  higher  in  rank,  may,  if  so  directed  by  the  Board,  exercise  the  powers  and  perform  the 
functions of the income-tax authority lower in rank and any such direction issued by the Board shall be 
deemed to be a direction issued under sub-section (1).] 

(2) The directions of the Board under sub-section (1) may authorise any other income-tax authority to 
issue orders in writing for the exercise of the powers and performance of the functions by all or any of the 
other income-tax authorities who are subordinate to it. 

(3)  In  issuing  the  directions  or  orders  referred  to  in  sub-sections  (1)  and  (2),  the  Board  or  other 
income-tax  authority  authorised  by  it  may  have  regard  to  any  one  or  more  of  the  following  criteria, 
namely :— 

(a)  territorial area; 

(b)  persons or classes of persons; 

(c)  incomes or classes of income; and 

(d)  cases or classes of cases. 

(4)  Without  prejudice  to  the  provisions  of  sub-sections  (1)  and  (2),  the  Board  may,  by  general  or 

special order, and subject to such conditions, restrictions or limitations as may be specified therein,— 

(a)  authorise  any 3[Principal  Director  General  or  Director  General]  or 4[Principal  Director  or 
Director] to perform such functions of any other income-tax authority as may be assigned to him by 
the Board; 

(b)  empower  the 3[Principal  Director  General  or  Director  General]  or 5[Principal  Chief 
Commissioner  or  Chief  Commissioner]  or 6[Principal  Commissioner  or  Commissioner]  to  issue 
orders in writing that the powers and functions conferred on, or as the case may be, assigned to, the 
Assessing  Officer  by  or  under  this  Act  in  respect  of  any  specified  area  or  persons  or  classes  of 
persons or incomes or classes of income or cases or classes of cases, shall be exercised or performed 
by  7[an  Additional  Commissioner  or]  8[an  Additional  Director  or]  a  9[Joint  Commissioner]  or  a 
10[Joint Director]] and, where any order is made under this clause, references in any other provision of 
this Act, or in any rule made thereunder to the Assessing Officer shall be deemed to be references to 
such 11[an Additional Commissioner or] 12[Additional Director or] a 9[Joint Commissioner] or 10[Joint 
Director] by whom the powers and functions are to be exercised or performed under such order, and 
any provision of this Act requiring approval or sanction of the 9[Joint Commissioner] shall not apply. 

1. Subs. by Act 4 of 1988, s. 32, for section 120 (w.e.f. 1-4-1988). 
2. Ins. by Act 21 of 2006, s. 30 (w.r.e.f. 1-4-1988) 
3. Subs. by Act 25 of 2014, s. 4, for “Director General” (w.r.e.f. 1-6-2013). 
4. Subs. by s. 4, ibid., for “Director” (w.r.e.f. 1-6-2013). 
5. Subs. by s. 4, ibid., for “Chief Commissioner” (w.r.e.f. 1-6-2013). 
6. Subs. by s. 4, ibid., for “Commissioner” (w.r.e.f. 1-6-2013). 
7. Ins. by Act 22 of 2007, s. 42 (w.r.e.f. 1-6-1994).  
8. Ins. by s. 42, ibid. (w.r.e.f. 1-10-1996).  
9. Subs. by Act 21 of 1998, s. 3, for “Deputy Commissioner” (w.r.e.f 1-10-1998). 
10. Subs. by s. 3, ibid., for “Deputy Director” (w.e.f. 1-10-1998). 
11. Ins. by Act 22 of 2007, s. 42 (w.r.e.f. 1-6-1994). 
12. Ins. by s. 42, ibid. (w.r.e.f. 1-10-1996). 

537 

                                                           
(5)  The  directions  and  orders  referred  to  in  sub-sections  (1)  and  (2)  may,  wherever  considered 
necessary or appropriate for the proper management of the work, require two or more Assessing Officers 
(whether  or  not  of  the  same  class)  to  exercise  and  perform,  concurrently,  the  powers  and  functions  in 
respect of any area or persons or classes of persons or incomes or classes of income or cases or classes of 
cases; and, where such powers and functions are exercised and performed concurrently by the Assessing 
Officers  of  different  classes,  any  authority  lower  in  rank  amongst  them  shall  exercise  the  powers  and 
perform the functions  as any higher authority amongst them  may direct, and, further, references in any 
other provision of this Act or in any rule made thereunder to the Assessing Officer shall be deemed to be 
references to such higher authority and any provision of this Act requiring approval or sanction of any 
such authority shall not apply. 

(6)  Notwithstanding  anything  contained  in  any  direction  or  order  issued  under  this  section,  or 
in section  124,  the  Board  may,  by  notification  in  the  Official  Gazette,  direct  that  for  the  purpose  of 
furnishing of the return of income or the doing of any other act or thing under this Act or any rule made 
thereunder  by  any  person  or  class  of  persons,  the  income-tax  authority  exercising  and  performing  the 
powers and functions in relation to the said person or class of persons shall be such authority as may be 
specified in the notification.] 

[121. Jurisdiction  of  Commissioners.]  Omitted  by  the  Direct  Tax  Laws  (Amendment)  Act  1987  

(4 of 1987), s. 33 (w.e.f. 1-4-1988).] 

[121A. Jurisdiction of Commissioners (Appeals).] Omitted by s. 33, ibid (w.e.f. 1-4-1988). Original 
section  was  inserted  by  the  Finance  (No.  2)  Act,  1977  (29  of  1977),  s.  39  and  the  Fifth  Schedule  
(w.e.f. 10-7-1978). 

[122. Jurisdiction of Appellate Assistant Commissioners.] Omitted by s. 33, ibid. (w.e.f. 1-4-1988). 

[123. Jurisdiction  of  Inspecting  Assistant  Commissioners.]  Omitted  by  s.  33,  ibid.  (w.e.f.  1-4-

1988). 

1[124. Jurisdiction  of  Assessing  Officers.—(1)  Where  by  virtue  of  any  direction  or  order  issued 
under  sub-section  (1)  or  sub-section  (2)  of section  120,  the  Assessing  Officer  has  been  vested  with 
jurisdiction over any area, within the limits of such area, he shall have jurisdiction— 

(a)  in respect of any person carrying on a business or profession, if the place at which he carries 
on his business or profession is situate within the area, or where his business or profession is carried 
on in more places than one, if the principal place of his business or profession is situate within the 
area, and 

(b)  in respect of any other person residing within the area. 

(2) Where a question arises under this section as to whether an Assessing Officer has jurisdiction to 
assess  any  person,  the  question  shall  be  determined  by  the 2[Principal  Director  General  or  Director 
General] or the 3[Principal Chief Commissioner or Chief Commissioner] or the 4[Principal Commissioner 
or  Commissioner];  or  where  the  question  is  one  relating  to  areas  within  the  jurisdiction  of 
different 2[Principal  Director  General  or  Director  General]  or 3[Principal  Chief  Commissioner  or  Chief 
Commissioner]  or 4[Principal  Commissioner  or  Commissioner],  by  the 2[Principal  Director  General  or 
Director  General]  or 3[Principal  Chief  Commissioners  or  Chief  Commissioners]  or 4[Principal 
Commissioner  or  Commissioner]  concerned  or,  if  they  are  not  in  agreement,  by  the  Board  or  by 
such 2[Principal  Director  General  or  Director  General]  or 3[Principal  Chief  Commissioner  or  Chief 
Commissioner] or 4[Principal Commissioner or Commissioner] as the Board may, by notification in the 
Official Gazette, specify. 

1. Subs. by Act 4 of 1988, s. 34, for section 124 (w.e.f. 1-4-1988). 
2. Subs. by Act 25 of 2014, s. 4, for “Director General” (w.r.e.f. 1-6-2013). 
3. Subs. by s. 4, ibid., for “Chief Commissioner” (w.r.e.f. 1-6-2013). 
4. Subs. by s. 4, ibid., for “Commissioner” (w.r.e.f. 1-6-2013). 

538 

                                                           
(3) No person shall be entitled to call in question the jurisdiction of an Assessing Officer— 

(a)  where he has made a return  1[under sub-section (1) of section 115WD or under sub-section 
(1) of section 139], after the expiry of one month from the date on which he was served with a notice 
under  sub-section  (1)  of  section  142 or  2[sub-section  (2)  of section  115WE or  sub-section  (2) 
of section 143] or after the completion of the assessment, whichever is earlier; 

(b)  where he has made no such return, after the expiry of the time allowed by the notice under 
3[sub-section  (2)  of section  115WD or  sub-section  (1)  of section  142 or  under  sub-section  (1) 
of section 115WH or under section 148 for the making of the return or by the notice under  the first 
proviso to section 115WF or under the first proviso to section 144] to show cause why the assessment 
should not be completed to the best of the judgment of the Assessing Officer, whichever is earlier; 

4[(c) where an action has been taken under section 132 or section 132A, after the expiry of one 
month from the date on which he was served with a notice under sub-section (1) of section 153A or 
sub-section (2) of section 153C or after the completion of the assessment, whichever is earlier.] 

(4) Subject to the provisions of sub-section (3), where an assessee calls in question the jurisdiction of 
an Assessing Officer, then the Assessing Officer shall, if not satisfied with the correctness of the claim, 
refer the matter for determination under sub-section (2) before the assessment is made. 

(5)  Notwithstanding  anything  contained  in  this  section  or  in  any  direction  or  order  issued 
under section 120, every Assessing Officer shall have all the powers conferred by or under this Act on an 
Assessing  Officer in respect  of the  income  accruing or  arising  or  received  within the area, if  any,  over 
which he has been vested with jurisdiction by virtue of the directions or orders issued under sub-section 
(1) or sub-section (2) of section 120. 

[125.     Powers  of  Commissioner  respecting  specified  areas,  cases,  persons, etc.] Omitted  by  the 

Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), s. 33 (w.e.f. 1-4-1988). 

[125A. Concurrent  jurisdiction  of  Inspecting  Assistant  Commissioner  and  Income-tax 
Officer.]Omitted  by  the  Direct  Tax  Laws  (Amendment)  Act,  1987  (4  of  1988),  s.  33  (w.e.f.  1-4-1988). 
Original section was inserted by the Taxation Laws (Amendment) Act, 1975, (w.e.f. 1-10-1975).] 

[126. Powers  of  Board  respecting  specified  area,  classes  of  persons  or  incomes.]Omitted  by  the 

Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), s. 33 (w.e.f. 1-4-1988). 

127.Power  to  transfer  cases.—(1)  The 5[Principal  Director  General  or  Director  General] 
or 6[Principal  Chief  Commissioner  or  Chief  Commissioner]  or 7[Principal  Commissioner  or 
Commissioner]  may,  after  giving  the  assessee  a  reasonable  opportunity  of  being  heard  in  the  matter, 
wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or 
more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other 
Assessing  Officer  or  Assessing  Officers  (whether  with  or  without  concurrent  jurisdiction)  also 
subordinate to him. 

(2) Where the Assessing Officer or Assessing Officers  from whom the case is to be transferred and 
the Assessing Officer or Assessing Officers to whom the case is to be transferred are not subordinate to 
the  same  5[Principal  Director  General  or  Director  General]  or 6[Principal  Chief  Commissioner  or  Chief 
Commissioner] or 7[Principal Commissioner or Commissioner],— 

(a)  where 

the 5[Principal  Director  General  or  Director  General]  or 6[Principal  Chief 
Commissioner or Chief Commissioner] or 7[Principal Commissioner or Commissioner] to whom such 

1. Subs. by Act 18 of 2005, s. 39, for “under sub-section (1) of section 139” (w.e.f. 1-4-2006).  
2. Subs. by s. 39, ibid., for “sub-section (2) of section 143” (w.e.f. 1-4-2006). 
3. Subs. by s. 39, ibid., for “sub-section (1) of section 142 or under section 148 for the making of the return or by the notice 

under the first proviso to section 144” (w.e.f. 1-4-2006). 

4. Ins. by Act 28 of 2016, s. 65 (w.e.f. 1-6-2016). 
5. Subs. by Act 25 of 2014, s. 4, for “Director General” (w.r.e.f. 1-6-2013). 
6. Subs. by s. 4, ibid., for “Chief Commissioner” (w.r.e.f. 1-6-2013). 
7. Subs. by s. 4, ibid., for “Commissioner”  (w.r.e.f. 1-6-2013). 

539 

                                                           
Assessing Officers are subordinate are in agreement, then the 1[Principal Director General or Director 
General] or 2[Principal Chief Commissioner or Chief Commissioner] or 3[Principal Commissioner or 
Commissioner] from whose jurisdiction the case is to be transferred may, after giving the assessee a 
reasonable  opportunity  of  being  heard  in  the  matter,  wherever  it  is  possible  to  do  so,  and  after 
recording his reasons for doing so, pass the order; 

(b)  where 

the 1[Principal  Directors  General  or  Directors  General]  or 2[Principal  Chief 
Commissioner or Chief Commissioner] or 3[Principal Commissioner or Commissioner] aforesaid are 
not  in  agreement,  the  order  transferring  the  case  may,  similarly,  be  passed  by  the  Board  or  any 
such 1[Principal  Director  General  or  Director  General]  or 2[Principal  Chief  Commissioner  or  Chief 
Commissioner] or 3[Principal Commissioner or Commissioner] as the Board may, by notification in 
the Official Gazette, authorise in this behalf. 

(3) Nothing in sub-section (1) or sub-section (2) shall be deemed to require any such opportunity to 
be given where the transfer is from any Assessing Officer or Assessing Officers (whether with or without 
concurrent  jurisdiction)  to  any  other  Assessing  Officer  or  Assessing  Officers  (whether  with  or  without 
concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place. 

(4) The transfer of a case under sub-section (1) or sub-section (2) may be made at any stage of the 
proceedings,  and  shall  not  render  necessary  the  re-issue  of  any  notice  already  issued  by  the  Assessing 
Officer or Assessing Officers from whom the case is transferred.] 

Explanation.—In section 120 and this section, the word “case”, in relation to any person whose name 
is specified in any order or direction issued thereunder, means all proceedings under this Act in respect of 
any year which may be pending on the date of such order or direction or which may have been completed 
on or before such date, and includes also all proceedings under this Act which may be commenced after 
the date of such order or direction in respect of any year. 

[128. Functions  of  Inspectors of Income-tax.]  Omitted  by  the  Direct  Tax  Laws  (Amendment)  Act, 

1987 (4 of 1988), s. 33 (w.e.f. 1-4-1988). 

129. Change of incumbent of an office.—Whenever in respect of any proceeding under this Act an 
income-tax authority ceases to exercise jurisdiction and is succeeded by another who has and exercises 
jurisdiction, the income-tax authority so succeeding may continue the proceeding from the stage at which 
the proceeding was left by his predecessor: 

Provided that  the  assessee  concerned  may  demand  that  before  the  proceeding  is  so  continued  the 
previous  proceeding  or  any  part  thereof  be  reopened  or  that  before  any  order  of  assessment  is  passed 
against him, he be reheard. 

[130. Commissioner competent to perform any function or functions.]Omitted by the Direct Tax 

Laws (Amendment) Act, 1987 (4 of 1988), s. 33 (w.e.f. 1-4-1988). 

[130A. Income-tax  Officer  competent  to  perform  any  function  or  functions.]Omitted  by  the 
Direct  Tax  Laws  (Amendment)  Act,  1987  (4  of  1988),  s.  33  (w.e.f.  1-4-1988).  Original  section  was 
inserted by the Finance (No. 2) Act, 1967 (20 of 1967), s. 27 (w.e.f. 1-4-1967). 

1. Subs. by Act 25 of 2014, s. 4, for “Director General” (w.r.e.f. 1-6-2013). 
2. Subs. by s. 4, ibid., for “Chief Commissioner” (w.r.e.f. 1-6-2013). 
3. Subs. by s. 4, ibid., for “Commissioner”  (w.r.e.f. 1-6-2013). 

540 

                                                           
 
131.  Power  regarding  discovery,  production  of  evidence,  etc.—(1)  The  1[Assessing  Officer],  
2[Deputy  Commissioner  (Appeals)],  3[,Commissioner  (Appeals)  4[,  5[Principal  Chief  Commissioner  or 
Chief  Commissioner  or  6[Principal  Commissioner  or  Commissioner]  and  Dispute  Resolution  Panel 
referred to in clause (a) of sub-section (15) of section 144C]] shall, for the purposes of this Act, have the 
same powers as are vested in a court under the Code of Civil Procedure, 1908 (5 of 1908), when trying a 
suit in respect of the following matters, namely:— 

(a) discovery and inspection; 

(b)  enforcing  the  attendance  of  any  person,  including  any  officer  of  a  banking  company  and 

examining him on oath; 

(c) compelling the production of books of account and other documents; and 

(d) issuing commissions. 

7[(1A)  8[If the  9[Principal Director General or Director General] or  10[Principal Director or Director] 
or  11[Joint Director] or  12[Assistant Director or Deputy Director], or the authorised officer referred to in 
sub-section  (1)  of section  132  before  he  takes  action  under  clauses  (i)  to  (v)  of  that  sub-section,]  has 
reason to suspect that any income has been concealed, or is likely to be concealed, by any person or class 
of persons, within his jurisdiction, then, for the purposes of making any enquiry or investigation relating 
thereto,  it  shall  be  competent  for  him  to  exercise  the  powers  conferred  under  sub-section  (1)  on  the 
income-tax authorities referred to in that sub-section, notwithstanding that no proceedings with respect to 
such person or class of persons are pending before him or any other income-tax authority. 

13[(2)  For  the  purpose  of  making  an  inquiry  or  investigation  in  respect  of  any  person  or  class  of 
persons in relation to an agreement referred to in section 90 or section 90A, it shall be competent for any 
income-tax authority not below the rank of Assistant Commissioner of Income-tax, as may be notified by 
the  Board  in  this  behalf,  to  exercise  the  powers  conferred  under  sub-section  (1)  on  the  income-tax 
authorities referred to in that sub-section, notwithstanding that no proceedings with respect to such person 
or class of persons are pending before it or any other income-tax authority.] 

(3)  Subject  to  any  rules  made  in  this  behalf,  any  authority  referred  to  in  sub-section  (1)  7[or  
sub-section (1A)] 13[or sub-section (2)] may impound and retain in its custody for such period as it thinks 
fit any books of account or other documents produced before it in any proceeding under this Act: 

Provided that 14[an 15[Assessing Officer] or an 16[Assistant Director or Deputy Director]] shall not— 

(a)   impound  any  books  of  account  or  other  documents  without  recording  his  reasons  for  so 

doing, or 

1. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2. Subs. by s. 2, ibid., for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988). 
3. Subs. by Act 29 of 1977, s. 3 and the Fifth Schedule, for “and Commissioner” (w.e.f. 10-7-1978). 
4. Subs. by Act 33 of 2009, s. 50, for “and Chief Commissioner or Commissioner” (w.e.f. 1-10-2009). 
5. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). 
6. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 
7. Ins. by Act 41 of 1975, s. 34 (w.e.f. 1-10-1975). 
8. Subs. by Act 26 of 1988, s. 33, for “If the Assistant Director of Inspection” (w.e.f. 1-6-1988). 
9. Subs. by Act 25 of 2014, s. 4, for “Director General” (w.e.f. 1-6-2013). 
10. Subs. by s. 4, ibid., for “Director” (w.e.f. 1-6-2013). 
11. Subs. by Act 21 of 1998, s. 3, for “Deputy Director” (w.e.f. 1-10-1998). 
12. Subs. by s. 3, ibid., for “Assistant Director” (w.e.f. 1-10-1998). 
13. Ins. by Act 8 of 2011, s. 22 (w.e.f. 1-6-2011). 
14. Subs. by Act 41 of 1975, s. 34, for “an Income-tax Officer” (w.e.f. 1-10-1975). 
15. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
16. Subs. by Act 21 of 1998, s. 3, for “Assistant Director” (w.e.f. 1-10-1998). Earlier substituted as “Assistant Director” by 

Act 4 of 1988, s. 2, for “Assistant Director of Inspection” (w.e.f. 1-4-1988). 

541 

                                                           
(b)   retain  in  his  custody  any  such  books  or  documents  for  a  period  exceeding  fifteen  days 
(exclusive  of  holidays)  without  obtaining  the  approval  of  1[  the  2[Principal  Chief  Commissioner  or 
Chief  Commissioner]  or  3[Principal  Director  General  or  Director  General]  or  4[Principal 
Commissioner or Commissioner ]or 5[Principal Director or Director] therefor, as the case may be.] 

6[132.  Search  and  seizure.—(1)  Where  the  7[3[Principal  Director  General  or  Director  General]  or 
5[Principal  Director  or  Director]]  or  the  8[2[Principal  Chief  Commissioner  or  Chief  Commissioner]  or 
4[Principal Commissioner or Commissioner]] 9[or Additional Director or Additional Commissioner] 10[or 
Joint  Director  or  Joint  Commissioner]  in  consequence  of  information  in  his  possession,  has  reason  to 
believe that— 

(a)  any person to whom a summons under sub-section (1) of section 37 of the Indian Income-tax 
Act,  1922  (11  of  1922),  or  under  sub-section  (1)  of  section  131  of  this  Act,  or  a  notice  under  
sub-section  (4)  of  section  22  of  the  Indian  Income-tax  Act,  1922,  or  under  sub-section  (1)  of  
section 142 of this Act was issued to produce, or cause to be produced, any books of account or other 
documents has omitted or failed to produce, or cause to be produced, such books of account or other 
documents as required by such summons or notice, or 

(b)  any person to whom a summons or notice as aforesaid has been or might be issued will not, 
or would not, produce or cause to be produced, any books of account or other documents which will 
be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or 
under this Act, or 

(c)  any person is in possession of any money, bullion, jewellery or other valuable article or thing 
and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly 
income or property 11[which has not been, or would not be, disclosed] for the purposes of the Indian 
Income-tax  Act,  1922  (11  of  1922),  or  this  Act  (hereinafter  in  this  section  referred  to  as  the 
undisclosed income or property),  

12[then,— 

(A) the 7[3[Principal Director General or Director General] or  5[Principal Director or Director] or 
the  8[2[Principal  Chief  Commissioner  or  Chief  Commissioner]  or  4[Principal  Commissioner  or 
Commissioner],  as  the  case  may  be,  may  authorise  any  13[Additional  Director  or  Additional 

1.  Subs.  by  Act  26  of  1988,  s.  33,  for  “the  Chief  Commissioner  or  Commissioner  therefor”  (w.e.f.  1-6-1988).  Earlier 

substituted as “Chief Commissioner or Commissioner” for “Commissioner” by 4 of 1988, s. 2 (w.e.f. 1-4-1988). 

2. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). 

3. Subs. by s. 4, ibid., for “Director General” (w.e.f. 1-6-2013). 

4. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 

5. Subs. by s. 4, ibid., for “Director” (w.e.f. 1-6-2013). 

6. Subs. by Act 1 of 1965, s. 2, for section 132 (w.e.f. 12-3-1965). 

7. Subs. by Act 4 of 1988, s. 2, for “Director of Inspection” (w.e.f. 1-4-1988). 

8. Subs. by Act s. 2, ibid., for “Commissioner” (w.e.f. 1-4-1988). 

9. Subs. by Act 33 of 2009, s. 51, for “or any such Joint Director or Joint Commissioner as may be empowered in this behalf 
by the Board,” (w.e.f. 1-6-1994). Earlier amended by Act 41 of 1975, s. 35 (w.e.f. 1-10-1975), 21 of 1998, s. 3 (w.e.f. 1-
10-1998) and 4 of 1988, s. 2 (w.e.f. 1-4-1988). 

10. Ins. by s. 51, ibid. (w.e.f. 1-10-1998). 

11. Subs. by Act 41 of 1975, s. 35, for “which has not been disclosed” (w.e.f. 1-10-1975). 

12.  Subs.  by  s.  35,  ibid.,  for  “he  may  authorise  any  Deputy  Director  of  Inspection,  Inspecting  Assistant  Commissioner, 
Assistant Director of Inspection or Income-tax Officer (hereinafter referred to as the authorized officer) to—” (w.e.f. 1-
10-1975). 

13. Ins. by Act 33 of 2009, s. 51 (w.e.f. 1-6-1994). 

542 

                                                           
Commissioner or] 1[Joint Director], 2[Joint Commissioner], 3[Assistant Director or Deputy Director], 
4[Assistant Commissioner or Deputy Commissioner] or Income-tax Officer, or 

(B)  such  5[Additional  Director  or  Additional  Commissioner  or]  1[Joint  Director],  or  2[Joint 
Commissioner],  as  the  case  may  be,  may  authorise  any  3[Assistant  Director  or  Deputy  Director], 
4[Assistant Commissioner or Deputy Commissioner ]or Income-tax Officer, 

(the officer so authorised in all cases being hereinafter referred to as the authorised officer) to—] 

 (i)   enter  and  search  any  6[building,  place,  vessel,  vehicle  or  aircraft]  where  he  has  reason  to 
suspect  that  such  books  of  account,  other  documents,  money,  bullion,  jewellery  or  other  valuable 
article or thing are kept; 

(ii)  break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising 

the powers conferred by clause (i) where the keys thereof are not available; 

7[(iia) search any person who has got out of, or is about to get into, or is in, the building, place, 
vessel, vehicle or aircraft, if the authorised officer has reason to suspect that such person has secreted 
about  his  person  any  such  books  of  account,  other  documents,  money,  bullion,  jewellery  or  other 
valuable article or thing;] 

8[(iib) require any person who is found to be in possession or control of any books of account or 
other documents maintained in the form of electronic record as defined in clause (t) of sub-section (1) 
of section 2 of the Information Technology Act, 2000 (21 of 2000), to afford the authorised officer 
the necessary facility to inspect such books of account or other documents;] 

(iii)  seize  any  such  books  of  account,  other  documents,  money,  bullion,  jewellery  or  other 

valuable article or thing found as a result of such search: 

9[Provided that  bullion,  jewellery  or  other  valuable  article  or  thing,  being  stock-in-trade  of  the 
business, found as a result of such search shall not be seized but the authorised officer shall make a 
note or inventory of such stock-in-trade of the business;] 

(iv) place marks of identification on any books of account or other documents or make or cause to 

be made extracts or copies therefrom; 

(v)  make a note or an inventory of any such money, bullion, jewellery or other valuable article or 

thing: 

1.  Subs.  by  Act  21  of  1998,  s.  3,  for  “Deputy  Director”  (w.e.f.  1-10-1998).  Earlier  substituted  as  “Deputy  Director”  for 

“Deputy Director of Inspection” by Act 4 of 1988, s. 2 (w.e.f. 1-4-1988). 

2.  Subs. by  s.  3,  ibid.,  for  “Deputy  Commissioner”  (w.e.f.  1-10-1998). Earlier  substituted  as  “Deputy  Commissioner”  for 

“Inspecting Assistant Commissioner” by s. 2, ibid. (w.e.f. 1-4-1988). 

3. Subs. by s. 3, ibid., for “Assistant Director” (w.e.f. 1-10-1998). Earlier substituted as “Assistant Director” for “Assistant 

Director of Inspection” by s. 2, ibid. (w.e.f. 1-4-1988). 

4.  Subs.  by  s.  3,  ibid.,  “Assistant  Commissioner”  (w.e.f.  1-10-1998).  Earlier  substituted  as  “Assistant  Commissioner”  for  

“or Income tax officer” by s. 37, ibid. (w.e.f. 1-4-1988). 

5. Ins. by Act 33 of 2009, s. 51 (w.e.f. 1-6-1994). 
6. Subs. by Act 41 of 1975, s. 35, for “building or place” (w.e.f. 1-10-1975). 
7. Ins. by s. 35, ibid. (w.e.f. 1-10-1975). 
8. Ins. by Act 20 of 2002, s. 56 (w.e.f. 1-6-2002). 
9. Ins. by Act 32 of 2003, s. 59 (w.e.f. 1-6-2003). 

543 

                                                           
1[Provided that where any building, place, vessel, vehicle or aircraft referred to in clause (i) is within 
the  area  of  jurisdiction  of  any  2[Principal  Chief  Commissioner  or  Chief  Commissioner]  or  3[Principal 
Commissioner  or  Commissioner],  but  such  2[Principal  Chief  Commissioner  or Chief  Commissioner]  or 
3[Principal Commissioner or Commissioner] has no jurisdiction over the person referred to in clause (a) 
or  clause  (b)  or  clause  (c),  then,  notwithstanding  anything  contained  in 4[section  120],  it  shall  be 
competent  for  him  to  exercise  the  powers  under  this  sub-section  in  all  cases  where  he  has  reason  to 
believe  that  any  delay  in  getting  the  authorisation  from  the  5[Principal  Chief  Commissioner  or  Chief 
Commissioner] or 6[Principal Commissioner or Commissioner] having jurisdiction over such person may 
be prejudicial to the interests of the revenue:] 

7[Provided  further that  where  it  is  not  possible  or  practicable  to  take  physical  possession  of  any 
valuable  article  or  thing  and  remove  it  to  a  safe  place  due  to  its  volume,  weight  or  other  physical 
characteristics or due to its being of a dangerous nature, the authorised officer may serve an order on the 
owner or the person who is in immediate possession or control thereof that he shall not remove, part with 
or otherwise deal with it, except with the previous permission of such authorised officer and such action 
of the authorised officer shall be deemed to be seizure of such valuable article or thing under clause (iii):] 

8[Provided also that nothing contained in the second proviso shall apply in case of any valuable article 

or thing, being stock-in-trade of the business:] 

9[Provided  also that  no  authorisation  shall  be  issued  by  the  Additional  Director  or  Additional 
Commissioner or Joint Director or Joint Commissioner on or after the 1st day of October, 2009 unless he 
has been empowered by the Board to do so.] 

 10[Explanation.—For  the  removal  of  doubts,  it  is  hereby  declared  that  the  reason  to  believe,  as 
recorded by the income-tax authority under this sub-section, shall not be disclosed to any person or any 
authority or the Appellate Tribunal.] 

11[(1A)  Where  any  5[Principal  Chief  Commissioner  or  Chief  Commissioner]  or  6[Principal 
Commissioner or Commissioner], in consequence of information in his possession, has reason to suspect 
that any books of account, other documents, money, bullion, jewellery or other valuable article or thing in 
respect of which an officer has been authorised by the  12[Principal Director General or Director General] 
or 13[Principal Director or Director] or any other 5[Principal Chief Commissioner or Chief Commissioner] 
or  6[Principal  Commissioner  or  Commissioner]  or  14[Additional  Director  or  Additional  Commissioner] 

1. Ins. by Act 41 of 1975, s. 35(w.e.f. 1-10-1975). 
2. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). Earlier substituted as “Chief Commissioner or 

Commissioner” by Act 4 of 1988, s. 2 (w.e.f. 1-4-1988).  

3. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). Earlier substituted as “Chief Commissioner or Commissioner” 

by s. 2, ibid. (w.e.f. 1-4-1988). 

4. Subs. by Act 4 of 1988, s. 37, for “section 121” (w.e.f. 1-4-1988). 
5. Subs. by Act 25 of 2014, s. 4, “Chief Commissioner or Commissioner” (w.e.f. 1-6-2013). Earlier substituted as “Chief 

Commissioner or Commissioner” for “Commissioner” by Act 4 of 1988, s. 2 (w.e.f. 1-4-1988). 

6. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 
7. Ins. by Act 26 of 1988, s. 34 (w.e.f. 1-4-1989). 
8. Ins. by Act 32 of 2003, s. 59 (w.e.f. 1-6-2003). 
9. Ins. by Act 33 of 2009, s. 51 (w.e.f. 1-4-2009). 
10. Ins. by Act 7 of 2017, s. 50 (w.e.f. 1-4-1962). 
11. Ins. by Act 41 of 1975, s. 35 (w.e.f. 1-10-1975). 
12.  Subs.  by  Act  25  of  2014,  s.  4,  for  “Director  General”  (w.e.f.  1-6-2013).  Earlier  substituted  as  “Director  General  or 

Director” for “Director of Inspection” by Act 4 of 1988, s. 2 (w.e.f. 1-4-1988). 

13. Subs. by s. 4, ibid., for “Director” (w.e.f. 1-6-2013). 
14. Subs. by Act 33 of 2009, s. 51, for “any such Joint Director or Joint Commissioner as may be empowered in this behalf 

by the Board” (w.e.f. 1-6-1994). 

544 

                                                           
1[or Joint Director or Joint Commissioner] to take action under clauses (i) to (v) of sub-section (1) are or 
is  kept  in  any  building,  place,  vessel,  vehicle  or  aircraft  not  mentioned  in  the  authorisation  under  
sub-section  (1),  such  2[Principal  Chief  Commissioner  or  Chief  Commissioner]  or  3[Principal 
Commissioner  or  Commissioner]  may,  notwithstanding  anything  contained  in 4[section  120],  authorise 
the said officer to take action under any of the clauses aforesaid in respect of such building, place, vessel, 
vehicle or aircraft.] 

 5[Explanation.—For  the  removal  of  doubts,  it  is  hereby  declared  that  the  reason  to  suspect,  as 
recorded by the income-tax authority under this sub-section, shall not be disclosed to any person or any 
authority or the Appellate Tribunal.] 

(2) The authorised officer may requisition the services of any police officer or of any officer of the 
Central Government, or of both, to assist him for all or any of the purposes specified in sub-section (1) 
6[or sub-section (1A)] and it shall be the duty of every such officer to comply with such requisition. 

(3) The authorised officer may, where it is not practicable to seize any such books of account, other 
documents,  money,  bullion,  jewellery  or  other  valuable  article  or  thing,  7[for  reasons  other  than  those 
mentioned in the second proviso to sub-section (1),] serve an order on the owner or the person who is in 
immediate  possession  or  control  thereof  that  he  shall  not  remove,  part  with  or  otherwise  deal  with  it 
except  with  the  previous  permission  of  such  officer  and  such  officer  may  take  such  steps  as  may  be 
necessary for ensuring compliance with this sub-section. 

8[Explanation.—For the removal of doubts, it is hereby declared that serving of an order as aforesaid 
under  this  sub-section  shall  not  be  deemed  to  be  seizure  of  such  books  of  account,  other  documents, 
money, bullion, jewellery or other valuable article or thing under clause (iii) of sub-section (1).] 

(4)  The  authorised  officer  may,  during  the  course  of  the  search  or  seizure,  examine  on  oath  any 
person who is found to be in possession or control of any books of account, documents, money, bullion, 
jewellery  or  other  valuable  article  or  thing  and  any  statement  made  by  such  person  during  such 
examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 
(11 of 1922), or under this Act. 

8[Explanation.—For the removal of doubts, it is hereby declared that the examination of any person 
under this sub-section may be not merely in respect of any books of account, other documents or assets 
found  as  a  result  of  the  search,  but  also  in  respect  of  all  matters  relevant  for  the  purposes  of  any 
investigation  connected  with  any  proceeding  under  the  Indian  Income-tax  Act,  1922  (11  of  1922),  or 
under this Act.] 

 6[(4A)  Where  any  books  of  account,  other  documents,  money,  bullion,  jewellery  or  other  valuable 
article or thing are or is found in the possession or control of any person in the course of a search, it may 
be presumed— 

 (i) that  such  books  of  account,  other  documents,  money,  bullion,  jewellery  or  other  valuable 

article or thing belong or belongs to such person; 

1. Ins. by Act 33 of 2009, s. 51, (w.e.f. 1-10-1998). 
2. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). Earlier substituted as “Chief Commissioner or 

Commissioner” for “Commissioner” by Act 4 of 1988, s. 2 (w.e.f. 1-4-1988). 

3. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 
4. Subs. by Act 4 of 1988, s. 37, for “section 121” (w.e.f. 1-4-1988). 
5. Ins. by Act 7 of 2017, s. 50 (w.e.f. 1-10-1975). 
6. Ins. by Act 41 of 1975, s. 35 (w.e.f. 1-10-1975). 
7. Ins. by Act 26 of 1988, s. 34 (w.e.f. 1-4-1989). 
8. Ins. by Act 4 of 1988, s. 37 (w.e.f. 1-4-1989). 

545 

                                                           
(ii)  that the contents of such books of account and other documents are true; and 

(iii) that the signature and every other part of such books of account and other documents which 
purport  to  be  in  the  handwriting  of  any  particular  person  or  which  may  reasonably  be  assumed  to 
have  been  signed  by,  or  to  be  in  the  handwriting  of,  any  particular  person,  are  in  that  person's 
handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped 
and executed or attested by the person by whom it purports to have been so executed or attested.] 

1* 

* 

* 

* 

* 

 (8) The books of account or other documents seized under sub-section (1) 2[or sub-section (1A)] shall 
not be retained by the authorised officer for a period exceeding 3[thirty days from the date of the order of 
assessment  under  4[section  153A or  clause  (c)  of section  158BC]] unless  the  reasons  for  retaining  the 
same are recorded by him in writing and the approval of the  5[6[Principal Chief Commissioner or Chief 
Commissioner],  7[Principal  Commissioner  or  Commissioner],  8[Principal  Director  General  or  Director 
General] or 9[Principal Director or Director]] for such retention is obtained: 

the 

Provided that 

5[6[Principal  Chief  Commissioner  or  Chief  Commissioner], 

7[Principal 
Commissioner  or  Commissioner],  8[Principal  Director  General  or  Director  General]  or  9[Principal 
Director or Director]] shall not authorise the retention of the books of account and other documents for a 
period  exceeding  thirty  days  after  all  the  proceedings  under  the  Indian  Income-tax  Act,  1922  (11  of 
1922), or this Act in respect of the years for which the books of account or other documents are relevant 
are completed. 

10[(8A) An order under sub-section (3) shall not be in force for a period exceeding sixty days from the 

date of the order.] 

(9)  The  person  from  whose  custody  any  books  of  account  or  other  documents  are  seized  under  
sub-section (1) 2[or sub-section (1A)] may make copies thereof, or take extracts therefrom, in the presence 
of the authorised officer or any other person empowered by him in this behalf, at such place and time as 
the authorised officer may appoint in this behalf. 

11[(9A) Where the authorised officer has no jurisdiction over the person referred to in clause (a) or 
clause  (b)  or  clause  (c)  of  sub-section  (1),  the  books  of  account  or  other  documents,  or  any  money, 
bullion,  jewellery  or  other  valuable  article  or  thing  (hereafter  in  this  section  and  in sections 
132A and 132B referred  to  as  the  assets)  seized  under  that  sub-section  shall  be  handed  over  by  the 
authorised officer to the Assessing Officer having jurisdiction over such person within a period of sixty 
days  from  the  date  on  which  the  last  of  the  authorisations  for  search  was  executed  and  thereupon  the 
powers exercisable by the authorised officer under sub-section (8) or sub-section (9) shall be exercisable 
by such Assessing Officer.] 

 12[(9B) Where, during the course of the search or seizure or within a period of sixty days from the 
date on which the last of the authorisations for search was executed, the authorised officer, for reasons to 

1. Sub-sections (5) to (7) omitted by Act 20 of 2002, s. 56 (w.e.f. 1-6-2002). 
2. Ins. by Act 41 of 1975, s. 35 (w.e.f. 1-10-1975). 
3. Subs. by Act 20 of 2002, s. 56, for “one hundred and eighty days from the date of the seizure” (w.e.f. 1-6-2002). 
4. Subs. by Act 32 of 2003, s. 59, for “under clause (c) of section 158BC” (w.e.f. 1-6-2003). 
5. Subs. by Act 26 of 1997, s. 41, for “Chief Commissioner or Commissioner” (w.e.f. 1-10-1996). 
6. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). 
7. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 
8. Subs. by s. 4, ibid., for “Director General” (w.e.f. 1-6-2013). 
9. Subs. by s. 4, ibid., for “Director” (w.e.f. 1-6-2013). 
10. Subs. by Act 20 of 2002, s. 56, for sub-section (8A) (w.e.f. 1-6-2002). 
11. Subs. by s. 56, ibid., for sub-section (9A) (w.e.f. 1-6-2002). 
12. Ins. by Act 7 of 2017, s. 50 (w.e.f. 1-4-2017). 

546 

 
 
 
 
 
 
 
 
                                                           
be recorded in writing, is satisfied that for the purpose of protecting the interest of revenue, it is necessary 
so to do, he may with the previous approval of the Principal Director General or Director General or the 
Principal  Director  or  Director,  by  order  in  writing,  attach  provisionally  any  property  belonging  to  the 
assessee, and for the said purpose, the provisions of the Second Schedule shall, mutatis mutandis, apply. 

(9C)  Every  provisional  attachment  made  under  sub-section (9B)  shall cease to have  effect after  the 

expiry of a period of six months from the date of the order referred to in sub-section (9B). 

(9D) The authorised officer may, during the course of the search or seizure or within a period of sixty 
days from the date on which the last of the authorisations for search was executed, make a reference to a 
Valuation Officer referred to in section 142A, who shall estimate the fair market value of the property in 
the  manner  provided  under  that section  and  submit  a report  of  the  estimate to  the  said  officer  within a 
period of sixty days from the date of receipt of such reference.] 

(10)  If  a  person  legally  entitled  to  the  books  of  account  or  other  documents  seized  under  
sub-section  (1)  1[or  sub-section  (1A)]  objects  for  any  reason  to  the  approval  given  by  the  2[3[Principal 
Chief  Commissioner  or  Chief  Commissioner],  4[Principal  Commissioner  or  Commissioner],  5[Principal 
Director General or Director General] or  6[Principal Director or Director]] under sub-section (8), he may 
make  an  application  to  the  Board  stating  therein  the  reasons  for  such  objection  and  requesting  for  the 
return  of  the  books  of  account  or  other  documents  7[and  the  Board  may,  after  giving  the  applicant  an 
opportunity of being heard, pass such orders as it thinks fit]. 

8* 

* 

* 

* 

* 

9[(13) The provisions of the Code of Criminal Procedure, 1973 (2 of 1974), relating to searches and 

seizure shall apply, so far as may be, to searches and seizure under sub-section (1) or sub-section (1A).] 

(14) The Board may make rules in relation to any search or seizure under this section; in particular, 
and without prejudice to the generality of the foregoing power, such rules may provide for the procedure 
to be followed by the authorised officer— 

(i)   for  obtaining  ingress  into  10[any  building,  place,  vessel,  vehicle  or  aircraft]  to  be  searched 

where free ingress thereto is not available; 

(ii)  for ensuring safe custody of any books of account or other documents or assets seized. 

 11[Explanation 1.—For the purposes of sub-sections (9A), (9B) and (9D), with respect to “execution 

of an authorisation for search”, the provisions of sub-section (2) of section 153B shall apply.] 

Explanation 2.—In this section, the word “proceeding” means any proceeding in respect of any year, 
whether under the Indian Income-tax Act, 1922 (11 of 1922), or this Act, which may be pending on the 
date on which a search is authorised under this section or which may have been completed on or before 
such date and includes also all proceedings under this Act which may be commenced after such date in 
respect of any year.] 

1. Ins. by Act 41 of 1975, s. 35 (w.e.f. 1-10-1975). 
2. Subs. by Act 26 of 1997, s. 41, for “Chief Commissioner or Commissioner” (w.e.f. 1-10-1996). 
3. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). 
4. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 
5. Subs. by s. 4, ibid., for “Director General” (w.e.f. 1-6-2013). 
6. Subs. by s. 4, ibid., for “Director” (w.e.f. 1-6-2013). 
7. Ins. by Act 20 of 2002, s. 56 (w.e.f. 1-6-2002). 
8. Sub-sections (11), (11A) and (12) omitted by Act 20 of 2002, s. 56 (w.e.f. 1-6-2002). 
9. Subs. by Act 41 of 1975, s. 35, for sub-section (13) (w.e.f. 1-10-1975). 
10. Subs. by s. 35, ibid., for “such building or place” (w.e.f. 1-10-1975). 
11. Subs. by Act 7 of 2017, s. 50, for Explanation 1 (w.e.f. 1-4-2017). 

547 

 
 
 
 
 
 
 
                                                           
1[132A. Powers to requisition books of account, etc.—(1) Where the 2[ 3[Principal Director General 
or  Director  General]  or  4[Principal  Director  or  Director]]  or  the  5[  6[Principal  Chief  Commissioner  or 
Chief Commissioner] or  7[Principal Commissioner or Commissioner]], in consequence of information in 
his possession, has reason to believe that— 

(a) any person to whom a summons under sub-section (1) of section 37 of the Indian Income-tax 
Act,  1922  (11  of  1922),  or  under  sub-section  (1)  of  section  131  of  this  Act,  or  a  notice  under          
sub-section (4) of section 22 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 
142  of  this  Act  was  issued  to  produce,  or  cause  to  be  produced,  any  books  of  account  or  other 
documents has omitted or failed to produce, or cause to be produced, such books of account or other 
documents, as required by such summons or notice and the said books of account or other documents 
have been taken into custody by any officer or authority under any other law for the time being in 
force, or 

(b)  any  books  of  account or  other  documents  will  be  useful  for,  or  relevant to, any  proceeding 
under  the  Indian  Income-tax  Act,  1922  (11  of  1922),  or  under  this  Act  and  any  person  to  whom  a 
summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause 
to be produced, such books of account or other documents on the return of such books of account or 
other  documents  by  any  officer  or  authority  by  whom  or  which  such  books  of  account  or  other 
documents have been taken into custody under any other law for the time being in force, or 

(c) any assets represent either wholly or partly income or property which has not been, or would 
not have been, disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act 
by  any  person  from  whose  possession  or  control  such  assets  have  been  taken  into  custody  by  any 
officer or authority under any other law for the time being in force, 

then, the 2[3[Principal  Director  General  or  Director  General]  or  8[Principal  Director  or  Director]]  or  the 
5[6[Principal  Chief  Commissioner  or  Chief  Commissioner]  or 
7[Principal  Commissioner  or 
Commissioner]] may authorise any  9[Additional Director, Additional Commissioner,]  10[Joint Director], 
11[Joint  Commissioner],  12[Assistant  Director  or  Deputy  Director]  or  13[Assessing  Officer]  [hereafter  in 
this section and in sub-section (2) of section 278D referred to as the requisitioning officer] to require the 
officer or authority referred to in clause (a) or clause (b) or clause (c), as the case may be, to deliver such 
books of account, other documents or assets to the requisitioning officer. 

1. Ins. by Act 41 of 1975, s. 36 (w.e.f. 1-10-1975). 
2. Subs. by Act 4 of 1988, s. 2, for “Director of Inspection” (w.e.f. 1-4-1988). 
3. Subs. by Act 25 of 2014, s. 4, for “Director General” (w.r.e.f. 1-6-2013). 
4. Subs. by s. 4, ibid., for “Director” (w.r.e.f. 1-6-2013). 
5. Subs. by Act 4 of 1988, s. 2, for “Commissioner” (w.e.f. 1-4-1988). 
6. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.r.e.f. 1-6-2013). 
7. Subs. by s. 4, ibid., for “Commissioner” (w.r.e.f. 1-6-2013). 
8. Subs. by s. 4, ibid., for “Director” (w.r.e.f. 1-6-2013). 
9. Ins. by Act 33 of 2009, s. 52 (w.e.f. 1-6-1994). 
10.  Subs.  by  Act  21  of  1998,  s. 3,  for  “Deputy  Director”  (w.e.f.  1-10-1998).  Earlier  substituted  as  “Deputy  Director”  by             

Act 4 of 1988, s. 2, for “Deputy Director of Inspection” (w.e.f. 1-4-1988). 

11. Subs. by s. 3, ibid., for “Deputy Commissioner” (w.e.f. 1-10-1998). Earlier substituted as “Deputy Commissioner” by 

Act 4 of 1988, s. 2, for “Inspecting Assistant Commissioner” (w.e.f. 1-4-1988). 

12.  Subs.  by  s.  3,  ibid.,  for  “Assistant  Director”  (w.e.f.  1-10-1998).  Earlier    substituted  as  “Assistant  Director”  by                     

Act 4 of 1988, s. 2 for “Assistant Director of Inspection” (w.e.f. 1-4-1988). 

13. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 

548 

                                                           
1[Explanation:—For  the  removal  of  doubts,  it  is  hereby  declared  that  the  reason  to  believe,  as 
recorded  y  the  income-tax authority  under this  sub-section, shall not  be  disclosed  to  any  person  or  any 
authority or the Appellate Tribunal.] 

(2) On a requisition being made under sub-section (1), the officer or authority referred to in clause (a) 
or clause (b) or clause (c), as the case may be, of that sub-section shall deliver the books of account, other 
documents or assets to the requisitioning officer either forthwith or when such officer or authority is of 
the opinion that it is no longer necessary to retain the same in his or its custody. 

(3) Where any books of account, other documents or assets have been delivered to the requisitioning 
officer, the provisions of sub-sections (4A) to (14) (both inclusive) of section 132 and section 132B shall, 
so far as may be, apply as if such books of account, other documents or assets had been seized under sub-
section (1) of section 132 by the requisitioning officer from the custody of the person referred to in clause 
(a) or clause (b) or clause (c), as the case may be, of sub-section (1) of this section and as if for the words 
“the  authorised  officer”  occurring  in  any  of  the  aforesaid  sub-sections  (4A)  to  (14),  the  words  “the 
requisitioning officer” were substituted.] 

2[3[132B]. Application  of  seized  or  requisitioned  assets.—(1)  The  assets  seized  under section 

132 or requisitioned under section 132A may be dealt with in the following manner, namely:— 

(i)  the amount of any existing liability under this Act, the Wealth-tax Act, 1957 (27 of 1957), the 
Expenditure-tax Act, 1987 (35 of 1987), the Gift-tax Act, 1958 (18 of 1958) and the Interest-tax Act, 
1974  (45  of  1974),  and  the  amount  of  the  liability  determined on  completion  of  the  assessment 
4[under section 153A and the assessment of the year relevant to the previous year in which search is 
initiated or requisition is made, or the amount of liability determined on completion of the assessment 
under  Chapter  XIV-B  for  the  block  period,  as  the  case  may  be]  (including  any  penalty  levied  or 
interest payable in connection with such assessment) and in respect of which such person is in default 
or is 5[deemed to be in default, or the amount of liability arising on an application made before the 
Settlement Commission under sub-section (1) of section 245C, may be recovered out of such assets]: 

6[Provided that where the person concerned makes an application to the Assessing Officer within 
thirty days from the end of the month in which the asset was seized, for release of asset and the nature 
and source of acquisition of any such asset is explained] to the satisfaction of the Assessing Officer, 
the amount of any existing liability referred to in this clause may be recovered out of such asset and 
the remaining portion, if any, of the asset may be released, with the prior approval of the  7[Principal 
Chief Commissioner or Chief Commissioner] or  8[Principal Commissioner or Commissioner], to the 
person from whose custody the assets were seized: 

Provided further that such asset or any portion thereof as is referred to in the first proviso shall be 
released  within  a  period  of  one  hundred  and  twenty  days  from  the  date  on  which  the  last  of  the 
authorisations for search under section 132 or for requisition under section 132A, as the case may be, 
was executed: 

1. Ins. by Act 7 of 2017, s. 51 (w.e.f. 1-10-1975). 
2. Section 132A renumbered as section 132B thereof by Act 41 of 1975, s. 36 (w.e.f. 1-10-1975).  
3. Subs. by Act 20 of 2002, s. 57, for section 132B (w.e.f. 1-6-2002). 
4. Subs. by Act 32 of 2003, s. 60, for “under Chapter XIVB for the block period” (w.e.f. 1-6-2003). 
5. Subs. by Act 20 of 2015, s. 34, for “deemed to be in default, may be recovered out of such assets” (w.e.f. 1-6-2015). 
6.  Subs.  by  Act  32  of  2003,  s.  60,  for  “Provided  that  where  the  nature  and  source  of  acquisition  of  any  such  asset  is 

explained” (w.e.f. 1-6-2003). 

7. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). 
8. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 

549 

                                                           
(ii)   if  the  assets  consist  solely  of  money,  or  partly  of  money  and  partly  of  other  assets,  the 
Assessing Officer may apply such money in the discharge of the liabilities referred to in clause (i) and 
the assessee shall be discharged of such liability to the extent of the money so applied; 

(iii)  the  assets  other  than  money  may  also  be  applied  for  the  discharge  of  any  such  liability 
referred to in clause (i) as remains undischarged and for this purpose such assets shall be deemed to 
be under distraint as if such distraint was effected by the Assessing Officer or, as the case may be, the 
Tax  Recovery  Officer  under  authorisation  from  the 1[Principal  Chief  Commissioner  or  Chief 
Commissioner]  or 2[Principal  Commissioner  or  Commissioner]  under  sub-section  (5)  of section 
226 and  the  Assessing  Officer  or,  as  the  case  may  be,  the  Tax  Recovery  Officer  may  recover  the 
amount of such liabilities by the sale of such assets and such sale shall be effected in the manner laid 
down in the Third Schedule. 

(2)  Nothing  contained  in  sub-section  (1)  shall  preclude  the  recovery  of  the  amount  of  liabilities 

aforesaid by any other mode laid down in this Act. 

(3) Any assets or proceeds thereof which remain after the liabilities referred to in clause (i) of sub-
section  (1) are  discharged shall  be forthwith  made  over  or  paid  to  the  persons  from  whose  custody  the 
assets were seized. 

(4) (a) The Central Government shall pay simple interest at the rate of  3[one-half per cent. for every 
month or part of a month] on the amount by which the aggregate amount of money seized under section 
132 or requisitioned under section 132A, as reduced by the amount of money, if any, released under the 
first  proviso to  clause  (i)  of  sub-section  (1),  and  of the  proceeds,  if any,  of  the assets  sold towards  the 
discharge of the existing liability referred to in clause (i) of sub-section (1), exceeds the aggregate of the 
amount required to meet the liabilities referred to in clause (i) of sub-section (1) of this section. 

(b)  Such  interest  shall  run  from  the  date  immediately  following  the  expiry  of  the  period  of  one 
hundred and twenty days from the date on which the last of the authorisations for search under section 
132 or  requisition  under  section  132A was  executed  to  the  date  of  completion  of  the  assessment 
4[under section 153A or under Chapter XIVB]. 

5[Explanation 1.]—In this section,— 

 (i) “block period” shall have the meaning assigned to it in clause (a) of section 158B; 

(ii)  “execution  of  an  authorisation  for  search  or  requisition”  shall  have  the  same  meaning  as 

assigned to it in Explanation 2 to section 158BE.] 

6[Explanation 2.—For the removal of doubts, it is hereby declared that the “existing liability” does 

not include advance tax payable in accordance with the provisions of Part C of Chapter XVII.] 

1. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). 
2. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 
3. Subs. by Act 22 of 2007, s. 43, for “six per cent. per annum” (w.e.f. 1-4-2008). Earlier “six” was substituted for “eight” 

by Act 54 of 2003, s. 6 (w.e.f. 8-9-2003). 

4. Subs. by Act 32 of 2003, s. 60, for “under Chapter XIV-B” (w.e.f. 1-6-2003). 
5. The Explanation renumbered as Explanation 1 thereof by Act 17 of 2013, s. 34 (w.e.f. 1-6-2013). 
6. Ins. by s. 34, ibid. (w.e.f. 1-6-2013). 

550 

                                                           
133. Power  to  call  for  information.—The  1[Assessing  Officer],  the  2[Deputy  Commissioner 
(Appeals)],  3[the  4[Joint  Commissioner]  or  the  Commissioner  (Appeals)]  may,  for  the  purposes  of  this 
Act,— 

(1) require any firm to furnish him with a return of the names and addresses of the partners of the 

firm and their respective shares; 

(2) require any Hindu undivided family to furnish him with a return of the names and addresses 

of the manager and the members of the family; 

(3) require any person whom he has reason to believe to be a trustee, guardian or agent, to furnish 
him with a return of the names of the persons for or of whom he is trustee, guardian or agent, and of 
their addresses; 

(4) require any assessee to furnish a statement of the names and addresses of all persons to whom 
he has paid in any previous year rent, interest, commission, royalty or brokerage, or any annuity, not 
being any annuity taxable under the head “Salaries” amounting to more than  5[one thousand rupees, 
or such higher amount as may be prescribed], together with particulars of all such payments made; 

(5) require any dealer, broker or agent or any person concerned in the management of a stock or 
commodity exchange to furnish a statement of the names and addresses of all persons to whom he or 
the exchange has paid any sum in connection with the transfer, whether by way of sale, exchange or 
otherwise,  of  assets,  or  on  whose  behalf  or  from  whom  he  or  the  exchange  has  received  any  such 
sum, together with particulars of all such payments and receipts; 

(6)  require  any  person,  including  a  banking  company  or  any  officer  thereof,  to  furnish 
information  in  relation  to  such  points  or  matters,  or  to  furnish  statements  of  accounts  and  affairs 
verified in the manner specified by the  1[Assessing Officer], the 6[Deputy Commissioner (Appeals)], 
3[the  7[Joint Commissioner] or the Commissioner (Appeals)], giving information in relation to such 
points  or  matters  as,  in  the  opinion  of  the  1[Assessing  Officer],  the  6[Deputy  Commissioner 
(Appeals)],  3[the  7[Joint  Commissioner]  or  the  Commissioner  (Appeals)],  will  be  useful  for,  or 
relevant to, any 8[enquiry or] proceeding under this Act: 

9[Provided that  the  powers  referred  to  in  clause  (6),  may  also  be  exercised  by  the 10[Principal 
Director General or Director General], the 11[Principal Chief Commissioner or Chief Commissioner], 
the 12[Principal Director or Director]  13[or the Principal Commissioner or Commissioner or the Joint 
Director or Deputy Director or Assistant Director]: 

8[Provided  further that  the  power  in  respect  of  an  inquiry,  in  a  case  where  no  proceeding  is 
pending, shall not be exercised by any income-tax authority below the rank of 12[Principal Director or 
Director] or 13[Principal Commissioner or Commissioner 14[, other than the Joint Director or Deputy 
Director or Assistant Director,]] without the prior approval of the 12[Principal Director or Director] or, 
as the case may be, the 13[Principal Commissioner or Commissioner]:] 

1. Subs. by Act 4 of 1988, s. 2, for “Income-tax” (w.e.f. 1-4-1988). 
2. Subs. by s. 2, ibid., for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988) 
3. Subs. by Act 29 of 1977, s. 39 and the Fifth Schedule, for “or the Inspecting Assistant Commissioner” (w.e.f. 10-7-1978). 
4.  Subs.  by  Act  21  of  1998,  s.  3,  for  “Deputy  Commissioner”  (w.e.f.  1-10-1998).  Earlier  Substituted  by  4  of  1988,  s.  2               

(w.e.f. 1-4-1988). 

5. Subs. by Act 4 of 1988, s. 39, for “four hundred rupees” (w.e.f. 1-4-1988). 
6. Subs. by s. 2, ibid., for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988). 
7. Subs. by 21 of 1998, s. 3, for “Deputy Commissioner” (w.e.f. 1-10-1998). Earlier Substituted as “Deputy Commissioner” 

for “Inspecting  Assistant Commissioner” by 4 of 1988, s. 2 (w.e.f. 1-4-1988). 

8. Ins. by Act 22 of 1995, s. 27 (w.e.f. 1-7-1995). 
9. Ins. by Act 4 of 1988, s. 39 (w.e.f. 1-4-1989). 
10. Subs. by Act 25 of 2014, s. 4, for “Director General” (w.r.e.f. 1-6-2013). 
11. Subs. by s. 4, ibid., for “Chief Commissioner” (w.r.e.f. 1-6-2013). 
12. Subs. by s. 4, ibid., for “Director” (w.r.e.f. 1-6-2013). 
13. Subs. by Act 7 of 2017, s. 52, for “and the Principal Commissioner or Commissioner” (w.e.f. 1-4-2017). 
14. Ins. by s. 52, ibid. (w.e.f. 1-4-2017). 

551 

                                                           
1[Provided  also that  for  the  purposes  of  an  agreement  referred  to  in  section  90 or section  90A,  an 
income-tax authority notified under sub-section (2) of section 131 may exercise all the powers conferred 
under  this  section,  notwithstanding  that  no  proceedings  are  pending  before  it  or  any  other  income-tax 
authority.] 

2[133A. Power  of  survey.—(1)  Notwithstanding  anything  contained  in  any  other  provision  of  this 

Act, an income-tax authority may enter— 

(a)  any place within the limits of the area assigned to him, or 

(b)  any place occupied by any person in respect of whom he exercises jurisdiction, 3[or] 

3[(c)  any  place  in  respect  of  which  he  is  authorised  for  the  purposes  of  this  section  by  such 
income-tax authority, who is assigned the area within which such place is situated or who exercises 
jurisdiction in respect of any person occupying such place,] 

4[at which a business or profession or an activity for charitable purpose is carried on, whether such place 
be the principal place or not of such business or profession or of such activity for charitable purpose, and 
require any proprietor, trustee, employee or any other person who may at that time and place be attending 
in  any  manner  to,  or  helping  in,  the  carrying  on  of  such  business  or  profession  or  such  activity  for 
charitable purpose—] 

 (i)  to afford him the necessary facility to inspect such books of account or other documents as he 

may require and which may be available at such place, 

(ii)  to afford him the necessary facility to check or verify the cash, stock or other valuable article 

or thing which may be found therein, and 

(iii) to furnish such information as he may require as to any matter which may be useful for, or 

relevant to, any proceeding under this Act. 

Explanation.—For  the  purposes  of  this  sub-section,  a  place  where  a  business  or  profession  5[or 
activity for charitable purpose] is carried on shall also include any other place, whether any business or 
profession 5[or activity for charitable purpose] is carried on therein or not, in which the person carrying on 
the business or profession  5[or activity for charitable purpose] states that any of his books of account or 
other documents or any part of his cash or stock or other valuable article or thing relating to his business 
or profession 5[or activity for charitable purpose] are or is kept. 

(2) An income-tax authority may enter any place of business or profession referred to in sub-section 
(1) only during the hours at which such place is open for the conduct of business or profession and, in the 
case of any other place, only after sunrise and before sunset. 

6[(2A)  Without  prejudice to  the  provisions  of  sub-section  (1),  an  income-tax  authority  acting  under 
this  sub-section  may  for  the  purpose  of  verifying  that  tax  has  been  deducted  or  collected  at  source  in 
accordance  with  the  provisions  under  sub-heading  B  of  Chapter  XVII  or  under  sub-heading  BB  of 
Chapter XVII, as the case may be, enter, after sunrise and before sunset, any office, or any other place 
where business or profession is carried on, within the limits of the area assigned to him, or any place in 
respect  of  which  he  is  authorised  for  the  purposes  of  this  section  by  such  income-tax  authority  who  is 
assigned the area within which such place is situated, where books of account or documents are kept and 

1. Ins. by Act 8 of 2011, s. 23 (w.e.f. 1-6-2011). 
2. Subs. by Act 41 of 1975, s. 37, for section 133A (w.e.f. 1-10-1975). 
3. Ins. by Act 22 of 1995, s. 28 (w.e.f. 1-7-1995). 
4. Subs. by Act 7 of 2017, s. 53, for certain words (w.e.f. 1-4-2017). 
5. Ins. by s. 53, ibid. (w.e.f. 1-4-2017). 
6. Ins. by Act 25 of 2014, s. 47 (w.e.f. 1-10-2014). 

552 

                                                           
require the deductor or the collector or any other person who may at that time and place be attending in 
any manner to such work,— 

(i)  to afford him the necessary facility to inspect such books of account or other documents as he 

may require and which may be available at such place, and 

(ii)  to furnish such information as he may require in relation to such matter.] 

(3) An income-tax authority acting under this section may,— 

(i)   if  he  so  deems  necessary,  place  marks  of  identification  on  the  books  of  account  or  other 

documents inspected by him and make or cause to be made extracts or copies therefrom, 

1[(ia) impound and retain in his custody for such period as he thinks fit any books of account or 

other documents inspected by him: 

Provided that such income-tax authority shall not— 

(a)  impound any books of account or other documents except after recording his reasons for 

so doing; or 

2[(b)  retain  in  his  custody  any  such  books  of  account  or  other  documents  for  a  period 
exceeding  fifteen  days  (exclusive  of  holidays)  without  obtaining  the  approval  of  the  Principal 
Chief Commissioner or the Chief Commissioner or the Principal Director General or the Director 
General  or  the  Principal  Commissioner  or  the  Commissioner  or  the  Principal  Director  or  the 
Director therefor, as the case may be,]] 

(ii)  make an inventory of any cash, stock or other valuable article or thing checked or verified by 

him, 

(iii) record the statement of any person which may be useful for, or relevant to, any proceeding 

under this Act : 

3[Provided that no action under clause (ia) or clause (ii) shall be taken by an income-tax authority 

acting under sub-section (2A).] 

(4)  An  income-tax  authority  acting  under  this  section  shall,  on  no  account,  remove  or  cause  to  be 

removed from the place wherein he has entered, 4*** any cash, stock or other valuable article or thing. 

(5) Where, having regard to the nature and scale of expenditure incurred by an assessee, in connection 
with any function, ceremony or event, the income-tax authority is of the opinion  that it is necessary or 
expedient so to do, he may, at any time after such function, ceremony or event, require the assessee by 
whom such expenditure has been incurred or any person who, in the opinion of the income-tax authority, 
is  likely  to  possess  information  as  respects  the  expenditure  incurred,  to  furnish  such  information  as  he 
may require as to any matter which may be useful for, or relevant to, any proceeding under this Act and 
may have the statements of the assessee or any other person recorded and any statement so recorded may 
thereafter be used in evidence in any proceeding under this Act. 

(6) If a person under this section is required to afford facility to the income-tax authority to inspect 
books  of  account  or  other  documents  or  to  check  or  verify  any  cash,  stock  or  other  valuable  article  or 
thing or to furnish any information or to have his statement recorded either refuses or evades to do so, the 
income-tax  authority  shall  have  all  the  powers  under  5[sub-section  (1)  of section  131] for  enforcing 
compliance with the requirement made: 

1. Ins. by Act 20 of 2002, s. 58 (w.e.f. 1-6-2002). 
2. Subs. by Act 25 of 2014, s. 47, ibid., for clause (ia) (w.e.f. 1-10-2014). 
3. Ins. by s. 47, ibid. (w.e.f. 1-10-2014). 
4. The words “any books of account or other documents or” omitted by Act 20 of 2002, s. 58 (w.e.f. 1-6-2002). 
5. Subs. by Act 4 of 1988, s. 126, for “sub-sections (1) and (2) of section 131 (w.e.f. 1-4-1989). 

553 

                                                           
1[Provided that no action under sub-section (1) shall be taken by an Assistant Director or a Deputy 
Director  or  an  Assessing  Officer  or  a  Tax  Recovery  Officer  or  an  Inspector  of  Income-tax  without 
obtaining the approval of the Joint Director or the Joint Commissioner, as the case may be.] 

Explanation.—In this section,— 

2[(a)  “income-tax  authority”  means  a 3[Principal  Commissioner  or  Commissioner],  a  Joint 
Commissioner, a 4[Principal Director or Director], a Joint Director, an Assistant Director or a Deputy 
Director  or  an  Assessing  Officer,  or  a  Tax  Recovery  Officer,  and  for  the  purposes  of  clause  (i)  of  
sub-section (1), clause (i) of sub-section (3) and sub-section (5), includes an Inspector of Income-tax;] 

(b)  “proceeding”  means  any  proceeding  under  this  Act  in  respect  of  any  year  which  may  be 
pending on the date on which the powers under this section are exercised or which may have been 
completed  on  or  before  such  date  and  includes  also  all  proceedings  under  this  Act  which  may  be 
commenced after such date in respect of any year. 

5[133B.Power to collect certain information.—(1) Notwithstanding anything contained in any other 
provision of this Act, an income-tax authority may, for the purpose of collecting any information which 
may be useful for, or relevant to, the purposes of this Act, enter— 

(a) any building or place within the limits of the area assigned to such authority ; or 

(b) any building or place occupied by any person in respect of whom he exercises jurisdiction, 

at which a business or profession is carried on, whether such place be the principal place or not of such 
business or profession, and require any proprietor, employee or any other person who may at that time 
and place be attending in any manner to, or helping in, the carrying on of such business or profession to 
furnish such information as may be prescribed. 

(2) An income-tax authority may enter any place of business or profession referred to in sub-section 

(1) only during the hours at which such place is open for the conduct of business or profession. 

(3)  For  the  removal  of  doubts,  it  is  hereby  declared  that  an  income-tax  authority  acting  under  this 
section shall, on no account, remove or cause to be removed from the building or place wherein  he has 
entered, any books of account or other documents or any cash, stock or other valuable article or thing. 

Explanation.—In this section, “income-tax authority” means a  6[Joint Commissioner], an  7[Assistant 
Director]or  8[Deputy Director] or an  9[Assessing Officer], and includes an Inspector of Income-tax who 
has  been  authorised  by  the  9[Assessing  Officer]  to  exercise  the  powers  conferred  under  this  section  in 
relation to the area in respect of which the 9[Assessing Officer] exercises jurisdiction or part thereof.] 

10[133C.Power  to  call  for  information  by  prescribed  income-tax  authority.—11[(1)] The 
prescribed  income-tax  authority may,  for  the  purposes  of  verification  of  information  in  its  possession 
relating  to  any  person, issue  a  notice to  such  person  requiring  him,  on  or  before  a  date  to  be  specified 
therein,  to  furnish  information  or  documents  verified  in  the  manner  specified  therein,  which  may  be 
useful for, or relevant to, any inquiry or proceeding under this Act. 

1. Ins. by Act 32 of 2003, s. 61 (w.e.f. 1-6-2003). 
2. Subs.by s. 61, ibid., for clause (a) (w.e.f. 1-6-2003).  
3. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.r.e.f. 1-6-2013). 
4. Subs. by s. 4, ibid., for “Director” (w.r.e.f. 1-6-2013). 
5. Ins. by Act 23 of 1986, s. 27 (w.e.f. 13-5-1986). 
6.  Subs.  by  Act  21  of  1998,  s.  3,  for  “Deputy  Commissioner”  (w.e.f.  1-10-1998).  Earlier  “Deputy  Commissioner”  was 

substituted for “Inspecting Assistant Commissioner” by Act 4 of 1988, s. 2 (w.e.f. 1-4-1988). 

7. Subs. by Act 4 of 1988, s. 2, for “Assistant Director of Inspection” (w.e.f. 1-4-1988). 
8. Subs. by s. 2, ibid., for “Deputy Director of Inspection”  (w.e.f. 1-4-1988). 
9. Subs. by s. 2, ibid., for “Income-tax Officer” (w.e.f. 1-4-1988). 
10. Ins. by Act 25 of 2014, s. 48 (w.e.f. 1-10-2014). 
11. Section 133C renumbered as sub-section (1) thereof by Act 28 of 2016, s. 66 (w.e.f. 1-6-2016). 

554 

                                                           
1[(2) Where any information or document has been received in response to a notice issued under sub-
section  (1),  the  prescribed  income-tax  authority  may  process  such  information  or  document  and  make 
available the outcome of such processing to the Assessing Officer.] 

2[(3)  The  Board  may  make  a  scheme  for  centralized  issuance  of  notice  and  for  processing  of 

information or documents and making available the outcome of the processing to the Assessing Officer.] 

Explanation.—In this section, the term “proceeding” shall have the  meaning assigned to it in clause 

(b) of the Explanation to section 133A.] 

134. Power  to 

inspect  registers  of  companies.—The  3[Assessing  Officer], 

the  4[Deputy 
Commissioner  (Appeals)],  5[the  6[Joint  Commissioner]  or  the  Commissioner  (Appeals)],  or  any  person 
subordinate  to  him  authorised  in  writing  in  this  behalf  by  the  3[Assessing  Officer],  the  4[Deputy 
Commissioner (Appeals)], 5[the 6[Joint Commissioner] or the Commissioner (Appeals)], may inspect, and 
if necessary, take copies, or cause copies to be taken, of any register of the members, debenture holders or 
mortgagees of any company or of any entry in such register. 

135. Power  of 7[8[Principal  Director  General  or Director  General]]  or 9[Principal  Director 
orDirector], 10[11[Principal  Chief  Commissioner 
or 12[Principal 
Commissioner  or Commissioner]  and  13[Joint  Commissioner].—The 8[Principal  Director  General  or 
Director  General]  or 9[Principal  Director  or  Director],  the  10[11[Principal  Chief  Commissioner  or  Chief 
Commissioner]] or 12[Principal Commissioner or Commissioner] and the  13[Joint Commissioner] shall be 
competent  to  make  any  enquiry  under  this  Act,  and  for  this  purpose  shall  have  all  the  powers  that 
an3[Assessing Officer] has under this Act in relation to the making of enquiries. 

or Chief  Commissioner]] 

136. Proceedings  before  income-tax  authorities  to  be  judicial  proceedings.—Any  proceeding 
under  this  Act  before  an  income-tax  authority  shall  be  deemed  to  be  a  judicial  proceeding  within  the 
meaning  of  sections  193  and  228  and  for  the  purposes  of  section  196  of  the  Indian  Penal  Code  (45  of 
1860) 14[and every income-tax authority shall be deemed to be a Civil Court for the purposes of section 
195, but not for the purposes of Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974).] 

D. Disclosure of information 

[137. Disclosure  of  information  prohibited.]Omitted  by  the  Finance  Act,  1964  (5  of  1964),  s.  32 

(w.e.f. 1-4-1964). 

1. Ins. by Act 28 of 2016, s. 66  (w.e.f. 1-6-2016). 
2. Ins. by Act 7 of 2017, s. 54 (w.e.f. 1-4-2017). 
3. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
4. Subs. by s. 2, ibid., for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).  
5. Subs. by Act 29 of 1977, s. 10, for “or the Inspecting Assistant Commissioner” (w.e.f. 10-7-1978).Earlier Subs. by Act 21 
of 1998, s. 3, for “Deputy commissioner” (w.e.f. 1-10-1998). Which was earlier subs. by 4 of 1988, s. 2, for “Inspecting 
Assistant Commissioner” (w.e.f. 1-4-1988). 

6.  Subs.  by  Act  21  of  1998,  s.  3,  for  “Deputy  commissioner”  (w.e.f.  1-10-1998).  Earlier  “Deputy  commissioner”  was 

substituted for “Inspecting Assistant Commissioner” by Act 4 of 1988, s. 2 (w.e.f. 1-4-1988). 

7. Subs. by Act 4 of 1988, s. 2, for “Director of Inspection” (w.e.f. 1-4-1988). 
8. Subs. by Act 25 of 2014, s. 4, for “Director General” (w.r.e.f. 1-6-2013). 
9. Subs. by s. 4, ibid., for “Director” (w.r.e.f. 1-6-2013) 
10.  Subs.  by  Act  21  of  1998,  s.  3,  for  “Deputy  Commissioner”  (w.e.f.  1-10-1998).  Earlier  “Deputy  Commissioner”  was 

substituted for “Inspecting Assistant Commissioner” by Act 4 of 1988, s. 2 (w.e.f. 1-4-1988).  

11. Subs. by Act 25 of 2014,s. 4, for “Chief Commissioner” (w.r.e.f. 1-6-2013). 
12. Subs. by s. 4, ibid., for “Commissioner” (w.r.e.f.  1-6-2013). 
13. Subs. by Act 21 of 1998, s. 3, for “Deputy Commissioner” (w.e.f. 1-10-1998). 
14. Ins. by Act 32 of 1985, s. 28 (w.e.f. 1-4-1974). 

555 

                                                           
1[138. Disclosure of information respecting assessees.—2[(1)(a) The Board or any other income-tax 
authority specified by it by a general or special order in this behalf may furnish or cause to be furnished 
to— 

(i)  any  officer,  authority  or  body  performing  any  functions  under  any  law  relating  to  the 
imposition of any tax, duty or cess, or to dealings in foreign exchange as defined in  3[clause (n) of 
section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999)]; or 

(ii)  such  officer,  authority  or  body  performing  functions  under  any  other  law  as  the  Central 
Government may, if in its opinion it is necessary so to do in the public interest, specify by notification 
in the Official Gazette in this behalf, 

any  such  information  4[received  or  obtained  by  any  income-tax  authority  in  the  performance  of  his 
functions under this Act], as may, in the opinion of the Board or other income-tax authority, be necessary 
for the purpose of enabling the officer, authority or body to perform his or its functions under that law. 

(b)  Where  a  person  makes  an  application  to  the  5[6[PrincipalChief  Commissioner  or  Chief 
Commissioner]  or  7[PrincipalCommissioner  or  Commissioner]]  in  the  prescribed  form  for  any 
information relating to any assessee8[received or obtained by any income-tax authority in the performance 
of  his  functions  under  this  Act],  the  5[6[Principal  Chief  Commissioner  or  Chief  Commissioner]  or 
7[Principal Commissioner or Commissioner]] may, if he is satisfied that it is in the public interest so to do, 
furnish or cause  to  be furnished  the  information  asked  for  9***  and  his  decision  in this  behalf  shall  be 
final and shall not be called in question in any court of law.] 

 (2)  Notwithstanding  anything  contained  in  sub-section  (1)  or  any  other  law  for  the  time  being  in 
force,  the  Central  Government  may,  having  regard  to  the  practices  and  usages  customary  or  any  other 
relevant factors, by order notified in the Official Gazette, direct that no information or document shall be 
furnished or produced by a public servant in respect of such matters relating to such class of assessees or 
except to such authorities as may be specified in the order.] 

1. Subs. by Act 5 of 1964, s. 33, for section 138 (w.e.f. 1-4-1964). 

2. Subs. by Act 20 of 1967, s. 28, for sub-section (1) (w.e.f. 1-4-1967). 

3. Subs. by Act 17 of 2013, s. 35, for “section 2 (d) of the Foreign Exchange Regulation Act, 1947 (7 of 1947)” (w.e.f. 1-4-

2013). 

4. Subs. by Act 4 of 1988, s. 41, for “relating to any assessee in respect of any assessment made under this Act or under the 

Indian Income-tax Act, 1922 (11 of 1922)” (w.e.f. 1-4-1989). 

5. Subs. by s. 2, ibid., for “Commissioner” (w.e.f. 1-4-1988). 

6. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.r.e.f. 1-6-2013). 

7. Subs. by s. 4, ibid., for “Commissioner” (w.r.e.f. 1-6-2013). 

8.  Subs.  by  Act  4  of  1988,  s.  41,  for  “in  respect  of  any  assessment  made  under  this  Act  or  the  Indian  Income-tax                               

Act, 1922 (11 of 1922), on or after the 1st day of April, 1960” (w.e.f. 1-4-1989). 

9. The words “in respect of that assessment only” omitted by s. 41, ibid. (w.e.f. 1-4-1989). 

556 

                                                           
CHAPTER XIV 

PROCEDURE FOR ASSESSMENT 

139. Return of income.—1[(1) Every person,— 

(a) being a 2[company or a firm]; or 

(b) being a person 3[other than a company or a firm], if his total income or the total income of any 
other person in respect of which he is assessable under this Act during the previous year exceeded the 
maximum amount which is not chargeable to income-tax, 

shall, on or before the due date, furnish a return of his income or the income of such other person during 
the  previous  year,  in  the  prescribed form  and  verified  in  the  prescribed  manner  and  setting  forth  such 
other particulars as may be prescribed : 

Provided that a person referred to in clause (b), who is not required to furnish a return under this sub-
section and residing in such area as may be specified by the Board in this behalf by notification in the 
Official  Gazette,  and  who  4[during  the  previous  year  incurs  an  expenditure  of  fifty  thousand  rupees  or 
more  towards  consumption  of  electricity  or  at  any  time  during  the  previous  year]fulfils  any  one  of  the 
following conditions, namely:— 

(i) is in occupation of an immovable property exceeding a specified floor area, whether by way of 

ownership, tenancy or otherwise, as may be specified by the Board in this behalf; or 

(ii) is the owner or the lessee of a motor vehicle other than a two-wheeled motor vehicle, whether 
having  any  detachable  side  car  having  extra  wheel  attached  to  such  two-wheeled  motor  vehicle  or 
not; or 

5* 

* 

* 

* 

* 

(iv) has incurred expenditure for himself or any other person on travel to any foreign country; or 

(v) is the holder of a credit card, not being an “add-on” card, issued by any bank or institution; or 

(vi) is a member of a club where entrance fee charged is twenty-five thousand rupees or more, 

shall furnish a return, of his income 6[during any previous year ending before the 1st day of April, 2005], 
on or before the due date in the prescribed form and verified in the prescribed manner and setting forth 
such other particulars as may be prescribed : 

Provided further that the Central Government may, by notification in the Official Gazette, specify the 

class or classes of persons to whom the provisions of the first proviso shall not apply: 

Providedalso that  every  2[company  or  a  firm]  shall  furnish  on  or  before  the  due  date  the  return  in 

respect of its income or loss in every previous year: 

1. Subs. by Act 14 of 2001, s. 59, for sub-section (1) (w.e.f. 1-4-2001). Earlier substituted by 13 of 1963, s. 8 (w.r.e.f. 1-4-
1962). As amended by Act 27 of 1967, s. 4 (w.e.f. 1-10-1967). As so amended by Act 42 of 1970, s. 26 (w.e.f. 1-4-1970). 
As  amended  by  Act  16  of  1972,  s.  26  (w.e.f.  1-4-1972).  Amended  by  Act  4  of  1988,  s.  42  (w.e.f.  1-4-1988).  As  so 
amended by Act 3 of 1989, s. 20 (w.e.f. 1-4-1989).Earlier amended by Act 12 of 1990, s. 34 (w.e.f. 1-4-1991). Amended 
by Act 18 of 1992, s. 59 (w.e.f. 1-4-1993). 

2. Subs. by Act 18 of 2005, s. 40, for “company” (w.e.f. 1-4-2006). 
3. Subs. by s. 40, ibid., for “other than a company” (w.e.f. 1-4-2006). 
4. Subs. by s. 40, ibid.,for “at any time during the previous year” (w.e.f. 1-4-2006). 
5.  Clause (iii) omitted by s. 40, ibid. (w.e.f. 1-4-2006).  
6. Subs. by Act 21 of 2006, s. 31, for “during the previous year” (w.e.f. 1-4-2006). 

557 

 
 
 
 
 
 
 
                                                           
1[Provided also that a person, being a resident other than not ordinarily resident in  India within the 
meaning of clause (6) of section 6, who is not required to furnish a return under this sub-section and who 
at any time during the previous year,— 

(a)  holds,  as a  beneficial owner  or  otherwise, any  asset  (including  any  financial  interest in  any 

entity) located outside India or has signing authority in any account located outside India; or 

(b)  is  a  beneficiary  of  any  asset  (including  any  financial  interest  in  any  entity)  located  outside 

India, 

shall furnish, on or before the due date, a return in respect of his income or loss for the previous year in 
such form and verified in such manner and setting forth such other particulars as may be prescribed: 

Provided  also that  nothing  contained  in  the  fourth  proviso  shall  apply  to  an  individual,  being  a 
beneficiary  of  any  asset  (including  any  financial  interest  in  any  entity)  located  outside  India  where, 
income, if any, arising from such asset is includible in the income of the person referred to in clause (a) of 
that proviso in accordance with the provisions of this Act:] 

2[Provided alsothat every person, being an individual or a Hindu undivided family or an association 
of persons or a body of individuals, whether incorporated or not, or an artificial juridical person, if his 
total income or the total income of any other person in respect of which he is assessable under this Act 
during the previous year, without giving effect to the  3[provisions of clause (38) of section 10 or section 
10 or  section  10B or section  10BA] or  Chapter  VIA  exceeded  the  maximum  amount  which  is  not 
chargeable to income-tax, shall, on or before the due date, furnish a return of his income or the income of 
such other person during the previous year, in the prescribed form and verified in the prescribed manner 
and setting forth such other particulars as may be prescribed.] 

Explanation 1.—For the purposes of this sub-section, the expression “motor vehicle” shall have the 

meaning assigned to it in clause (28) of section 2 of the Motor Vehicles Act, 1988 (59 of 1988). 

Explanation 2.—In this sub-section, “due date” means,— 

(a) where the assessee4[other than an assessee referred to in clause (aa)] is— 

(i) a company5***; or 

(ii) a person (other than a company) whose accounts are required to be audited under this Act 

or under any other law for the time being in force; or 

(iii) a working partner of a firm whose accounts are required to be audited under this Act or 

under any other law for the time being in force, 

The 6[30th day of September] of the assessment year; 

7[(aa) in the case of an assessee8[who] is required to furnish a report referred to in section 92E, 

the 30th day of November of the assessment year; 

(b)  in  the  case  of  a  person  other  than  a  company,  referred  to  in  the  first  proviso  to  this  sub-

section, the 31st day of October of the assessment year; 

(c) in the case of any other assessee, the 31st day of July of the assessment year. 

1.  Subs.  by  Act  20  of  2015,  s.  35,  for  the  proviso  (w.e.f.  1-4-2016).  Earlier  Substituted  by  Act  23  of  2012,                                   

s. 59 (w.e.f. 1-4-2012). 

2. Ins. by Act 18 of 2005, s. 40 (w.e.f. 1-4-2006). 
3. Subs. by Act 28 of 2016, s. 67, for “provisions of section 10A” (w.e.f. 1-4-2017). 
4. Ins. by Act 23 of 2012, s. 59 (w.e.f. 1-4-2012). 
5. The words, brackets and letter “other than a company referred to in clause (aa)” omitted by s. 59, ibid. (w.e.f. 1-4-2012). 

Earlier the words were inserted by Act 8 of 2011, s. 24 (w.e.f. 1-4-2011). 
6. Subs. by Act 18 of 2008, s. 30, for “30th day of October” (w.e.f. 1-4-2008). 
7. Ins. by Act 8 of 2011, s. 24 (w.e.f. -4-2011). 
8. Subs. by Act 23 of 2012, s. 59, for “being a company, which” (w.e.f. 1-4-2012). 

558 

                                                           
Explanation 3.—For the purposes of this sub-section, the expression “travel to any foreign country” 
does not include travel to the neighbouring countries or to such places of pilgrimage as the Board may 
specify in this behalf by notification in the Official Gazette.] 

1[Explanation 4.—For the purposes of this section “beneficial owner” in respect of an asset means an 
individual who has provided, directly or indirectly, consideration for the asset for the immediate or future 
benefit, direct or indirect, of himself or any other person. 

Explanation  5.—For  the  purposes  of  this  section  “beneficiary”  in  respect  of  an  asset  means  an 
individual  who  derives  benefit  from  the  asset  during  the  previous  year  and  the  consideration  for  such 
asset has been provided by any person other than such beneficiary.] 

2[(1A) Without prejudice to the provisions of sub-section (1), any person, being an individual who is 
in  receipt  of  income  chargeable  under  the  head  “Salaries”  may,  at  his  option,  furnish  a  return  of  his 
income for any previous year to his employer, in accordance with such scheme as may be specified by the 
Board  in  this  behalf,  by  notification  in  the  Official  Gazette,  and  subject  to  such  conditions  as  may  be 
specified therein, and such employer shall furnish all returns of income received by him on or before the 
due date, in such form (including on a floppy, diskette, magnetic cartridge tape, CD-ROM or any other 
computer  readable  media)  and  manner  as  may  be  specified  in  that  scheme,  and  in  such  case,  any 
employee who has filed a return of his income to his employer shall be deemed to have furnisheda return 
of income under sub-section (1), and the provisions of this Act shall apply accordingly.] 

* 

* 

* 

3* 
4[(1B) Without prejudice to the provisions of sub-section (1), any person, being a company or being a 
person  other  than  a  company,  required to furnish  a return  of  income  under  sub-section (1),  may,  at  his 
option, on or before the due date, furnish a return of his income for any previous year in accordance with 
such scheme as may be specified by the Board in this behalf by notification in the Official Gazette and 
subject  to  such  conditions  as  may  be  specified  therein,  in  such  form  (including  on  a  floppy,  diskette, 
magnetic cartridge tape, CD-ROM or any other computer readable media) and in the manner as may be 
specified  in  that  scheme,  and  in  such  case,  the  return  of  income  furnished  under  such  scheme  shall  be 
deemed  to  be  a  return  furnished  under  sub-section  (1),  and  the  provisions  of  this  Act  shall  apply 
accordingly.] 

* 

5[(1C)  Notwithstanding  anything  contained  in  sub-section  (1),  the  Central  Government  may,  by 
notification  in  the  Official  Gazette,  exempt  any  class  or  classes  of  persons  from  the  requirement  of 
furnishing a return of income having regard to such conditions as may be specified in that notification.] 

* 

* 

6* 
(3) If any person who 7*** has sustained a loss in any previous year under the head “Profits and gains 
of business or profession” or under the head “Capital gains” and claims that the loss or any part thereof 
should be carried forward under sub-section (1) of section 72, or sub-section (2) of section 73, 8[or sub-
section  (2)  of section  73A]  or  9[sub-section  (1)  or  sub-section  (3)  of section  74],  10[or  sub-section  (3) 
of section 74A], he may furnish, within the time allowed under sub-section (1),  11*** a return of loss in 
the prescribed form and verified in the prescribed manner and containing such other particulars as may be 
prescribed, and all the provisions of this Act shall apply as if it were a return under sub-section (1). 

* 

* 

1. Ins. by Act 20 of 2015, s. 35 (w.e.f. 1-4-2016). 
2. Ins. by Act 20 of 2002, s. 59 (w.e.f. 1-4-2002).Earlier sub-section (1A) was amended by 13 of 1963, s. 8 (w.e.f. 14-1962). 

Earlier amended by 19 of 1970, s. 20 (w.e.f. 1-4-1971). 

3. Explanation omitted by Act 67 of 1984, s. 25 (w.ef. 1-4-1985). 
4. Ins. by Act 32 of 2003, s. 62 (w.e.f. 1-4-2003). 
5. Ins. by Act 8 of 2011, s. 24 (w.e.f. 1-6-2011). 
6. Sub-section (2) omittedby Act 4 of 1988, s. 42 (w.e.f. 1-4-1989). 
7. The words “has not been served with a notice under sub-section (2)” omitted by Act 4 of 1988, s. 42 (w.e.f. 1-4-1989). 
8. Ins. by Act 28 of 2016, s. 67 (w.e.f. 1-4-2016). 
9. Subs. by Act 11 of 1987, s. 74, for “sub-section (1) of section 74” (w.e.f. 1-4-1988). 
10. Ins. by Act 20 of 1974, s. 10 (w.e.f. 1-4-1975).  
11. The words “or by the thirty-first day of July of the assessment year relevant to the previous year during which the loss 

was sustained” by Act 4 of 1988, s. 42 (w.e.f. 1-4-1989). 

559 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
1[2[(4) Anyperson who has not furnished a return within the time allowed to him under sub-section 
(1), may furnish the return for any previous year at any  time before the end of the relevant assessment 
year or before the completion of the assessment, whichever is earlier.] 

3[(4A) Every  person  in  receipt  of  income  derived  from  property  held  under  trust  or  other  legal 
obligation  wholly  for  charitable  or  religious  purposes  or  in  part  only  for  such  purposes,  or  of  income 
being voluntary contributions referred to in sub-clause (iia) of clause (24) of section 2, shall, if the total 
income in respect of which he is assessable as a representative assessee (the total income for this purpose 
being computed under this Act without giving effect to the provisions of sections 11 and 12) exceeds the 
maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous 
year in the prescribed form and verified in the prescribed manner and setting forth such other particulars 
as may be prescribed and all the provisions of this Act shall, so far as may be, apply as if it were a return 
required to be furnished under sub-section (1).]] 

4[(4B) The chief executive officer (whether such chief executive officer is known as Secretary or by 
any other designation) of every political party shall, if the total income in respect of which the political 
party is assessable (the total income for this purpose being computed under this Act without giving effect 
to the provisions of section 13A) exceeds the maximum amount which is not chargeable to income-tax, 
furnish a return of such income of the previous year in the prescribed form and verified in the prescribed 
manner and setting forth such other particulars as may be prescribed and all the provisions of this Act, 
shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1).] 

5[(4C) Every— 

(a) 6[researchassociation] referred to in clause (21) of section 10; 

(b) news agency referred to in clause (22B) of section 10; 

(c) association or institution referred to in clause (23A) of section 10; 

7[(ca)person referred to in clause (23AAA) of section 10;] 

(d) institution referred to in clause (23B) of section 10; 

(e) fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause 
(v) or any university or other educational institution referred to in 8[sub-clause (iiiab) or] 9[sub-clause 
(iiiad) or sub-clause (vi)] or any hospital or other medical institution referred to in 8[sub-clause (iiiac) 
or] 10[sub-clause (iiiae) or sub-clause (via)] of clause (23C) of section 10; 

11[(ea) Mutual Fund referred to in clause (23D) of section 10; 

(eb) securitisation trust referred to in clause (23DA) of section 10; 

7[(eba) InvestorProtection Fund referred to in clause (23EC) or clause (23ED) of section 10; 

(ebb) Core Settlement Guarantee Fund referred to in clause (23EE) of section 10;] 

(ec) venture capital company or venture capital fund referred to in clause (23FB) of section 10;] 

1. Subs. by Act 4 of 1988, s. 42, for sub-sections (4) and (4a) (w.e.f. 1-4-1989). 
2. Subs. by Act 28 of 2016, s. 67, for sub-section (4) (w.e.f. 1-4-2017). Earlier sub-section (4) was substituted by Act 4 of 

1988, s. 42 (w.e.f. 1-4-1989). 

3. Subs. by Act 3 of 1989, s. 20, for sub-section (4A) (w.e.f. 1-4-1989). Original sub-section (4A) was inserted by Act 19 of 

1970, s. 20 (w.e.f. 1-4-1971) and substituted by Act 16 of 1972, s. 26 (w.e.f. 1-4-1973).  

4. Ins. by Act 29 of 1978, s. 2 (w.e.f. 1-4-1979). 
5. Ins. by Act 20 of 2002, s. 59 (w.e.f. 1-4-2003). 
6. Subs. by Act 14 of 2010, s. 32, for “scientific research association” (w.e.f. 1-4-2011). 
7. Ins. by Act 7 of 2017, s. 55 (w.e.f. 1-4-2018). 
8. Ins. by Act 20 of 2015, s. 35 (w.e.f. 1-4-2016). 
9. Subs. by Act 29 of 2006, s. 12, for “sub-clause (vi)” (w.r.e.f. 1-4-2006). 
10. Subs. by s. 12,ibid., for “sub-clause (via)” (w.e.f. 1-4-2006). 
11. Ins. by Act 25 of 2014, s. 49 (w.e.f. 1-4-2015). 

560 

                                                           
(f) trade union referred to in sub-clause (a) or association referred to in sub-clause (b) of clause 

(24) of section 10; 

1[(fa) Board orAuthority referred to in clause (29A) of section 10;] 

2[(g) body or authority or Board or Trust or Commission (by whatever name called) referred to in 

clause (46) of section 10; 

(h) infrastructure debt fund referred to in clause (47) of section 10,] 

shall,  if  the  total  income  in  respect  of  which  such  3[research  association],  news  agency,  association  or 
institution, 1[person or] fund or trust or university or other educational institution or any hospital or other 
medical  institution  or  trade  union  2[or  body  or  authority  or  Board  or  Trust  or  Commission  or 
infrastructure  debt  fund]4[or  Mutual  Fund  or  securitisation  trust  or  venture  capital  company  or  venture 
capital fund] is assessable, without giving effect to the provisions of section 10, exceeds the maximum 
amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the 
prescribed form and verified in the prescribed manner and setting forth such other particulars as may be 
prescribed and all the provisions of this Act shall, so far as may be, apply as if it were a return required to 
be furnished under sub-section (1).] 

5[(4D) Every university, college or other institution referred to in clause (ii) and clause (iii) of sub-
section  (1)  of section  35,  which  is  not  required  to  furnish  return  of  income  or  loss  under  any  other 
provision of this section, shall furnish the return in respect of its income or loss in every previous year 
and  all  the  provisions  of  this  Act  shall,  so  far  as  may  be,  apply  as  if  it  were  a  return  required  to  be 
furnished under sub-section (1).] 

4[(4E) Every business trust, which is not required to furnish return of income or loss under any other 
provisions of this section, shall furnish the return of its income in respect of its income or loss in every 
previous year and all the provisions of this Act shall, so far as may be, apply if it were a return required to 
be furnished under sub-section (1).] 

6[(4F)Every investment fund referred to in section 115UB, which is not required to furnish return of 
income or loss under any other provisions of this section, shall furnish the return of income in respect of 
its income or loss in every previous year and all the provisions of this Act shall, so far as may be, apply as 
if it were a return required to be furnished under sub-section (1).] 

7[(5) If any person, having furnished a return under sub-section (1) or sub-section (4), discovers any 
omission or any wrong statement therein, he may furnish a revised return at any time before 8*** the end 
of the relevant assessment year or before the completion of the assessment, whichever is earlier.] 

1. Ins. by Act 7 of 2017, s. 55 (w.e.f. 1-4-2018). 

2. Ins. by Act 8 of 2011, s. 24 (w.e.f. 1-6-2011). 

3. Subs. by Act 14 of 2010, s. 32, for “scientific research association” (w.e.f. 1-4-2011). 

4. Ins. by Act 25 of 2014, s. 49 (w.e.f. 1-4-2015). 

5. Ins. by Act 29 of 2006, s. 12 (w.e.f. 1-4-2006). 

6. Ins. by Act 20 of 2015, s. 35 (w.e.f.  1-4-2016). 

7. Subs. by Act 28 of 2016, s. 67, for sub-section (5) (w.e.f. 1-4-2017). Earlier sub-section (5) was substituted by Act 4 of 

1988, s. 42 (w.e.f. 1-4-1988). 

8. The words “the expiry of one year from” omitted by Act 7 of 2017, s. 55 (w.e.f. 1-4-2018). 

561 

                                                           
1[(6) The prescribed form of the returns referred to 2[in sub-sections (1) and (3) of this section, and in 
clause (i) of sub-section (1) of section 142] shall, in such cases as may be prescribed, require the assessee 
to furnish the particulars of income exempt from tax, 3[assets of the prescribed nature and 4[value, held by 
him as a beneficial owner or otherwise in which he is a beneficiary], his bank account and credit card held 
by  him],  expenditure  exceeding  the  prescribed  limits  incurred  by  him  under  prescribed  heads  and  such 
other out-goings as may be prescribed. 

(6A) Without prejudice to the provisions of sub-section (6), the prescribed form of the returns referred 
to 5[in 6*** this section, and in clause (i) of sub-section (1) of section 142]shall, in the case of an assessee 
engaged in any business or profession, also require him to furnish  7[the report of any audit8[referred to 
in section 44AB,or, where the report has been furnished prior to the furnishing of the return, a copy  of 
such report together with proof of furnishing the report]], the particulars of the location and style of the 
principal place where he carries on the business or profession and all the branches thereof, the names and 
addresses of his partners, if any, in such business or profession and, if he is a member of an association or 
body of individuals, the names of the other members of the association or the body of individuals and the 
extent of the share of the assessee and the shares of all such partners or the members, as the case may be, 
in the profits of the business or profession and any branches thereof.] 

9* 

* 

* 

* 

* 

10[(8)  (a)  11[Where  the  return  under  sub-section  (1)  or  sub-section  (2)  or  sub-section  (4)  for  an 
assessment  year  is  furnished  after  the  specified  date,  or  is  not  furnished,  then  [whether  or  not  the 
12[Assessing Officer] has extended the date for furnishing the return under sub-section (1) or sub-section 
(2)], the assessee shall be liable to pay simple interest at  13[fifteen per cent.] per annum, reckoned from 
the day immediately following the specified date to the date of the furnishing of the return or, where no 
return has been furnished, the date of completion of the assessment under section 144, on the amount of 
the tax payable on the total income as determined on regular assessment, as reduced by the advance tax, if 
any, paid, and any tax deducted at source: 

Provided that the  12[Assessing Officer] may, in such cases and under such circumstances as may be 

prescribed, reduce or waive the interest payable by any assessee under this sub-section. 

Explanation 1.—For the purposes of this sub-section, “specified date”, in relation to a return for an 

assessment year, means,— 

(a) in the case of every assessee whose total income, or the total income of any person in respect 
of which he is assessable under this Act, includes any income from business or profession, the date of 
the expiry of four months from the end of the previous year or where there is more than one previous 
year,  from  the  end  of  the  previous  year  which  expired  last  before  the  commencement  of  the 
assessment year or the 30th day of June of the assessment year, whichever is later; 

1. Subs. by Act 41 of 1975, s. 38, for sub-section (6) (w.e.f. 1-4-1976). 
2. Subs. by Act 4 of 1988, s. 42, for “in sub-sections (1), (2) and (3)” (w.e.f. 1-4-1989). 
3. Subs. by Act 20 of 2015, s. 35, for “assets of the prescribed nature, value and belonging to him” (w.e.f. 1-4-2016). 
4.  Subs. by Act 27 of 1999, s. 62, for “and value and belonging to him” (w.e.f. 1-6-1999). 
5. Subs. by Act 4 of 1988, s. 42, for “in sub-sections (1), (2) and (3)”(w.e.f. 1-4-1989). 
6. The words “sub-sections (1) and (3) of” omitted by Act 22 of 1995, s. 29 (w.e.f. 1-7-1995). 
7. Ins. by Act 26 of 1988, s. 35 (w.e.f. 1-4-1989). 
8. Subs. by Act 22 of 1995, s. 29, for “obtained under section 44AB” (w.e.f. 1-7-1995). 
9. Sub-section (7) omitted by Act 4 of 1988, s. 42 (w.e.f. 1-4-1989). 
10. Subs. by Act 42 of 1970, s. 26, for sub-section (8) (w.e.f. 1-4-1971). Earlier sub-section (8) was inserted by Act 13 of 

1963,           s. 8 (w.e.f. 28-4-1963). 

11.  Subs.  by  Act  16  of  1972,  s.  26,  for  the  portion  beginning  with  “Where  the  return”  and  ending  with  “under  this  sub-

section” (w.e.f. 1-4-1972). 

12. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
13. Subs. by Act 67 of 1984, s. 25, for “twelve per cent.” (w.e.f. 1-10-1984). 

562 

 
 
 
 
 
 
 
 
                                                           
(b) in the case of every other assessee, the 30th day of June of the assessment year.] 

1[Explanation 2.—Where, in relation to an assessment year, an assessment is made for the first time 
under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of 
this sub-section.] 

2[(b)  Where  as  a  result  of  an  order  under section  147 or section  154 or section  155 or section 
250 or section  254 or section  260 or section  262 or section  263 or section  264 3[or  an  order  of  the 
Settlement Commission under sub-section (4) of section 245D], the amount of tax on which interest was 
payable  under  this  sub-section  has  been  increased  or  reduced,  as  the  case  may  be,  the  interest  shall  be 
increased or reduced accordingly, and— 

(i) in a case where the interest is increased, the 4[Assessing Officer] shall serve on the assessee, a 
notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall 
be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly; 

(ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded.]] 

5[(c)  The  provisions  of  this  sub-section  shall  apply  in  respect  of  the  assessment  for  the  assessment 
year commencing on the 1st day of April, 1988, or any earlier assessment year, and references therein to 
the  other  provisions  of  this  Act  shall  be  construed  as  references  to  the  said  provisions  as  they  were 
applicable to the relevant assessment year.] 

6[(9) Where the  4[Assessing Officer] considers that the return of income furnished by the assessee is 
defective,  he  may  intimate  the  defect  to  the  assessee  and  give  him  an  opportunity  to  rectify  the  defect 
within a period of fifteen days from the date of such intimation or within such further period which, on an 
application made in this behalf, the 4[Assessing Officer] may, in his discretion, allow; and if the defect is 
not rectified within the said period of fifteen days or, as the case may be, the further period so allowed, 
then, notwithstanding anything contained in any other provision of this Act, the return shall be treated as 
an  invalid  return  and  the  provisions  of  this  Act  shall  apply  as  if  the  assessee  had  failed  to  furnish  the 
return: 

Provided that where the assessee rectifies the defect after the expiry of the said period of fifteen days 
or the further period allowed, but before the assessment is made, the  4[Assessing Officer] may condone 
the delay and treat the return as a valid return. 

Explanation.—For the purposes of this sub-section, a return of income shall be regarded as defective 

unless all the following conditions are fulfilled, namely:— 

(a)  the  annexures,  statements  and  columns  in  the  return  of  income  relating  to  computation  of 
income chargeable under each head of income, computation of gross total income and total income 
have been duly filled in; 

7* 

* 

* 

* 

* 

1.  Subs.  by  Act  67  of  1984,  s.  25,  for  Explanation2  (w.e.f.  1-4-1985).  Earlier  the  Explanation  was  renumbered  as 

Explanation2 thereof by Act 16 of 1972, s. 26 (w.e.f. 1-4-1971). 
2. Subs. by Act 67 of 1984, s. 25, for clause (b) (w.e.f. 1-4-1985). 
3. Ins. by Act 4 of 1988, s. 126 (w.e.f. 1-4-1989). 
4. Subs. by s. 2, ibid.,for “Income-tax Officer” (w.e.f. 1-4-1988). 
5. Ins. by s. 42, ibid. (w.e.f. 1-4-1989). 
6. Ins. by Act 44 of 1980, s. 24 (w.e.f. 1-9-1980). 
7.  Clause  (aa)  omitted  by  Act  28  of  2016,  s.  67  (w.e.f.  1-4-2017).  Earlier  clause  (aa)  omitted  by  Act  17  of  2013,  s.  36                     

(w.e.f. 1-6-2013). 

563 

 
 
 
 
 
 
 
                                                           
(b) the return is accompanied by a statement showing the computation of the tax payable on the 

basis of the return; 

1[(bb) the return is accompanied by the report of the audit referred to in section 44AB, or, where 
the report has been furnished prior to the furnishing of the return, by a copy of such report together 
with proof of furnishing the report;] 

(c) the return is accompanied by proof of— 

(i)  the  tax,  if  any,  claimed  to  have  been  2[deducted  or  collected  at  source]3***  and  the 

advance tax and tax on self-assessment, if any, claimed to have been paid: 

4[Provided that where the return is not accompanied by proof of the tax, if any,  5[claimed to 
have been deducted or collected at source], the return of income shall not be regarded as defective 
if— 

6[(a)  a  certificate  for  tax  deducted  or  collected  was  not  furnished  under section 

203 or section 206C to the person furnishing his return of income;] 

(b) such certificate is produced within a period of two years specified under sub-section 

(14) of section 155;] 

(ii)  the  amount  of  compulsory  deposit,  if  any,  claimed  to  have  been  made  under  the 

Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 (38 of 1974); 

(d) where regular books of account are maintained by the assessee, the return is accompanied by 

copies of— 

(i)  manufacturing  account,  trading  account,  profit  and  loss  account  or,  as  the  case  may  be, 

income and expenditure account or any other similar account and balance sheet; 

(ii) in the case of a proprietary business or profession, the personal account of the proprietor; 
in  the  case  of  a  firm,  association  of  persons  or  body  of  individuals,  personal  accounts  of  the 
partners or members; and in the case of a partner or member of a firm, association of persons or 
body  of  individuals,  also  his  personal  account  in  the  firm,  association  of  persons  or  body  of 
individuals; 

(e) where the accounts of the assessee have been audited, the return is accompanied by copies of 
the audited profit and loss account and balance sheet and the 7[auditor’s report and, where an audit of 
cost accounts of the assessee has been conducted under section 233B of the Companies Act, 1956 (1 
of 1956), also the report under that section]; 

(f) where regular books of account are not maintained by the assessee, the return is accompanied 
by a statement indicating the amounts of turnover or, as the case may be, gross receipts, gross profit, 
expenses and net profit of the business or profession and the basis on which such amounts have been 
computed,  and  also  disclosing  the  amounts  of  total  sundry  debtors,  sundry  creditors,  stock-in-trade 
and cash balance as at the end of the previous year.] 

8* 
9*   

* 

* 

* 

* 

* 

* 

* 

* 

1. Subs. by Act 22 of 1995, s. 29, for clause (bb) (w.e.f. 1-7-1995). Earlier clause (bb) was inserted by Act 26 of 1988, s. 35                         

(w.e.f. 1-4-1989). 

2. Subs. by Act 21 of 2006, s. 31, for “deducted at source” (w.e.f. 1-4-2007). 
3. The words “before the 1st day of April, 2008” omitted by Act 18 of 2008, s. 30 (w.e.f. 1-4-2008). 
4. Ins. by Act 20 of 2002, s. 59 (w.e.f. 1-6-2002). 
5. Subs. by Act 21 of 2006, s. 31, for “claimed to have been deducted at source” (w.e.f. 1-4-2007). 
6. Subs. by s. 31, ibid., for clause (a) (w.e.f. 1-4-2018). 
7. Subs. by Act 32 of 1985, s. 29, for “auditor’s report” (w.e.f. 1-4-1985). 
8.  The  proviso  omitted  by  Act  22  of  2007,  s.  44  (w.e.f.  1-6-2006).  Earlier  the  proviso  inserted  by  Act  21  of  2006,                                       

s. 31 (w.e.f. 1-6-2006). 

9. Sub-section (10) omitted by Act 49 of 1991, s. 44 (w.e.f. -4-1991). 

564 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
1[139A. Permanent account number.—(1) Every person,— 

(i) if his total income or the total income of any other person in respect of which he is assessable 
under this Act during any previous year exceeded the maximum amount which is not chargeable to 
income-tax; or 

(ii) carrying on any business or profession whose total sales, turnover or gross receipts are or is 

likely to exceed 2[five lakhrupees] in any previous year; or 

(iii) who is required to furnish a return of income under 3[sub-section (4A) of section 139;or 

(iv)  being  an  employer,  who  is  required  to  furnish  a  return  of  fringe  benefits  under  

 section 115WD,] 4[or] 

4[(v)  being  a  resident,  other  than  an  individual,  which  enters  into  a  financial  transaction  of  an 

amount aggregating to two lakh fifty thousand rupees or more in a financial year; or 

(vi) who is the managing director, director, partner, trustee, author, founder, karta, chief executive 
officer,  principal  officer  or  office  bearer  of  the  person  referred  to  in  clause  (v)  or  any  person 
competent to act on behalf of the person referred to in clause (v),] 

and who has not been allotted a permanent account number shall, within such time, as may be prescribed, 
apply to the Assessing Officer for the allotment of a permanent account number. 

5[(1A)  Notwithstanding  anything  contained  in  sub-section  (1),  the  Central  Government  may,  by 
notification in the Official Gazette, specify, any class or classes of persons by whom tax is payable under 
this Act or any tax or duty is payable under any other law for the time being in force including importers 
and  exporters  whether  any  tax  is  payable  by  them  or  not  and  such  persons  shall,  within  such  time  as 
mentioned in that notification, apply to the Assessing Officer for the allotment of a permanent account 
number.] 

6[(1B) Notwithstanding anything contained in sub-section (1), the Central Government may, for the 
purpose of collecting any information which may be useful for or relevant to the purposes of this Act, by 
notification  in  the  Official  Gazette,  specify,  any  class  or  classes  of  persons  who  shall  apply  to  the 
Assessing Officer for the allotment of the permanent account number and such persons shall, within such 
time  as  mentioned in  that notification, apply  to  the Assessing  Officer for the allotment  of  a  permanent 
account number.] 

7[(2) The Assessing Officer, having regard to the nature of the transactions as may be prescribed, may 
also allot a permanent account number, to any other person (whether any tax is payable by him or not), in 
the manner and in accordance with the procedure as may be prescribed.] 

(3)  Any  person,  not  falling  under  sub-section  (1)  or  sub-section  (2),  may  apply  to  the  Assessing 
Officer for the allotment of a permanent account number and, thereupon, the Assessing Officer shall allot 
a permanent account number to such person forthwith. 

(4) For the purpose of allotment of permanent account numbers under the new series, the Board may, 
by  notificationin  the  Official  Gazette,  specify  the  date  from  which  the  persons  referred  to  in  
sub-sections  (1)  and  (2)  and  other  persons  who  have  been  allotted  permanent  account  numbers  and 
residing in a place to be specified in such notification, shall, within such time as may be specified, apply 
to the Assessing Officer for the allotment of a permanent account number under the new series and upon 
allotment of such permanent account number to a person, the permanent account number, if any, allotted 
to him earlier shall cease to have effect: 

Provided that the persons to whom permanent account number under the new series has already been 

allotted shall not apply for such number again. 

1. Subs. by Act 22 of 1995, s. 30, for section 139A (w.e.f. 1-7-1995). 
2. Subs. by Act 21 of 1998, s. 41, for “fifty thousand rupees” (w.e.f. 1-8-1998). 
3. Subs. by Act 18 of 2005, s. 41, for “sub-section (4A) of section 139” (w.e.f. 1-4-2006). 
4. Ins. by Act 13 of 2018, s. 44 (w.e.f. 1-4-2018). 
5. Ins. by Act 10 of 2000, s. 58 (w.e.f. 1-6-2000). 
6. Ins. by Act 21 of 2006, s. 32 (w.e.f. 1-6-2006). 
7. Subs. by s. 32, ibid., for sub-section (2) (w.e.f. 1-6-2006). 

565 

                                                           
(5) Every person shall— 

(a) quote such number in all his returns to, or correspondence with, any income-tax authority; 

(b) quote such number in all challans for the payment of any sum due under this Act; 

(c) quote such number in all documents pertaining to such transactions as may be prescribedby 

the Board in the interests of the revenue, and entered into by him: 

Provided that  the  Board  may  prescribe  different  dates  for  different  transactions  or  class  of 

transactions or for different class of persons: 

1[Provided  further that  a  person  shall  quote  General  Index  Register  Number  till  such  time 

Permanent Account Number is allotted to such person;] 

(d)  intimate  the  Assessing  Officer  any  change  in  his  address  or  in  the  name  and  nature  of  his 

business on the basis of which the permanent account number was allotted to him. 
2[(5A) Every person receiving any sum or income or amount from which tax has been deducted under 
the provisions of Chapter XVIIB, shall intimate his permanent account number to the person responsible 
for deducting such tax under that Chapter: 

3* 
Provided further that a person referred to in this sub-section shall intimate the General Index Register 

* 

* 

* 

* 

Number till such time permanent account number is allotted to such person. 

(5B) Where any sum or income or amount has been paid after deducting tax under Chapter XVIIB, 
every person deducting tax under that Chapter shall quote the permanent account number of the person to 
whom such sum or income or amount has been paid by him— 

(i)  in  the  statement  furnished  in  accordance  with  the  provisions  of  sub-section  (2C)  of  

 section 192;  

(ii) in all certificates furnished in accordance with the provisions of section 203; 

(iii)  in  all  returns  prepared  and  delivered  or  caused  to  be  delivered  in  accordance  with  the 

provisions of section 206 to any income-tax authority; 

4[(iv) in all 5*** statements prepared and delivered or caused to be delivered in accordance with 

the provisions of sub-section (3) of section 200:]  

Provided that  the  Central  Government  may,  by  notification  in  the  Official  Gazette,  specify 
different  dates  from  which  the  provisions  of  this  sub-section  shall  apply  in  respect  of  any  class  or 
classes of persons: 

Provided  further that  nothing  contained  in  sub-sections  (5A)  and  (5B)  shall  apply  in  case  of  a 
person whose total income is not chargeable to income-tax or who is not required to obtain permanent 
account number under any provision of this Act if such person furnishes to the person responsible for 
deducting tax, a declaration referred to in section 197A in the form and manner prescribed thereunder 
to the effect that the tax on his estimated total income of the previous year in which such income is to 
be included in computing his total income will be nil. 
(5C)  Every  6[buyer  or  licensee  or  lessee]  referred  to  in section  206C shall  intimate  his  permanent 

account number to the 7[person responsible for collecting tax] referred to in that section. 

(5D) Every 7[person] collecting tax in accordance with the provisions of section 206C shall quote the 

permanent account number of every 6[buyer or licensee or lessee] referred to in that section— 

(i)  in  all  certificates  furnished  in  accordance  with  the  provisions  of  sub-section  (5)  of  

section 206C; 

1. Ins. by Act 21 of 1998, s. 41 (w.e.f. 1-8-1998). 
2. Ins. by Act 14 of 2001, s. 60 (w.e.f. 1-6-2001). 
3. The first proviso omitted by Act 23 of 2004, s. 33 (w.e.f. 1-4-2005). 
4. Ins. by Act 21 of 2006, s. 32 (w.e.f. 1-6-2006). 
5. The word “quarterly” omitted by Act 33 of 2009, s. 53 (w.e.f. 1-10-2009). 
6. Subs. by Act 23 of 2004, s. 33, for “buyer” (w.e.f. 1-10-2004). 
7. Subs. by Act 21 of 2006, s. 32, for “seller” (w.e.f. 1-4-2007). 

566 

 
 
 
 
 
 
 
 
                                                           
(ii)  in  all  returns  prepared  and  delivered  or  caused  to  be  delivered  in  accordance  with  the 

provisions of sub-section (5A) or sub-section (5B) of  section 206C to an income-tax authority;] 

1[(iii) in all 2*** statements prepared and delivered or caused to be delivered in accordance with 

the provisions of sub-section (3) of  section 206C.]   

(6)  Every  person  receiving  any  document  relating  to  a  transaction  prescribed  under  clause  (c)  of  
sub-section (5) shall ensure that the Permanent Account Number 3[or the General Index Register Number] 
has been duly quoted in the document. 

(7) No person who has already been allotted a permanent account number under the new series shall 

apply, obtain or possess another permanent account number. 

4[Explanation.—For  the  removal  of  doubts,  it  is  hereby  declared  that  any  person,  who  has  been 
allotted a permanent account number under any clause other than clause (iv) of sub-section (1), shall not 
be  required  to  obtain  another  permanent  account  number  and  the  permanent  account  number  already 
allotted to him shall be deemed to be the permanent account number in relation to fringe benefit tax.] 

 (8) The Board may make rules providing for— 

(a)  the  form  and  the  manner  in  which  an  application  may  be  made  for  the  allotment  of  a 

permanent account number and the particulars which such application shall contain; 

(b)  the  categories  of  transactions  in  relation  to  which  Permanent  Account  Numbers  3[or  the 
General Index Register Number] shall be quoted by every person in the documents pertaining to such 
transactions; 

(c) the categories of documents pertaining to business or profession in which such numbers shall 

be quoted by every person; 

3[(d) class or classes of persons to whom the provisions of this section shall not apply; 

(e) the form and the manner in which the person who has not been allotted a Permanent Account 

Number or who does not have General Index Register Number shall make his declaration; 

(f) the manner in which the Permanent Account Number or the General Index Register Number 

shall be quoted in respect of the categories of transactions referred to in clause (c); 

(g) the time and the manner in which the transactions referred to in clause (c) shall be intimated 

to the prescribed authority.] 

Explanation.—For the purposes of this section,— 

(a)  “Assessing  Officer”  includes  an  income-tax  authority  who  is  assigned  the  duty  of  allotting 

permanent account numbers; 

(b) “permanent account number” means a number which the Assessing Officer may allot to any 
person for the purpose of identification and includes a permanent account number allotted under the 
new series; 

(c) “permanent account number under the new series” means a permanent account number having 

ten alphanumeric characters 5***;] 

3[(d)  “General  Index  Register  Number”  means  a  number  given  by  an  Assessing  Officer  to  an 
assessee  in  the  General  Index  Register  maintained  by  him  and  containing  the  designation  and 
particulars of the ward or circle or range of the Assessing Officer.] 

1. Ins. by Act 21 of 2006, s. 32 (w.e.f. 1-6-2006). 
2. The word “quarterly” omitted by Act 33 of 2009, s. 53 (w.e.f. 1-10-2009). 
3. Ins. by Act 21 of 1998, s. 41 (w.e.f. 1-8-1998). 
4. Ins. by Act 18 of 2005, s. 41 (w.e.f. 1-4-2006). 
5. The words “and issued in the form of a laminated card” omitted by Act 13 of 2018, s. 44 (w.e.f. 1-4-2018). 

567 

                                                           
1[139AA.Quoting  of  Aadhaar  number.—(1)  Every  person  who  is  eligible  to  obtain  Aadhaar 

number shall, on or after the 1st day of July, 2017, quote Aadhaar number— 

(i) in the application form for allotment of permanent account number; 

(ii) in the return of income: 

Provided that  where  the  person  does  not  possess  the  Aadhaar  Number,  the  Enrolment  ID  of 
Aadhaar application form issued to him at the time of enrolment shall be quoted in the application for 
permanent account number or, as the case may be, in the return of income furnished by him. 

(2) Every person who has been allotted permanent account number as on the 1st day of July, 2017, 
and  who  is  eligible  to  obtain  Aadhaar  number,  shall  intimate  his  Aadhaar  number  to  such  authority  in 
such form and manner as may be prescribed, on or before a date to be notified by the Central Government 
in the Official Gazette: 

Provided that  in  case  of  failure  to  intimate  the  Aadhaar  number,  the  permanent  account  number 
allotted to the person shall be deemed to be invalid and the other provisions of this Act shall apply, as if 
the person had not applied for allotment of permanent account number. 

(3) The provisions of this section shall not apply to such person or class or classes of persons or any 
State  or  part  of  any  State, as  may  be  notified by  the Central  Government  in  this  behalf, in the  Official 
Gazette. 

Explanation.—For the purposes of this section, the expressions— 

(i)  “Aadhaar  number”,  “Enrolment”  and  “resident”  shall  have  the  same  meanings  respectively 
assigned  to  them  in  clauses  (a),  (m)  and  (v)  of  section  2  of  the  Aadhaar  (Targeted  Delivery  of 
Financial and other Subsidies, Benefits and Services) Act, 2016; 

(ii) “Enrolment ID” means a 28 digit Enrolment Identification Number issued to a resident at the 

time of enrolment.] 

2[139B. Scheme for submission of returns through Tax Return Preparers.—(1) For the purpose 
of enabling any specified class or classes of persons in preparing and furnishing returns of income, the 
Board  may,  without  prejudice  to  the  provisions  of  section  139,  frame  a  Scheme,  by  notification  in  the 
Official Gazette, providing that such persons may furnish their returns of income through a Tax Return 
Preparer authorised to act as such under the Scheme. 

(2) Every Tax Return Preparer shall assist the persons furnishing the return of income in such manner 

as may be specified in the Scheme framed under this section and affix his signature on such return. 

(3) For the purposes of this section,— 

(a) “Tax Return Preparer” means any individual, [not being a person referred to in clause (ii) or 
clause (iii) or clause (iv) of sub-section (2) of section 288 or an employee of the “specified class or 
classes  of  persons”],  who  has  been  authorised  to  act  as  a  Tax  Return  Preparer  under  the  Scheme 
framed under this section; 

(b) “specified class or classes of persons” means any person, other than a company or a person, 
whose accounts are required to be audited under section 44AB or under any other law for the time 
being in force, who is required to furnish a return of income under this Act. 

1. Ins. by Act 7 of 2017, s. 56 (w.e.f. 1-4-2017). 
2. Ins. by Act 21 of 2006, s. 33 (w.e.f. 1-6-2006). 

568 

                                                           
(4) The Scheme framed by the Board under this section may provide for the following, namely:— 

(a) the manner in which and the period for which the Tax Return Preparers shall be authorised 

under sub-section (3); 

(b) the educational and other qualifications to be possessed, and the training and other conditions 

required to be fulfilled, by a person to act as a Tax Return Preparer; 

(c) the code of conduct for the Tax Return Preparers; 

(d) the duties and obligations of the Tax Return Preparers; 

(e)  the  circumstances  under  which  the  authorisation  given  to  a  Tax  Return  Preparer  may  be 

withdrawn; 

(f) any other matter which is required to be, or may be, specified by the Scheme for the purposes 

of this section. 

(5) The  Scheme  framed  by  the  Board  under  this  section  shall  be  laid,  as  soon as  may  be  after  it is 
framed, before each House of Parliament, while it is in session, for a total period of thirty days which may 
be comprised in one session or in two or more successive sessions, and if, before the expiry of the session 
immediately following the session or the successive sessions aforesaid, both Houses agree in making any 
modification in the Scheme or both Houses agree that the Scheme should not be framed, the Scheme shall 
thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that 
any such modification or annulment shall be without prejudice to the validity of anything previously done 
under that Scheme.] 

1[139C.  Power  of  Board  to  dispense  with  furnishing  documents,  etc.,  with  return.—(1)  The 
Board  may  make  rules  providing  for  a  class  or  classes  of  persons  who  may  not  be  required  to  furnish 
documents, statements, receipts, certificates, reports of audit or any other documents, which are otherwise 
under  any  other  provisions  of  this  Act,  except  section  139D,  required  to  be  furnished,  along  with  the 
return but on demand to be produced before the Assessing Officer. 

(2) Any rule made under the proviso to sub-section (9) of section 139 as it stood immediately before 
its omission by the Finance Act, 2007 shall be deemed to have been made  under the provisions of this 
section. 

139D. Filing of return in electronic form.—The Board may make rules providing for— 

(a) the class or classes of persons who shall be required to furnish the return in electronic form; 

(b) the form and the manner in which the return in electronic form may be furnished; 

(c) the documents, statements, receipts, certificates or audited reports which may not be furnished 
along  with  the  return  in  electronic  form  but  shall  be  produced  before  the  Assessing  Officer  on 
demand; 

(d) the computer resource or the electronic record to which the return in electronic form may be 

transmitted.] 
140. Return by whom to be 2[verified].—The return 3[under section 115WD or section 139] shall be 

4[verified]— 

5[(a) in the case of an individual,— 

(i) by the individual himself; 

(ii)  where  he  is  absent  from  India,  by  the  individual  himself  or  by  some  person  duly 

authorised by him in this behalf; 

1. Ins. by Act 22 of 2007, s. 45 (w.e.f. 1-6-2006). 
2. Subs. by Act 25 of 2014, s. 50, for “signed” (w.e.f. 1-10-2014). 
3. Subs. by Act 18 of 2005, s. 42, for “under section 139” (w.e.f. 1-4-2006). 
4. Subs. by Act 25 of 2014, s. 50, for “signed and verified” (w.e.f. 1-10-2014). 
5. Subs. by Act 4 of 1988, s. 44, for clause (a) (w.e.f. 1-4-1989). 

569 

                                                           
(iii) where he is mentally incapacitated from attending to his affairs, by his guardian or any 

other person competent to act on his behalf; and 

(iv) where, for any other reason, it is not possible for the individual to 1[verify] the return, by 

any person duly authorised by him in this behalf: 

Provided that in a case referred to in sub-clause (ii) or sub-clause (iv), the person 2[verifying] 
the return holds a valid power of attorney from the individual to do so, which shall be attached to 
the return;] 

(b)  in  the  case  of  a  Hindu  undivided  family,  by  the  karta,  and,  where  the  karta  is  absent from 
India  or  is  mentally  incapacitated  from  attending  to  his  affairs,  by  any  other  adult  member  of such 
family; 

3[(c) in the case of a company, by the managing director thereof, or where for any unavoidable 
reason  such  managing  director  is  not  able  to  4[verify]the  return,  or  where  there  is  no  managing 
director, by any director thereof: 

5[Provided that where the company is not resident in India, the return may be verified by a person 
who  holds  a  valid  power  of  attorney  from  such  company  to  do  so,  which  shall  be  attached  to  the 
return: 

Provided further that,— 

(a) where the company is being wound up, whether under the orders of a court or otherwise, 
or where any person has been appointed as the receiver of any assets of the company, the return 
shall be 6[verified] by the liquidator referred to in sub-section (1) of  section 178;  

(b) where the management of the company has been taken over by the Central Government or 
any  State  Government  under  any  law,  the  return  of  the  company  shall  be  6[verified]  by  the 
principal officer thereof 7[or];] 

7[(c)  where  in  respect  of  a  company,  an  application  for  corporate  insolvency  resolution 
process has been admitted by the Adjudicating Authority under section 7 or section 9 or section 
10 of the Insolvency and Bankruptcy Code, 2016, the return shall be verified by the insolvency 
professional appointed by such Adjudicating Authority. 

Explanation.––For the purposes of this clause the expressions “insolvency professional” and 
“Adjudicating Authority” shall have the respective meanings assigned to them in clause (18) of 
section 3 and clause (1) of section 5 of the Insolvency and Bankruptcy Code, 2016;] 

(cc)  in  the  case  of  a  firm,  by  the  managing  partner  thereof,  or  where  for  any  unavoidable 
reason such managing partner is not able to  4[verify] the return, or where there is no managing 
partner as such, by any partner thereof, not being a minor; 

8[(cd) in the case of a limited liability partnership, by the designated partner thereof, or where 
for  any  unavoidable reason  such  designated  partner is  not  able  to  4[verify] the return,  or  where 
there is no designated partner as such, by any partner thereof;] 

(d) in the case of a local authority, by the principal officer thereof;] 
9[(dd) in the case of a political party referred to in sub-section (4B) of  section 139, by the 
chief executive officer of such party (whether such chief executive officer is known as secretary 
or by any other designation);] 

1. Subs. by Act 25 of 2014, s. 50, for “sign” (w.e.f. 1-10-2014). 
2. Subs. by s. 50, ibid., for “signing” (w.e.f. 1-10-2014). 
3. Subs. by Act 41 of 1975, s. 40, for clauses (c) and (d) (w.e.f. 1-4-1976). 
4. Subs. by Act 25 of 2014, s. 50, for “sign and verify” (w.e.f. 1-10-2014). 
5. Added by Act 4 of 1988, s. 44 (w.e.f. 1-4-1989). 
6. Subs. by Act 25 of 2014, s. 50, for “signed and verified” (w.e.f. 1-10-2014). 
7. Ins. by Act 13 of 2018, s. 45 (w.e.f. 1-4-2018). 
8. Ins. by Act 33 of 2009, s. 54 (w.e.f. 1-4-2010). 
9. Ins. by Act 4 of 1988, s. 44 (w.e.f. 1-4-1989). 

570 

                                                           
(e)  in  the  case  of  any  other  association,  by  any  member  of  the  association  or  the  principal 

officer thereof; and 

(f) in the case of any other person, by that person or by some person competent to act on his 

behalf. 

1[140A. Self-assessment.—2[(1) Where any tax is payable on the basis of any return required to be 
furnished under 3[4[section 115WD or section 115WH or section 139] or section 142  5[or section 148 or 
6[section 153A or, as the case may be, section 158BC]]], 7[after taking into account,— 

(i) the amount of tax, if any, already paid under any provision of this Act; 

(ii) any tax deducted or collected at source; 

(iii) any relief of tax or deduction of tax claimed under section 90 or section 91 on account of tax 

paid in a country outside India; 

(iv) any relief of tax claimed under section 90A on account of tax paid in any specified territory 

outside India referred to in that section; and 

(v)  any  tax  credit  claimed  to  be  set  off  in  accordance  with  the  provisions  of section 

115JAA 8[or section 115JD],] 

9[the  assessee  shall  be  liable  to  pay  such  tax,  together  with  interest  10[and  fee]  payable  under  any 
provision of this Act for any delay in furnishing the return or any default or delay in payment of advance 
tax,  before  furnishing  the  return  and  the  return  shall  be  accompanied  by  proof  of  payment  of  such  tax 
11[interestand fee].]] 

12[Explanation.—Where  the  amount  paid  by  the  assessee  under  this  sub-section  falls  short  of  the 
aggregate of the tax 13[interestand fee as aforesaid, the amount so paid shall first be adjusted towards the 
fee  payable  and  thereafter  towards]  the  interest  payable  as  aforesaid  and  the  balance,  if  any,  shall  be 
adjusted towards the tax payable.] 

14[15[(1A) For the purposes of sub-section (1), interest payable,— 

16[(i)  under section  234A shall  be  computed  on  the  amount  of  the  tax  on  the  total  income  as 

declared in the return as reduced by the amount of,— 

(a) advance tax, if any, paid; 

(b) any tax deducted or collected at source; 

(c) any relief of tax or deduction of tax claimed under section 90 or section 91 on account of 

tax paid in a country outside India; 

1. Subs. by Act 42 of 1970, s. 27, for section 140A (w.e.f. 1-4-1971). Earlier section 140A was inserted by Act 5 of 1964,    

s. 34 (w.e.f. 1-4-1964). 

2. Subs. by Act 41 of 1975, s. 41, for sub-section (1) (w.e.f. 1-4-1976). 
3. Subs. by Act 49 of 1991, s. 45, for “section 139 or section 148” (w.e.f. 27-9-1991). 
4. Subs. by Act 18 of 2005, s. 43, for “section 139” (w.e.f. 1-4-2006). 
5. Subs. by Act 27 of 1999, s. 63, for “or, as the case may be, section 148” (w.e.f. 1-6-1999). 
6. Subs. by Act 32 of 2003, s. 63, for “as the case may be, section 158BC” (w.e.f. 1-6-2003). 
7. Subs. by Act 21 of 2006, s. 34, for “after taking into account the amount of tax, if any, already paid under any provision 

of this Act” (w.e.f. 1-4-2007). 

8. Ins. by Act 23 of 2012, s. 60 (w.e.f. 1-4-2013). 
9. Subs. by Act 4 of 1988, s. 45, for “the assessee shall be liable to pay such tax before furnishing the return and the return 

shall be accompanied by proof of payment of such tax” (w.e.f. 1-4-1989). 

10. Ins. by Act 7 of 2017, s. 57 (w.e.f. 1-4-2018). 
11. Subs. by Act 7 of 2017, s. 57, for “and interest” (w.e.f. 1-4-2018). 
12. Ins. by Act 4 of 1988, s. 45 (w.e.f. 1-4-1989). 
13.  Subs.  by  Act  7  of  2017,  s.  57,  for  “and  interest  as  aforesaid,  the  amount  so  paid  shall  first  be  adjusted                                       

towards” (w.e.f. 1-4-2018). 

14. Ins. by Act 14 of 2001, s. 61 (w.r.e.f. 1-4-1989). 
15. Subs. by Act 18 of 2005, s. 43, for sub-section (1A) (w.e.f. 1-4-2006). Earlier  
16. Subs. by Act 21 of 2006, s. 34, for clause (i) (w.e.f. 1-4-2007). 

571 

                                                           
(d)  any  relief  of  tax  claimed  under section  90A on  account  of  tax  paid  in  any  specified 

territory outside India referred to in that section; and 

(e)  any  tax  credit  claimed  to  be  set  off  in  accordance  with  the  provisions  of                           

section 115JAA 1[or section 115JD];] 

(ii)  under section  115WK shall  be  computed  on  the  amount  of  tax  on  the  value  of  the  fringe 

benefits as declared in the return as reduced by the advance tax, paid, if any.] 

(1B) For the purposes of sub-section (1), interest payable under section 234B shall be computed on an 
amount equal to the assessed tax or, as the case may  be, on the amount by which the advance tax paid 
falls short of the assessed tax. 

2[Explanation.—For  the  purposes  of  this  sub-section,  “assessed  tax”  means  the  tax  on  the  total 

income as declared in the return as reduced by the amount of,— 

(i) tax deducted or collected at source, in accordance with the provisions of Chapter XVII, on any 
income which is subject to such deduction or collection and which is taken into account in computing 
such total income; 

(ii) any relief of tax or deduction of tax claimed under section 90 or section 91 on account of tax 

paid in a country outside India; 

(iii) any relief of tax claimed under section 90A on account of tax paid in any specified territory 

outside India referred to in that section; and 

(iv)  any  tax  credit  claimed  to  be  set  off  in  accordance  with  the  provisions  of section 

115JAA 1[or section 115JD].]] 

(2)  After  a  regular  assessment  under 3[section  115WE or section  115WF or section  143] or        

 section 144 4[or 5[an assessment under section 153A or section 158BC]] has been made, any amount paid 
under sub-section (1) shall be deemed to have been paid towards such regular assessment 4[or assessment, 
as the case may be]. 

6[(3) If any assessee fails to pay the whole or any part of such tax or interest or both in accordance 
with  the  provisions  of  sub-section  (1),  he  shall,  without  prejudice  to  any  other  consequences  which  he 
may  incur,  be  deemed  to  be  an  assessee  in  default  in  respect  of  the  tax  or  interest  or  both  remaining 
unpaid, and all the provisions of this Act shall apply accordingly.]] 

7[(4) The provisions of this section as they stood immediately before their amendment by the Direct 
Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any assessment for the 
assessment year commencing on the 1st day of April, 1988, or any earlier assessment year and references 
in this section to the other provisions of this Act shall be construed as references to those provisions as for 
the time being in force and applicable to the relevant assessment year.] 

141. [Provisional assessment.]—Omitted by the Taxation Laws (Amendment) Act, 1970, s. 28 (w.e.f. 

1-4-1971). 

141A. [Provisional  assessment  for  refund.]—Omitted  by  the  Direct  Tax  Laws  (Amendment)  Act, 
1987,  (w.e.f.  1-4-1989).  Earlier  section  141A  was  inserted  by the  Finance  Act,  1968,  s.  11  (w.e.f.  1-4-
1968). Original section was inserted by the Finance Act, 1963, s. 9 (w.e.f. 1-4-1963) and omitted by the 
Finance Act, 1964, s. 35 (w.e.f. 1-4-1964). 

1. Ins. by Act 23 of 2012, s. 60 (w.e.f. 1-4-2013). 
2. Subs. by Act 21 of 2006, s. 34, for the Explanation (w.e.f. 1-4-2007). 
3. Subs. by Act 18 of 2005, s. 43, for “section 143” (w.e.f. 1-4-2006). 
4. Ins. by Act 27 of 1999, s. 63 (w.e.f. 1-6-1999). 
5. Subs. by Act 32 of 2003, s. 63 (w.e.f. 1-6-2003). 
6. Subs. by Act 4 of 1988, s. 45, for sub-section (3) (w.e.f. 1-4-1989). 
7. Ins. by Act 36 of 1989, s. 14 (w.e.f. 1-4-1989). 

572 

                                                           
142. Inquiry before assessment.—(1) For the purpose of making an assessment under this Act, the 
1[Assessing  Officer]  may  serve  on  any  person  who  has  made  a  return  2[under  section  115WD  or  
section 139 3[or in whose case the time allowed under sub-section (1) of section 139] for furnishing the 
return has expired] a notice requiring him, on a date to be therein specified,— 

4[(i) where such person has not made a return  5[6[within the time allowed under sub-section (1) 
of section 139] or before the end of the relevant assessment year], to furnish a return of his income or 
the income of any other person in respect of which he is assessable under this Act, in the prescribed 
form  and  verified  in  the  prescribed  mannerand  setting  forth  such  other  particulars  as  may  be 
prescribed, or:] 

7[Provided that where any notice has been served under this sub-section for the purposes of this 
clause after the end of the relevant assessment year commencing on or after the 1st day of April, 1990 
to a person who has not made a return within the time allowed under sub-section (1) of section 139 or 
before the end of the relevant assessment year, any such notice issued to him shall be deemed to have 
been served in accordance with the provisions of this sub-section,] 

8[(ii)]  to  produce,  or  cause  to  be  produced,  such  accounts  or  documents  as  the  1[Assessing 

Officer] may require, or 

8[(iii)] to furnish in writing and verified in the prescribed manner information in such form and on 
such  points  or  matters  (including  a  statement  of  all  assets  and  liabilities  of  the  assessee,  whether 
included in the accounts or not) as the 1[Assessing Officer] may require: 

Provided that— 

(a) the previous approval of the 9[Joint Commissioner] shall be obtained before requiring the 

assessee to furnish a statement of all assets and liabilities not included in the accounts; 

(b)  the  1[Assessing  Officer]  shall  not  require  the  production  of  any  accounts  relating  to  a 

period more than three years prior to the previous year. 

(2) For the purpose of obtaining full information in respect of the income or loss of any person, the 

1[Assessing Officer] may make such inquiry as he considers necessary. 

10[(2A)If, at any stage of the proceedings before him, the 1[Assessing Officer], having regard to 11[the 
nature  and  complexity  of  the  accounts,  volume  of  the  accounts,  doubts  about  the  correctness  of  the 
accounts,  multiplicity  of  transactions  in  the  accounts  or  specialised  nature  of  business  activity  of  the 
assessee, and] the interests of the revenue, is of the opinion that it is necessary so to do, he may, with the 
previous  approval  of  the  12[Principal  Chief  Commissioner  or  Chief  Commissioner]  or  13[Principal 
Commissioner  or  Commissioner],  direct  the  assessee  to  get  the  accounts  audited  by  an  accountant,  as 

1. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2. Subs. by Act 18 of 2005, s. 44, for “under section 139 or in whose case the time allowed under sub-section (1) of that 

section” (w.e.f. 1-4-2006). 

3. Subs. by Act 4 of 1988, s. 47, for “or to whom a notice has been issued under sub-section (2) of section 139 (whether a 

return has been made or not)” (w.e.f. 1-4-1989). 

4. Ins. by s. 47, ibid (w.e.f. 1-4-1989). 
5. Subs. by Act 12 of 1990, s. 36, for “before the end of the relevant assessment year” (w.e.f. 1-4-1990). 
6. Subs. by Act 21 of 2006, s. 35, for “within the time allowed under sub-section (1) of section 139” (w.e.f. 1-4-2006) 
7. Ins. by, s. 35, ibid. (w.e.f. 1-4-1990). 
8. Clauses (i) and (ii) renumbered as clauses (ii) and (iii) thereof by Act 4 of 1988, s. 47 (w.e.f. 1-4-1989). 
9.  Subs.  by  Act  21  of  1998,  s.  3,  for  “Deputy  Commissioner”  (w.e.f.  1-10-1998).  Earlier  substituted  as  “Deputy 

Commissioner” for “Inspecting Assistant Commissioner” by Act 4 of 1988, s. 2 (w.e.f. 1-4-1988).  

10. Ins. by Act 41 of 1975, s. 43 (w.e.f. 1-4-1976). 
11. Subs. by Act 17 of 2013, s. 37, for “the nature and complexity of the accounts of the assessee and” (w.e.f. 1-6-2013). 
12. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). Earlier substituted as Chief Commissioner or 

Commissioner” for “Commissioner” by Act 4 of 1988, s. 2 (w.e.f. 1-4-1988).  

13. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 

573 

                                                           
defined  in  the Explanation below  sub-section  (2)  of section  288,  nominated  by  the  1[Principal  Chief 
Commissioner or Chief Commissioner] or 2[Principal Commissioner or Commissioner] in this behalf and 
to furnish a report of such audit in the prescribed formduly signed and verified by such accountant and 
setting forth such particulars as may be prescribed and such other particulars as the  3[Assessing Officer] 
may require: 

4[Provided that  the  Assessing  Officer  shall  not  direct  the  assessee  to  get  the  accounts  so  audited 

unless the assessee has been given a reasonable opportunity of being heard.] 

(2B)  The  provisions  of  sub-section  (2A)  shall  have  effect  notwithstanding  that  the  accounts  of  the 

assessee have been audited under any other law for the time being in force or otherwise. 

(2C)  Every  report  under  sub-section  (2A)  shall  be  furnished  by  the  assessee  to  the  3[Assessing 

Officer] within such period as may be specified by the 3[Assessing Officer]: 

Provided that the 3[Assessing Officer] may, 5[suomotu, oron an application] made in this behalf by the 
assessee and for any good and sufficient reason, extend the said period by such further period or periods 
as he thinks fit; so, however, that the aggregate of the period originally fixed and the period or periods so 
extended shall not, in any case, exceed one hundred and eighty days from the date on which the direction 
under sub-section (2A) is received by the assessee. 

(2D) The expenses of, and incidental to, any audit under sub-section (2A) (including the remuneration 
of the accountant) shall be determined by the 1[Principal Chief Commissioner or Chief Commissioner] or 
2[Principal Commissioner or Commissioner] (which determination shall be final) and paid by the assessee 
and in default of such payment, shall be recoverable from the assessee in the manner provided in Chapter 
XVIID for the recovery of arrears of tax:] 

4[Provided that  where  any  direction  for  audit  under  sub-section  (2A)  is  issued  by  the  Assessing 
Officer on or after the 1st day of June, 2007, the expenses of, and incidental to, such audit (including the 
remuneration  of  the  Accountant)  shall  be  determined  by  the  1[Principal  Chief  Commissioner  or  Chief 
Commissioner]  or  2[Principal  Commissioner  or  Commissioner]  in  accordance  with  such  guidelines  as 
may be prescribedand the expenses so determined shall be paid by the Central Government.] 

(3)  The  assessee  shall,  except  where  the  assessment  is  made  under section  144,  be  given  an 
opportunity  of  being  heard  in  respect  of  any  material  gathered  on  the  basis  of  any  inquiry  under  
sub-section (2) 6[or any audit under sub-section (2A)] and proposed to be utilised for the purposes of the 
assessment. 

7[(4) The provisions of this section as they stood immediately before their amendment by the Direct 
Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any assessment for the 
assessment year commencing on the 1st day of April, 1988, or any earlier assessment year and references 
in this section to the other provisions of this Act shall be construed as references to those provisions as for 
the time being in force and applicable to the relevant assessment year.] 

1. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). Earlier substituted as Chief Commissioner or 

Commissioner” for “Commissioner” by Act 4 of 1988, s. 2 (w.e.f. 1-4-1988). 

2. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 
3. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
4. Ins. by Act 22 of 2007, s. 46 (w.e.f. 1-6-2007). 
5. Subs. by Act 18 of 2008, s. 31, for “on an application” (w.e.f. 1-4-2008). 
6. Ins. by Act 41 of 1975, s. 43 (w.e.f. 1-4-1976). 
7. Ins. by Act 36 of 1989, s. 15 (w.e.f. 1-4-1989). 

574 

                                                           
1[142A.  Estimation  of  value  of  assets  by  Valuation  Officer.—(1)  The  Assessing  Officermay,  for 
the purposes of assessment or reassessment, make a reference to a Valuation Officer to estimate the value, 
including fair market value, of any asset, property or investment and submit a copy of report to him. 

(2)  The  Assessing  Officer  may  make  a  reference  to  the  Valuation  Officer  under  sub-section  (1) 

whether or not he is satisfied about the correctness or completeness of the accounts of the assessee. 

(3)  The  Valuation  Officer,  on  a  reference  made  under  sub-section  (1),  shall,  for  the  purpose  of 
estimating the value of the asset, property or investment, have all the powers that he has under section 
38A of the Wealth-tax Act, 1957 (27 of 1957). 

(4) The Valuation Officer shall, estimate the value of the asset, property or investment after taking 
into  account  such  evidence  as  the  assessee  may  produce  and  any  other  evidence  in  his  possession 
gathered, after giving an opportunity of being heard to the assessee. 

(5) The Valuation Officer may estimate the value of the asset, property or investment to the best of 

his judgment, if the assessee does not co-operate or comply with his directions. 

(6) The Valuation Officer shall send a copy of the report of the estimate made under sub-section (4) 
or sub-section (5), as the case may be, to the Assessing Officer and the assessee, within a period of six 
months from the end of the month in which a reference is made under sub-section (1). 

(7) The Assessing Officer may, on receipt of the report from the Valuation Officer, and after giving 
the  assessee  an  opportunity  of  being  heard,  take  into  account  such  report  in  making  the  assessment  or 
reassessment. 

Explanation.—In this section, “Valuation Officer” has the same meaning as in clause (r) of section 2 

of the Wealth-tax Act, 1957 (27 of 1957).] 

2[143. Assessment.—3[(1) Where a return has been made under section 139, or in response to a notice 

under sub-section (1) of section 142, such return shall be processed in the following manner, namely:— 

(a) the total income or loss shall be computed after making the following adjustments, namely:— 

(i) any arithmetical error in the return; 4*** 

(ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; 

5[(iii) disallowance of loss claimed, if return of the previous year for which set off of loss is 

claimed was furnished beyond the due date specified under sub-section (1) of section 139; 

(iv)  disallowance  of  expenditure  indicated  in  the  audit  report  but  not  taken  into  account  in 

computing the total income in the return; 

(v)  disallowance  of  deduction  claimed  under  sections 10AA, 80-IA, 80-IAB, 80-IB,  
80-IC, 80-ID or section  80-IE,  if  the  return  is  furnished  beyond  the  due  date  specified  under  
sub-section (1) of section 139; or 

(vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been 

included in computing the total income in the return: 

1. Subs by Act 25 of 2014, s. 51, for section 142A (w.e.f. 1-10-2014). 

2. Subs. by Act 4 of 1988, s. 48, for section 143 (w.e.f 1-4-1989). 

3. Subs. by Act 18 of 2008, s. 32, for sub-section (1) (w.e.f. 1-4-2008). 

4. The word “or” omitted by Act 28 of 2016, s. 68 (w.e.f. 1-4-2017). 

5. Ins. by s. 68, ibid. (w.e.f. 1-4-2017). 

575 

                                                           
Provided that no such adjustments shall be made unless an intimation is given to the assessee 

of such adjustments either in writing or in electronic mode: 

Provided  further that  the  response  received  from  the  assessee,  if  any,  shall  be  considered 
before making any adjustment, and in a case where no response is received within thirty days of 
the issue of such intimation, such adjustments shall be made;] 

1[Provided also that no adjustment shall be made under sub-clause (vi) in relation to a return 

furnished for the assessment year commencing on or after the 1st day of April, 2018;] 
(b)  the  tax 2[,  interest  and  fee],  if  any,  shall  be  computed  on  the  basis  of  the  total  income 

computed under clause (a); 

(c)  the  sum  payable  by,  or  the  amount  of  refund  due  to,  the  assessee  shall  be  determined  after 
adjustment of the tax 2[, interest and fee], if any, computed under clause (b) by any tax deducted at 
source,  any  tax  collected  at  source,  any  advance  tax  paid,  any  relief  allowable under  an  agreement 
under section 90 or section 90A, or any relief allowable under section 91, any rebate allowable under 
Part A of Chapter VIII, any tax paid on self-assessment and any amount paid otherwise by way of tax  
3[, interest or fee]; 

(d)  an  intimation  shall  be  prepared  or  generated  and  sent  to  the  assessee  specifying  the  sum 

determined to be payable by, or the amount of refund due to, the assessee under clause (c); and 

(e) the amount of refund due to the assessee in pursuance of the determination under clause (c) 

shall be granted to the assessee: 

Provided that an intimation shall also be sent to the assessee in a case where the loss declared in 
the return by the assessee is adjusted but no tax 3[, interest or fee] is payable by, or no refund is due 
to, him: 

Provided  further that  no  intimation  under  this  sub-section  shall  be  sent  after  the  expiry  of  one 

year from the end of the financial year in which the return is made. 

Explanation.—For the purposes of this sub-section,— 

(a) “an incorrect claim apparent from any information in the return” shall mean a claim, on the 

basis of an entry, in the return,— 

(i) of an item, which is inconsistent with another entry of the same or some other item in such 

return; 

(ii) in respect of which the information required to be furnished under this Act to substantiate 

such entry has not been so furnished; or 

(iii) in respect of a deduction, where such deduction exceeds specified statutory limit which 

may have been expressed as monetary amount or percentage or ratio or fraction; 

(b) the acknowledgement of the return shall be deemed to be the intimation in a case where no 
sum is payable by, or refundable to, the assessee under clause (c), and where no adjustment has been 
made under clause (a). 

(1A) For the purposes of processing of returns under sub-section (1), the Board may make a scheme 
for centralised processing of returns with a view to expeditiously determining the tax payable by, or the 
refund due to, the assessee as required under the said sub-section. 

(1B) Save as otherwise expressly provided, for the purpose of giving effect to the scheme made under 
sub-section (1A), the Central Government may, by notification in the Official Gazette, direct that any of 
the  provisions  of  this  Act  relating  to  processing  of  returns  shall  not  apply  or  shall  apply  with  such 
exceptions, modifications and adaptations as may be specified in that notification; so, however, that no 
direction shall be issued after 4[the 31st day of March, 2012]. 

1. Ins. by Act 13 of 2018, s. 46 (w.e.f. 1-4-2018). 
2. Subs. by Act 7 of 2017, s. 58, for “and interest” (w.e.f. 1-4-2018). 
3. Subs. by s. 58, ibid.,for “or interest” (w.e.f. 1-4-2018). 
4. Subs. by Act 8 of 2011, s. 25, for “the 31st day March, 2011” (w.e.f. 1-4-2011). 

576 

                                                           
(1C)  Every  notification  issued  under  sub-section  (1B),  along  with  the  scheme  made  under  
sub-section (1A), shall, as soon as may be after the notification is issued, be laid before each House of 
Parliament.] 

1[(1D) Notwithstanding anything contained in sub-section (1), the processing of a return shall not be 

necessary, where a notice has been issued to the assessee under sub-section (2): 

Provided  that  the  provisions  of  this  sub-section  shall  not  apply  to  any  return  furnished  for  the 

assessment year commencing on or after the 1st day of April, 2017.] 

2[(2)  Where  a  return  has  been  furnished  under section  139,  or  in  response  to  a  notice  under  
sub-section (1) of section 142, the Assessing Officer or the prescribed income-tax authority, as the case 
may be, if, considers it necessary or expedient to ensure that the assessee has not understated the income 
or  has  not  computed  excessive  loss  or  has  not  under-paid  the  tax  in  any  manner,  shall  serve  on  the 
assessee  a  notice  requiring  him,  on  a  date  to  be  specified  therein,  either  to  attend  the  office  of  the 
Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on 
which the assessee may rely in support of the return: 

Provided that no notice under this sub-section shall be served on the assessee after the expiry of six 

months from the end of the financial year in which the return is furnished.] 

3[(3) 4[On the day specified in the notice issued under] sub-section (2), or as soon afterwards as may 
be,  after  hearing  such  evidence  as  the  assessee  may  produce  and  such  other  evidence  as  the  Assessing 
Officer may require on specified points, and after taking into account all relevant material which he has 
gathered, the Assessing Officer shall, by an order in writing, make an assessment of the total income or 
loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the 
basis of such assessment.] 

5[Provided that in the case of a— 

(a) 6[research association] referred to in clause (21) of section 10; 

(b) news agency referred to in clause (22B) of section 10; 

(c) association or institution referred to in clause (23A) of section 10; 

(d) institution referred to in clause (23B) of section 10; 

(e)  fund  or  institution  referred  to  in  sub-clause  (iv)  or  trust  or  institution  referred  to  in  
sub-clause (v) or any university or other educational institution referred to in sub-clause (vi) or any 
hospital or other medical institution referred to in sub-clause (via) of clause (23C) of section 10, 

which is required to furnish the return of income under sub-section (4C) of section 139, no order making 
an  assessment  of  the  total  income  or  loss  of  such  6[research  association],  news  agency,  association  or 
institution or fund or trust or university or other educational institution or any hospital or other medical 
institution, shall be made by the Assessing Officer, without giving effect to the provisions of section 10, 
unless— 

(i)  the  Assessing  Officer  has  intimated  the  Central  Government  or  the  prescribed  authority  the 
contravention  of  the  provisions  of  clause  (21)  or  clause  (22B)  or  clause  (23A)  or  clause  (23B)  or  
sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, as 
the case may be, by such  6[research association], news agency, association or institution or fund or 
trust or university or other educational institution or any hospital or other medical institution, where 
in his view such contravention has taken place; and 

1. Subs. by Act 7 of 2017, s. 58, for sub-section (ID) (w.e.f. 1-4-2018). 
2. Subs. by Act 28 of 2016, s. 68, for sub-section (2) (w.e.f. 1-6-2016). 
3. Subs. by Act 20 of 2002, s. 60, for sub-section (3) (w.e.f. 1-6-2002). 
4. Subs. by Act 7 of 2017, s. 58, for certain words (w.e.f. 1-6-2016). 
5. Ins. by Act 20 of 2002, s. 60 (w.e.f. 1-4-2003). 
6. Subs. by Act 14 of 2010, s. 34, for “scientific research association” (w.e.f. 1-4-2011). 

577 

                                                           
 
(ii) the approval granted to such 1[research association] or other association 2[or fund or trust] or 
institution  or  university  or  other  educational  institution  or  hospital  or  other  medical  institution  has 
been withdrawn or notification issued in respect of such news agency or fund or trust or institution 
has been rescinded:] 

3[Provided further that where the Assessing Officer is satisfied that the activities of the university, 
college or other institution referred to in clause (ii) and clause (iii) of sub-section (1) of section 35 are 
not being carried out in accordance with all or any of the conditions subject to which such university, 
college or other institution was approved, he may, after giving a reasonable opportunity of showing 
cause  against  the  proposed  withdrawal  to  the  concerned  university,  college  or  other  institution, 
recommend to the Central Government to withdraw the approval and that Government may by order, 
withdraw the approval and forward a copy of the order to the concerned university, college or other 
institution and the Assessing Officer:] 

4[Provided also that notwithstanding anything contained in the first and the second provisos, no 
effect shall be given by the Assessing Officer to the provisions of clause (23C) of section 10 in the 
case of a trust or institution for a previous year, if the provisions of the first proviso to clause (15) of  
section  2 become  applicable  in  the  case  of  such  person  in  such  previous  year,  whether  or  not  the 
approval granted to such trust or institution or notification issued in respect of such trust or institution 
has been withdrawn or rescinded.] 
5[(3A) The Central Government may make a scheme, by notification in the Official Gazette, for the 
purposes  of  making  assessment  of  total  income  or  loss  of  the  assessee  under  sub-section  (3)  so  as  to 
impart greater efficiency, transparency and accountability by–– 

(a)  eliminating  the  interface  between  the  Assessing  Officer  and  the  assessee  in  the  course  of 

proceedings to the extent technologically feasible; 

(b)  optimising  utilisation  of  the  resources  through  economies  of  scale  and  functional 

specialisation; 

(c) introducing a team-based assessment with dynamic jurisdiction. 

(3B) The Central Government may, for the purpose of giving effect to the scheme made under sub-
section (3A), by notification in the Official Gazette, direct that any of the provisions of this Act relating to 
assessment of total income or loss shall not apply or shall apply with such exceptions, modifications and 
adaptations as may be specified in the notification: Provided that no direction shall be issued after the 31st 
day of March, 2020. 

(3C) Every notification issued under sub-section (3A) and sub-section (3B) shall, as soon as may be 

after the notification is issued, be laid before each House of Parliament.] 

6[(4) Where a regular assessment under sub-section (3) of this section or section 144 is made,— 

(a) any tax or interest paid by the assessee under sub-section (1) shall be deemed to have been 

paid towards such regular assessment; 

(b)  if  no  refund  is  due  on  regular  assessment  or  the  amount  refunded  under  sub-section  (1) 
exceeds the amount refundable on regular assessment, the whole or the excess amount so refunded 
shall  be  deemed  to  be  tax  payable  by  the  assessee  and  the  provisions  of  this  Act  shall  apply 
accordingly. 
7* 
8* 

*] 

* 

* 

* 

* 

* 

* 

* 

1. Subs. by Act 14 of 2010, s. 34, for “scientific research association” (w.e.f. 1-4-2011). 
2. Ins. by Act 22 of 2007, s. 47 (w.e.f. 1-6-2007). 
3. Ins. by Act 29 of 2006, s. 13 (w.e.f. 1-4-2006). 
4. Ins. by Act 23 of 2012 s. 61 (w.e.f. 1-4-2009). 
5. Ins. by Act 13 of 2018, s. 46 (w.e.f. 1-4-2018). 
6. Ins. by Act 36 of 1989, s. 16 (w.e.f. 1-4-1989). 
7. Sub-section (5) omitted by Act 27 of 1999, s. 64 (w.e.f. 1-6-1999). 
8. The Explanation omitted by s. 64, ibid (w.e.f. 1-6-1999). 

578 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
144. Best judgment assessment.—1[(1)] If any person— 

(a) fails to make the return required  2[under sub-section (1) of section 139] and has not made a 

return or a revised return under sub-section (4) or sub-section (5) of that section, or 

(b) fails to comply with all the terms of a notice issued under sub-section (1) of section 142 3[or 

fails to comply with a direction issued under sub-section (2A) of that section], or 

(c) having made a return, fails to comply with all the terms of a notice issued under sub-section 

(2) of section 143, 

the 4[Assessing Officer], after taking into account all relevant material which the 4[Assessing Officer] has 
gathered,  5[shall,  after  giving  the  assessee  an  opportunity  of  being  heard,  make  the  assessment]  of  the 
total income or loss to the best of his judgment and determine the sum payable by the assesse 6*** on the 
basis of such assessment: 

7[Provided that such opportunity shall be given by the Assessing Officer by serving a notice calling 
upon  the assessee  to  show  cause,  on a  date  and  time  to  be  specified  in the  notice,  why  the  assessment 
should not be completed to the best of his judgment: 

Provided further that it shall not be necessary to give such opportunity in a case where a notice under 

sub-section (1) of section 142 has been issued prior to the making of an assessment under this section.] 

8[(2) The provisions of this section as they stood immediately before their amendment by the Direct 
Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any assessment for the 
assessment year commencing on the 1st day of April, 1988, or any earlier assessment year and references 
in this section to the other provisions of this Act shall be construed as references to those provisions as for 
the time being in force and applicable to the relevant assessment year.] 

9[144A. Power  of  10[Joint  Commissioner]  to  issue  directions  in  certain  cases.—11***  A  10[Joint 
Commissioner] may, on his own motion or on a reference being made to him by the  4[Assessing Officer] 
or  on  the  application  of  an  assessee,  call  for  and  examine  the  record  of  any  proceeding  in  which  an 
assessment  is  pending  and,  if  he  considers  that,  having  regard  to  the  nature  of  the  case  or  the  amount 
involved or for any other reason, it is necessary or expedient so to do, he may issue such directions as he 
thinks fit for the guidance of the 4[Assessing Officer] to enable him to complete the assessment and such 
directions shall be binding on the 4[Assessing Officer]: 

Provided that no directions which are prejudicial to the assessee shall be issued before an opportunity 

is given to the assessee to be heard. 

Explanation.—For  the  purposes  of  this  12[section]  no  direction  as  to  the  lines  on  which  an 
investigation connected with the assessment should be made, shall be deemed to be a direction prejudicial 
to the assessee. 

13*   

* 

* 

* 

* 

1. Section 144 renumbered as sub-section (1) thereof by Act 36 of 1989, s. 17 (w.e.f. 1-4-1989). 
2. Subs. by Act 4 of 1988, s. 49, for “by any notice given under sub-section (2) of section 139” (w.e.f. 1-4-1989). 
3. Ins. by Act 41 of 1975, s. 44 (w.e.f. 1-4-1976). 
4. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
5. Subs. by s. 49, ibid., for “shall make the assessment” (w.e.f. 1-4-1989). 
6. The words “or refundable to the assess” omitted by s. 49, ibid. (w.e.f. 1-4-1989). 
7. Ins. by s. 49, ibid., (w.e.f. 1-4-1989). 
8. Ins. by Act 36 of 1989, s. 17 (w.e.f. 1-4-1989). 
9. Ins. by Act 41 of 1975, s. 45 (w.e.f. 1-4-1976). 
10. Subs. by Act 21 of 1998, s. 3, for “Deputy Commissioner” (w.e.f.1-10-1998). Earlier the quoted words were substituted 

by Act 4 of 1988, s. 2, for “Inspecting Assistant Commissioner” (w.e.f. 1-4-1988). 
11. The brackets and figures “(1)” omitted by Act 4 of 1988, s. 126 (w.e.f. 1-4-1989). 
12. Subs. by Act 3 of 1989, s. 22, for “sub-section” (w.e.f. 1-4-1989). 
13. Sub-section (2) omitted by Act 4 of 1988, s. 50 (w.e.f. 1-4-1989). 

579 

 
 
 
 
 
 
 
                                                           
[144B. Reference  to  Deputy  Commissioner  in  certain  cases].—Omitted  by  the  Direct  Tax  Laws 

(Amendment) Act, 1987 (4 of 1988), s. 51 (w.e.f. 1-4-1989).]] 

1[144BA. Reference to 2[Principal Commissioner orCommissioner]  in certain cases.—(1) If, the 
Assessing Officer, at any stage of the assessment or reassessment proceedings before him having regard 
to  the  material  and  evidence  available,  considers  that  it  is  necessary  to  declare  an  arrangement  as  an 
impermissible avoidance arrangement and to determine the consequence of such an arrangement within 
the  meaning  of  Chapter  X-A,  then,  he  may  make  a  reference  to  the 2[Principal  Commissioner 
or Commissioner] in this regard. 

(2) The 2[Principal Commissioner or Commissioner] shall, on receipt of a reference under sub-section 
(1), if he is of the opinion that the provisions of Chapter X-A are required to be invoked, issue a notice to 
the  assessee,  setting  out  the  reasons  and  basis  of  such  opinion,  for  submitting  objections,  if  any,  and 
providing an opportunity of being heard to the assessee within such period, not exceeding sixty days, as 
may be specified in the notice. 

(3) If the assessee does not furnish any objection to the notice within the time specified in the notice 
issued under sub-section (2), the 2[Principal Commissioner or Commissioner] shall issue such directions 
as  he  deems  fit  in  respect  of  declaration  of  the  arrangement  to  be  an  impermissible  avoidance 
arrangement. 

(4)  In  case  the  assessee  objects  to  the  proposed  action,  and  the 2[Principal  Commissioner 
or Commissioner]  after  hearing  the  assessee  in  the  matter  is  not  satisfied  by  the  explanation  of  the 
assessee,  then,  he  shall  make  a  reference  in  the  matter  to  the  Approving  Panel  for  the  purpose  of 
declaration of the arrangement as an impermissible avoidance arrangement. 

(5) If the 2[Principal Commissioner or Commissioner] is satisfied, after having heard the assessee that 
the provisions of Chapter X-A are not to be  invoked, he shall by an order in writing, communicate the 
same to the Assessing Officer with a copy to the assessee. 

(6)  The  Approving  Panel,  on  receipt  of  a  reference  from 

the 2[Principal  Commissioner 
or Commissioner]  under  sub-section  (4),  shall  issue  such  directions,  as  it  deems  fit,  in  respect  of  the 
declaration  of  the  arrangement  as  an  impermissible  avoidance  arrangement  in  accordance  with  the 
provisions of Chapter X-A including specifying of the previous year or years to which such declaration of 
an arrangement as an impermissible avoidance arrangement shall apply. 

(7) No direction under sub-section (6) shall be issued unless an opportunity of being heard is given to 
the  assessee  and  the  Assessing  Officer  on  such  directions  which  are  prejudicial  to  the  interest  of  the 
assessee or the interests of the revenue, as the case may be. 

(8) The Approving Panel may, before issuing any direction under sub-section (6),— 

(i) if it is of the opinion that any further inquiry in the matter is necessary, direct the 2[Principal 
Commissioner or Commissioner] to make such inquiry or cause the inquiry to be made by any other 
income-tax authority and furnish a report containing the result of such inquiry to it; or 

(ii) call for and examine such records relating to the matter as it deems fit; or 

(iii) require the assessee to furnish such documents and evidence as it may direct. 

(9) If the members of the Approving Panel differ in opinion on any point, such point shall be decided 

according to the opinion of the majority of the members. 

(10)  The  Assessing  Officer,  on 

the 2[Principal  Commissioner 
or Commissioner] under sub-section (3) or of the Approving Panel under sub-section (6), shall proceed to 
complete  the  proceedings  referred  to  in  sub-section  (1)in  accordance  with  such  directions  and  the 
provisions of Chapter X-A. 

receipt  of  directions  of 

1. Ins. by Act 17 of 2013, s. 39 (w.e.f. 1-4-2016). Earlier s. 144BA omitted by Act 17 of 2013, s. 38 (w.e.f. 1-4-2014) which 

was inserted by Act 23 of 2012, s. 62 (w.e.f. 1-4-2014). 

2. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.e.f. 1-6-2013). 

580 

                                                           
(11)  If  any  direction  issued  under  sub-section  (6)  specifies  that  declaration  of  the  arrangement  as 
impermissible avoidance arrangement is applicable for any previous year other than the previous year to 
which  the  proceedings  referred  to  in  sub-section  (1)  pertains,  then,  the  Assessing  Officer  while 
completing  any  assessment  or  reassessment  proceedings  of  the  assessment  year  relevant  to  such  other 
previous year shall do so in accordance with such directions and the provisions of Chapter XA and it shall 
not be necessary for him to seek fresh direction on the issue for the relevant assessment year. 

(12)  No  order  of  assessment  or  reassessment  shall  be  passed  by  the  Assessing  Officer  without  the 
prior  approval  of  the 1[Principal  Commissioner  or Commissioner],  if  any  tax  consequences  have  been 
determined in the order under the provisions of Chapter X-A. 

(13) The Approving Panel shall issue directions under sub-section (6) within a period of six months 

from the end of the month in which the reference under sub-section (4) was received. 

(14) The directions issued by the Approving Panel under sub-section (6) shall be binding on— 

(i) theassessee; and 

(ii) the 1[Principal Commissioner or Commissioner] and the income-tax authorities subordinate to 

him, 

and notwithstanding anything contained in any other provision of the Act, no appeal under the Act shall 
lie against such directions. 

(15)  The  Central  Government  shall,  for  the  purposes  of  this  section,  constitute  one  or  more 
Approving  Panels  as  may  be  necessary  and  each  panel  shall  consist  of  three  members  including  a 
Chairperson. 

(16) The Chairperson of the Approving Panel shall be a person who is or has been a judge of a High 

Court, and— 

(i) one member shall be a member of Indian Revenue Service not below the rank of  2[Principal 

Chief Commissioner or Chief Commissioner]  of Income-tax; and 

(ii)  one  member  shall  be  an  academic  or  scholar  having  special  knowledge  of  matters,  such  as 

direct taxes, business accounts and international trade practices. 

(17) The term of the Approving Panel shall ordinarily be for one year and may be extended from time 

to time up to a period of three years. 

(18)  The  Chairperson  and  members  of  the  Approving  Panel  shall  meet,  as  and  when  required,  to 

consider the references made to the panel and shall be paid such remuneration as may be prescribed. 

(19) In addition to the powers conferred on the Approving Panel under this section, it shall have the 

powers which are vested in the Authority for Advance Rulings under section 245U. 

(20)  The  Board  shall  provide  to  the  Approving  Panel  such  officials  as  may  be  necessary  for  the 

efficient exercise of powers and discharge of functions of the Approving Panel under the Act. 

(21) The Board may make rules for the purposes of the constitution and efficient functioning of the 

Approving Panel and expeditious disposal of the references received under sub-section (4). 

Explanation.—In  computing  the  period  referred  to  in  sub-section  (13),  the  following  shall  be 

excluded— 

(i) the period commencing from the date on which the first direction is issued by the Approving 
Panel to the 1[Principal Commissioner or Commissioner] for getting the inquiries conducted through 
the authority competent under an agreement referred to in section 90 or section 90A and ending with 
the date on which the information so requested is last received by the Approving Panel or one year, 
whichever is less; 

1. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.e.f. 1-6-2013). 
2. Subs. by s. 4, ibid., for “Chief Commissioner” (w.e.f. 1-6-2013). 

581 

                                                           
(ii)  the  period  during  which  the  proceeding  of  the  Approving  Panel  is  stayed  by  an  order  or 

injunction of any court: 

Provided that  where  immediately  after  the  exclusion of  the  aforesaid time  or  period,  the  period 
available to the Approving Panel for issue of directions is less than sixty days, such remaining period 
shall be extended to sixty days and the aforesaid period of six months shall be deemed to have been 
extended accordingly.] 

1[144C. Reference  to  dispute  resolution  panel.—(1)  The  Assessing  Officer  shall,  notwithstanding 
anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order 
of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes 
to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is 
prejudicial to the interest of such assessee. 

(2) On receipt of the draft order, the eligible assessee shall, within thirty days of the receipt by him of 

the draft order,— 

(a) file his acceptance of the variations to the Assessing Officer; or 

(b) file his objections, if any, to such variation with,— 

(i) the Dispute Resolution Panel; and 

(ii) the Assessing Officer. 

(3) The Assessing Officer shall complete the assessment on the basis of the draft order, if— 

(a) theassessee intimates to the Assessing Officer the acceptance of the variation; or 

(b) no objections are received within the period specified in sub-section (2). 

(4) The Assessing Officer shall, notwithstanding anything contained 2[in section 153 orsection 153B], 
pass the assessment order under sub-section (3) within one month from the end of the month in which,— 

(a) the acceptance is received; or 

(b) the period of filing of objections under sub-section (2) expires. 

(5)  The  Dispute  Resolution  Panel  shall,  in  a  case  where  any  objection  is  received  under                       

sub-section (2), issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable 
him to complete the assessment. 

(6)  The  Dispute  Resolution  Panel  shall  issue  the  directions  referred  to  in  sub-section  (5),  after 

considering the following, namely:— 

(a) draft order; 

(b) objections filed by the assessee; 

(c) evidence furnished by the assessee; 

(d) report, if any, of the Assessing Officer, Valuation Officer or Transfer Pricing Officer or any 

other authority; 

(e) records relating to the draft order; 

(f) evidence collected by, or caused to be collected by, it; and 

(g) result of any enquiry made by, or caused to be made by, it. 

1. Ins. by Act 33 of 2009, s. 56 (w.r.e.f. 1-4-2009). 
2. Subs. by Act 23 of 2012, s. 63, for “in section 153” (w.r.e.f. 1-10-2009). 

582 

                                                           
(7) The Dispute Resolution Panel may, before issuing any directions referred to in sub-section (5),— 

(a) make such further enquiry, as it thinks fit; or 

(b) cause any further enquiry to be made by any income-tax authority and report the result of the 

same to it. 

(8) The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft 
order  so,  however,  that  it  shall  not  set  aside  any  proposed  variation  or  issue  any  direction  under  sub-
section (5) for further enquiry and passing of the assessment order. 

1[Explanation.—For  the  removal  of  doubts,  it  is  hereby  declared  that  the  power  of  the  Dispute 
Resolution Panel to enhance the variation shall include and shall be deemed always to have included the 
power  to  consider  any  matter  arising  out  of  the  assessment  proceedings  relating  to  the  draft  order, 
notwithstanding that such matter was raised or not by the eligible assessee.] 

(9) If the members of the Dispute Resolution Panel differ in opinion on any point, the point shall be 

decided according to the opinion of the majority of the members. 

(10)  Every  direction  issued  by  the  Dispute  Resolution  Panel  shall  be  binding  on  the  Assessing 

Officer. 

(11) No direction under sub-section (5) shall be issued unless an opportunity of being heard is given 
to the assessee and the Assessing Officer on such directions which are prejudicial to the interest of the 
assessee or the interest of the revenue, respectively. 

(12) No direction under sub-section (5) shall be issued after nine months from the end of the month in 

which the draft order is forwarded to the eligible assessee. 

(13)  Upon  receipt  of  the  directions  issued  under  sub-section  (5),  the  Assessing  Officer  shall,  in 
conformity with the directions, complete, notwithstanding anything to the contrary contained  2[insection 
153 or section  153B],  the  assessment  without  providing  any  further  opportunity  of  being  heard  to  the 
assessee, within one month from the end of the month in which such direction is received. 

(14)  The  Board  may  make  rules  for  the  purposes  of  the  efficient  functioning  of  the  Dispute 
Resolution  Panel  and  expeditious  disposal  of  the  objections  filed  under  sub-section  (2)  by  the  eligible 
assessee. 

3[(14A)The provisions of this section shall not apply to any assessment or reassessment order passed 
by  the  Assessing  Officer  with  the  prior  approval  of  the 4[Principal  Commissioner  or Commissioner]  as 
provided in sub-section (12) of section 144BA.] 

(15) For the purposes of this section,— 

(a) “Dispute Resolution Panel” means a collegium comprising of three 4[Principal Commissioner 

or Commissioners] of Income-tax constituted by the Board for this purpose; 

(b) “eligibleassessee” means,— 

(i)  any  person  in  whose  case  the  variation  referred  to  in  sub-section  (1)  arises  as  a 

consequence  of  the  order  of  the  Transfer  Pricing  Officer  passed  under  sub-section  (3)  of                
section 92CA; and 

(ii) any foreign company.] 

1. Ins. by Act 23 of 2012, s. 63 (w.r.e.f. 1-4-2009). 
2. Subs. by s. 63, ibid., for “in section 153” (w.e.f. 1-10-2009). 
3. Ins. by Act 17 of 2013, s. 40 (w.e.f. 1-4-2016). Earlier sub-section (14A) omitted by Act 17 of 2013, s. 40 (w.e.f. 1-4-

2013) which was inserted by Act 23 of 2012, s. 63 (w.e.f. 1-4-2013). 
4. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.r.e.f. 1-6-2013). 

583 

                                                           
1[145. Method of accounting.—(1) Income chargeable under the head “Profits and gains of business 
or  profession”  or  “Income  from  other  sources”  shall,  subject  to  the  provisions  of  sub-section  (2),  be 
computed in accordance with either cash or mercantile system of accounting regularly employed by the 
assessee. 

(2)  The  Central  Government  may  notify  in  the  Official  Gazette  from  time  to  time  2[income 
computation and disclosure standards] to be followed by any class of assessees or in respect of any class 
of income. 

(3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts 
of the assessee, or where the method of accounting provided in sub-section (1)  3[has not been regularly 
followed  by  the  assessee,  or  income  has  not  been  computed  in  accordance  with  the  standards  notified 
under  sub-section  (2)],  the  Assessing  Officer  may  make  an  assessment  in  the  manner  provided  in  
section 144.] 

4[145A. Method  of  accounting  in  certain  cases.—For  the  purpose  of  determining  the  income 

chargeable under the head “Profits and gains of business or profession”,–– 

(i)  the  valuation  of  inventory  shall  be  made  at  lower  of  actual  cost  or  net  realisable  value 

computed  in  accordance  with  the  income  computation  and  disclosure  standards  notified  under                
sub-section (2) of section 145; 

(ii) the valuation of purchase and sale of goods or services and of inventory shall be adjusted to 
include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred 
by the assessee to bring the goods or services to the place of its location and condition as on the date 
of valuation; 

(iii)  the  inventory  being  securities  not  listed  on  a  recognised  stock  exchange,  or  listed  but  not 
quoted  on a  recognised  stock  exchange  with regularity  from  time  to  time,  shall be  valued  at  actual 
cost initially recognised in accordance with the income computation and disclosure standards notified 
under sub-section (2) of section 145; 

(iv)  the  inventory  being  securities  other  than those  referred to in  clause  (iii), shall be  valued  at 
lower of actual cost or net realisable value in accordance with the income computation and disclosure 
standards notified under sub-section (2) of section 145: 

Provided  that  the  inventory  being  securities  held  by  a  scheduled  bank  or  public  financial 
institution  shall  be  valued  in  accordance  with  the  income  computation  and  disclosure  standards 
notified under sub-section (2) of section 145 after taking into account the extant guidelines issued by 
the Reserve Bank of India in this regard: 

Provided further that the comparison of actual cost and net realisable value of securities shall be 

made category-wise. 

1. Subs. by Act 22 of 1995, s. 31, for section 145 (w.e.f. 1-4-1997). 

2. Subs. by Act 25 of 2014, s. 52, for “accounting standards” (w.e.f. 1-4-2015). 

3. Subs. by s. 52, ibid., for “or accounting standards as notified under sub-section (2), have not been regularly followed by 

the assessee” (w.e.f. 1-4-2015). 

4.  Subs.  by  Act  13  of  2018,  s.  47,  for  section  145A  (w.r.e.f.  1-4-2017).  Earlier  it  was  substituted  by  Act  33  of  2009,                      

s. 57, (w.e.f. 1-4-2010). 

584 

                                                           
Explanation 1.—For the purposes of this section, any tax, duty, cess or fee (by whatever name called) 
under any law for the time being in force, shall include all such payment notwithstanding any right arising 
as a consequence to such payment. 

Explanation 2.—For the purposes of this section,— 

(a) “public financial institution” shall have the meaning assigned to it in clause (72) of section 2 

of the Companies Act, 2013 (18 of 2013); 

(b)  “recognised  stock  exchange”  shall  have  the  meaning  assigned  to  it  in  clause  (ii)  of 

Explanation 1 to clause (5) of section 43; 

(c)  “scheduled  bank”  shall  have  the  meaning  assigned  to  it  in  clause  (ii)  of  the  Explanation  to 

clause (viia) of sub-section (1) of section 36. 

145B.  Taxability  of  certain  income.—(1)  Notwithstanding  anything  to  the  contrary  contained  in 
section 145, the interest received by an assessee on any compensation or on enhanced compensation, as 
the case may be, shall be deemed to be the income of the previous year in which it is received. 

(2)  Any  claim  for  escalation  of  price  in  a  contract  or  export  incentives  shall  be  deemed  to  be  the 

income of the previous year in which reasonable certainty of its realisation is achieved. 

(3) The income referred to in sub-clause (xviii) of clause (24) of section 2 shall be deemed to be the 
income of the previous year in which it is received, if not charged to income-tax in any earlier previous 
year.] 

146.  [Reopening  of  assessment  at  the  instance  of  the  assessee.]  Omitted  by  the  Direct  Tax  Laws 

(Amendment) Act, 1988 (4 of 1988), s.53 (w.e.f. 1-4-1989). 

1[147.  Income  escaping  assessment.—If  the  2[Assessing  Officer]  3[has  reason  to  believe]  that  any 
income  chargeable  to  tax  has  escaped  assessment  for  any  assessment  year,  he  may,  subject  to  the 
provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to 
tax  which  has  escaped  assessment  and  which  comes  to  his  notice  subsequently  in  the  course  of  the 
proceedings  under  this  section,  or  recompute  the  loss  or  the  depreciation  allowance  or  any  other 
allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 
148 to 153 referred to as the relevant assessment year): 

Provided that where an assessment under sub-section (3) of section 143 or this section has been made 
for the relevant assessment year, no action shall be taken under this section after the expiry of four years 
from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment 
for  such  assessment  year  by  reason  of  the  failure  on  the  part  of  the  assessee  to  make  a  return  under  
section  139 or  in  response  to  a  notice  issued  undersub-section  (1)  of section  142 or section  148 or  to 
disclose fully and truly all material facts necessary for his assessment, for that assessment year: 

1. Subs. by Act 4 of 1988, s. 54, for sections 147 and 148 (w.e.f. 1-4-1989). 

2. Subs. by s. 2,ibid., for “Income-tax Officer” (w.e.f. 1-4-1988). 

3. Subs. by Act 3 of 1989, s. 23, for “, for reasons to be recorded by him in writing, is of the opinion” (w.e.f. 1-4-1989). 

585 

                                                           
1[Provided further that nothing contained in the first proviso shall apply in a case where any income 
in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, 
has escaped assessment for any assessment year:] 

2[3[Provided  also] that  the  Assessing  Officer  may  assess  or  reassess  such  income,  other  than 
theincome involving matters which are the subject matters of any appeal, reference or revision, which is 
chargeable to tax and has escaped assessment.] 

Explanation  1.—Production  before  the  Assessing  Officer  of  account  books  or  other  evidence  from 
which material evidence could with due diligence have been discovered by the Assessing Officer will not 
necessarily amount to disclosure within the meaning of the foregoing proviso. 

Explanation  2.—For  the  purposes  of  this  section,  the  following  shall  also  be  deemed  to  be  cases 

where income chargeable to tax has escaped assessment, namely:— 

(a) where no return of income has been furnished by the assessee although his total income or the 
total  income  of  any  other  person  in  respect  of  which  he  is  assessable  under  this  Act  during  the 
previous year exceeded the maximum amount which is not chargeable to income-tax; 

(b) where a return of income has been furnished by the assessee but no assessment has been made 
and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed 
excessive loss, deduction, allowance or relief in the return; 

1[(ba) where the assessee has failed to furnish a report in respect of any international transaction 

which he was so required under section 92E;] 

(c) where an assessment has been made, but— 

(i) income chargeable to tax has been underassessed; or 

(ii) such income has been assessed at too low a rate; or 

(iii) such income has been made the subject of excessive relief under this Act ; or 

(iv) excessive loss or depreciation allowance or any other allowance under this Act has been 

computed;] 

4[(ca) where a return of income has not been furnished by the assessee or a return of income has 
been  furnished  by  him  and  on  the  basis  of  information  or  document  received  from  the  prescribed 
income-tax  authority,  under  sub-section  (2)  of section  133C,  it  is  noticed  by  the  Assessing  Officer 
that the income of the assessee exceeds the maximum amount not chargeable to tax, or as the case 
may be, the assessee has understated the income or has claimed excessive loss, deduction, allowance 
or relief in the return;] 

1[(d) where a person is found to have any asset (including financial interest in any entity) located 

outside India.] 

5[Explanation  3.—For  the  purpose  of  assessment  or  reassessment  under  this  section,  the  Assessing 
Officer  may  assess  or  reassess  the  income  in  respect  of  any  issue,  which  has  escaped  assessment,  and 
such  issue  comes  to  his  notice  subsequently  in  the  course  of  the  proceedings  under  this  section, 
notwithstanding  that  the  reasons  for  such  issue  have  not  been  included  in  the  reasons  recorded  under  
sub-section (2) of section 148.] 

1[Explanation 4.—For the removal of doubts, it is hereby clarified that the provisions of this section, 
as  amended  by  the  Finance  Act,  2012  (23  of  2012),  shall  also  be  applicable  for  any  assessment  year 
beginning on or before the 1st day of April, 2012.] 

1. Ins. by Act 23 of 2012, s. 64 (w.e.f. 1-7-2012). 
2. Ins. by Act 18 of 2008, s. 33 (w.e.f. 1-4-2008). 
3. Subs. by Act 23 of 2012, s. 64, for “Provided further” (w.e.f. 1-7-2012). 
4. Ins. by Act 28 of 2016, s. 69 (w.e.f. 1-6-2016). 
5. Ins. by 33 of 2009, s. 58 (w.e.f. 1-4-1989). 

586 

                                                           
148. Issue of notice where income has escaped assessment.—1[(1)] Before making the assessment, 
reassessment  or  recomputation  under section  147,  the  Assessing  Officer  shall  serve  on  the  assessee  a 
notice requiring him to furnish within such period, 2*** as may be specified in the notice, a return of his 
income or the income of any other person in respect of which he is assessable under this Act during the 
previous  year  corresponding  to  the  relevant  assessment  year,  in  the  prescribed form  and  verified  in  the 
prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this 
Act  shall,  so  far  as  may  be,  apply  accordingly  as  if  such  return  were  a  return  required  to  be  furnished 
undersection 139:] 

3[Provided that in a case— 

(a) where a return has been furnished during the period commencing on the 1st day of October, 
1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, 
and 

(b) subsequently a notice has been served under sub-section (2) of section 143 after the expiry of 
twelve  months  specified  in  the  proviso  to  sub-section  (2)  of  section  143,  as  it  stood  immediately 
before the amendment of said sub-section by the Finance Act, 2002 (20 of 2002) but before the expiry 
of  the  time  limit  for  making  the  assessment,  re-assessment  or  recomputation  as  specified  in  
sub-section (2) of  section 153,  every  such  notice  referred  to in  this clause  shall  be  deemed  to  be  a 
valid notice: 

Provided further that in a case— 

(a) where a return has been furnished during the period commencing on the 1st day of October, 
1991  and  ending  on  the  30th  day  of  September,  2005,  in  response  to  a  notice  served  under  this 
section, and 

(b) subsequently a notice has been served under clause (ii) of sub-section (2) of section 143 after 
the expiry of twelve months specified in the proviso to clause (ii) of sub-section (2) of section 143, 
but before the expiry of the time limit for making the assessment, reassessment or recomputation as 
specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed 
to be a valid notice.] 
4[Explanation.—For the  removal  of  doubts, it  is  hereby  declared  that  nothing  contained in  the  first 
proviso or the second proviso shall apply to any return which has been furnished on or after the 1st day of 
October, 2005 in response to a notice served under this section.] 

5[(2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for 

doing so.] 

149.  Time  limit  for  notice.—6[(1)  No  notice  under section  148 shall  be  issued  for  the  relevant 

assessment year,— 

7[(a) if four years have elapsed from the end of the relevant assessment year, unless the case falls 

under clause (b) 8[or clause (c)]; 

(b)  if  four  years,  but  not  more  than  six  years,  have  elapsed  from  the  end  of  the  relevant 
assessment year unless the income chargeable to tax which has escaped assessment amounts to or is 
likely to amount to one lakh rupees or more for that year;] 

8[(c)  if  four  years,  but  not  more  than  sixteen  years,  have  elapsed  from  the  end  of  the  relevant 
assessment year unless the income in relation to any asset (including financial interest in any entity) 
located outside India, chargeable to tax, has escaped assessment.] 

1. Section 54 renumbered as sub-section (1) thereof by Act 3 of 1989, s. 24 (w.e.f. 1-4-1989). 
2. The words “not being less than thirty days,” omitted by Act 33 of 1996, s. 43 (w.e.f. 1-4-1989). 
3. Ins. by Act 21 of 2006, s. 36 (w.e.f. 1-10-1991). 
4. Ins. by s. 36, ibid (w.e.f. 1-10-2005). 
5. Ins. by Act 3 of 1989, s. 24 (w.e.f. 1-4-1989). 
6. Subs. by Act 4 of 1988, s. 55, for sub-section (1) (w.e.f. 1-4-1989). 
7. Subs. by Act 14 of 2001, s. 63, for clauses (a) and (b) (w.e.f. 1-6-2001). 
8. Ins. by Act 23 of 2012, s. 65 (w.e.f. 1-7-2012). 

587 

                                                           
Explanation.—In  determining  income  chargeable  to  tax  which  has  escaped  assessment  for  the 
purposes of this sub-section, the provisions of Explanation 2 of section 147 shall apply as they apply for 
the purposes of that section.] 

(2)  The  provisions  of  sub-section  (1)  as  to  the  issue  of  notice  shall  be  subject  to  the  provisions 

of section 151. 

(3) If the person on whom a notice under section 148 is to be served is a person treated as the agent of 
a  non-resident  under section  163 and  the  assessment,  reassessment  or  recomputation  to  be  made  in 
pursuance of the notice is to be made on him as the agent of such non-resident, the notice shall not be 
issued after the expiry of a period of 1[six years] from the end of the relevant assessment year. 

2[Explanation.—For the removal of doubts, it is hereby clarified that the provisions of sub-sections 
(1)  and  (3),  as  amended  by  the  Finance  Act,  2012,  shall  also  be  applicable  for  any  assessment  year 
beginning on or before the 1st day of April, 2012.] 

150.  Provision  for  cases  where  assessment  is  in  pursuance  of  an  order  on  appeal,  etc.—(1) 
Notwithstanding  anything  contained  in section  149,  the  notice  under section  148 may  be  issued  at  any 
time for the purpose of making an assessment or reassessment or recomputation in consequence of or to 
give effect to any finding or direction contained in an order passed by any authority in any proceeding 
under this Act by way of appeal, reference or revision  3[or by a Court in any proceeding under any other 
law]. 

(2)  The  provisions  of  sub-section  (1)  shall  not  apply  in  any  case  where  any  such  assessment, 
reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect 
of which an assessment, reassessment or recomputation could not have been made at the time the order 
which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason 
of  any  other  provision  limiting  the  time  within  which  any  action  for  assessment,  reassessment  or 
recomputation may be taken. 

4[151.Sanction for issue of notice.—(1) No notice shall be issued under section 148 by an Assessing 
Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless the 
Principal  Chief  Commissioner  or  Chief  Commissioner  or  Principal  Commissioner  or  Commissioner  is 
satisfied, on the reasons recorded by the Assessing Officer, that it is a fit case for the issue of such notice. 
(2)  In  a  case  other  than  a  case  falling  under  sub-section  (1),  no  notice  shall  be  issued  under  
section  148 by  an  Assessing  Officer,  who  is  below  the  rank  of  Joint  Commissioner,  unless  the  Joint 
Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the 
issue of such notice. 

(3) For the purposes of sub-section (1) and sub-section (2), the Principal Chief Commissioner or the 
Chief Commissioner or the Principal Commissioner or the Commissioner or the Joint Commissioner, as 
the case may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a case 
for the issue of notice under section 148, need not issue such notice himself.] 

152.  Other  provisions.—(1)  In  an  assessment,  reassessment  or  recomputation  made  under  
section 147, the tax shall be chargeable at the rate or rates at which it would have been charged had the 
income not escaped assessment. 

(2) Where an assessment is reopened 5[under section 147], the assessee may, if he has not impugned 
any  part  of  the  original assessment  order  for  that  year  either  under sections  246 to 248 or  under section 
264,  claim  that  the  proceedings  under section  147 shall  be  dropped  on  his  showing  that  he  had  been 
assessed on an amount or to a sum not lower than what he would be rightly liable for even if the income 
alleged to have escaped assessment had been taken into account, or the assessment or computation had 
been properly made: 

Provided that  in  so  doing  he  shall  not  be  entitled  to  reopen  matters  concluded  by  an  order 

under section 154, 155, 260, 262, or 263. 

1. Subs. by Act 23 of 2012, s. 65, for “two years” (w.e.f. 1-7-2012). 
2. Ins. by s. 65, ibid. (w.e.f. 1-7-2012). 
3. Added by Act 4 of 1988, s. 56 (w.e.f. 1-4-1989). 
4. Subs. by Act 20 of 2015, s. 36, for section 151 (w.e.f. 1-6-2015). 
5. Subs. by Act 4 of 1988, s. 58, for “in circumstances falling under clause (b) of section 147” (w.e.f. 1-4-1989). 

588 

                                                           
1[153. Time limit for completion of assessment, reassessment and recomputation.—(1) No order 
of assessment shall be made under section 143 or section 144 at any time after the expiry of twenty-one 
months from the end of the assessment year in which the income was first assessable: 

2[Provided that in respect of an order of assessment relating to the assessment year commencing on 
the 1st day of April, 2018, the provisions of this sub-section shall have effect, as if for the words “twenty-
one months”, the words “eighteen months” had been substituted: 

Provided further that in respect of an order of assessment relating to the assessment year commencing 
on  or  after  the  1st  day  of  April,  2019,  the  provisions  of  this  sub-section  shall  have  effect,  as  if for the 
words “twenty-one months”, the words “twelve months” had been substituted.] 

(2) No order of assessment, reassessment or recomputation shall be made under section 147 after the 
expiry  of  nine  months  from  the  end  of  the  financial  year  in  which  the  notice  under section  148 was  
served: 

2[Provided that where the notice under section 148 is served on or after the 1st day of April, 2019, the 
provisions  of  this  sub-section  shall  have  effect,  as  if  for  the  words  “nine  months”,  the  words  “twelve 
months” had been substituted.] 

(3) Notwithstanding anything contained in sub-sections (1) and (2), an order of fresh assessment in 
pursuance  of  an  order  under section  254 or section  263 or section  264,  setting  aside  or  cancelling  an 
assessment, may be made at any time before the expiry of nine months from the end of the financial year 
in  which  the  order  under section  254 is  received  by  the  Principal  Chief  Commissioner  or  Chief 
Commissioner  or  Principal  Commissioner  or  Commissioner  or,  as  the  case  may  be,  the  order 
under section 263 or section 264 is passed by the Principal Commissioner or Commissioner: 

2[Provided that where the order under section 254 is received by the Principal Chief Commissioner or 
Chief  Commissioner  or  Principal  Commissioner  or  Commissioner  or,  as  the  case  may  be,  the  order 
under section  263 or section  264 is  passed  by  the  Principal  Commissioner  or  Commissioner  on  or  after 
the 1st day of April, 2019, the provisions of this sub-section shall have effect, as if for the words “nine 
months”, the words “twelve months” had been substituted.] 

(4)  Notwithstanding  anything  contained  in  sub-sections  (1),  (2)  and  (3),  where  a  reference  under  
sub-section  (1)  of section  92CA is  made  during  the  course  of  the  proceeding  for  the  assessment  or 
reassessment,  the  period  available  for  completion  of  assessment  or  reassessment,  as  the  case  may  be, 
under the said sub-sections (1), (2) and (3) shall be extended by twelve months. 

(5)  Where  effect  to  an  order  under section  250 or section  254 or section  260 or section  262 or  
section  263 or section  264 is  to  be  given  by  the  Assessing  Officer,  wholly  or  partly,  otherwise  than  by 
making  a  fresh  assessment  or  reassessment,  such  effect  shall  be  given  within  a  period  of  three  months 
from  the  end  of  the  month  in  which  order  under section  250 or section  254 or section  260 or            
section  262 is  received  by  the  Principal  Chief  Commissioner  or  Chief  Commissioner  or  Principal 
Commissioner or Commissioner, as the case may be, the order under section 263 or section 264 is passed 
by the Principal Commissioner or Commissioner: 

Provided that where it is not possible for the Assessing Officer to give effect to such order within the 
aforesaid period, for reasons beyond his control, the Principal Commissioner or Commissioner on receipt 
of such request in writing from the Assessing Officer, if satisfied, may allow an additional period of six 
months to give effect to the order: 

1. Subs. by Act 28 of 2016, s. 70, for section 153 (w.e.f. 1-6-2016). 
2. Ins. by Act 7 of 2017, s. 59 (w.e.f. 1-4-2017). 

589 

                                                           
1[Provided 

further that  where  an  order  under section  250 or section  254 or section  260 or           

section  262 or section  263 or section  264 requires  verification  of  any  issue  by  way  of  submission  of 
anydocument  by  the  assessee  or  any  other  person  or  where  an  opportunity  of  being  heard  is  to  be 
provided  to  the  assessee,  the  order  giving  effect  to  the  said  order  under section  250 or section  254 or                  
section  260 or section  262 or section  263  or section  264 shall  be  made  within  the  time  specifiedin  sub-
section (3).] 

(6) Nothing contained in sub-sections (1) and (2) shall apply to the following classes of assessments, 
reassessments  and  recomputation  which  may,  subject  to  the  provisions  of  sub-sections  (3)  and  (5),  be 
completed— 

(i) where the assessment, reassessment or recomputation is made on the assessee or any person in 
consequence  of  or  to  give  effect  to  any  finding  or  direction  contained  in  an  order  under  
section  250, section  254, section  260, section  262, section  263,  or section  264 or  in  an  order  of  any 
court in a proceeding otherwise than by way of appeal or reference under this Act, on or before the 
expiry of twelve months from the end of the month in which such order is received or passed by the 
Principal Commissioner or Commissioner, as the case may be; or 

(ii) where, in the case of a firm, an assessment is made on a partner of the firm in consequence of 
an assessment made on the firm under section 147, on or before the expiry of twelve months from the 
end of the month in which the assessment order in the case of the firm is passed. 

(7) Where effect to any order, finding or direction referred to in sub-section (5) or sub-section (6) is 
to be given by the Assessing Officer, within the time specified in the said sub-sections, and such order has 
been received or passed, as the case may be, by the income-tax authority specified therein before the 1st 
day of June, 2016, the Assessing Officer shall give effect to such order, finding or direction, or assess, 
reassess or recompute the income of the assessee, on or before the 31st day of March, 2017. 

(8)  Notwithstanding  anything  contained  in  the  foregoing  provisions  of  this  section,  sub-section  (2) 
of section 153A or sub-section (1) of section 153B, the order of assessment or reassessment, relating to 
any assessment year, which stands revived under sub-section (2) of section 153A, shall be made within a 
period  of  one  year  from  the  end  of  the  month  of  such  revival  or  within  the  period  specified  in  this  
section or sub-section (1) ofsection 153B, whichever is later. 

(9) The provisions of this section as they stood immediately before the commencement of the Finance 
Act, 2016, shall apply to and in relation to any order of assessment, reassessment or recomputation made 
before the 1st day of June, 2016: 

1[Provided that  where  a  notice  under  sub-section  (1)  of section  142 or  sub-section  (2)  of  
section  143 or section  148 has  been  issued  prior  to  the  1st  day  of  June,  2016  and  the  assessment  or 
reassessment has not been completed by such date due to exclusion of time referred to in Explanation 1, 
such assessment or reassessment shall be completed in accordance with the provisions of this section as it 
stood immediately before its substitution by the Finance Act, 2016 (28 of 2016).] 

Explanation 1.—For the purposes of this section, in computing the period of limitation— 

(i) the time taken in reopening the whole or any part of the proceeding or in giving an opportunity 

to the assessee to be re-heard under the proviso to section 129; or 

(ii) the period during which the assessment proceeding is stayed by an order or injunction of any 

court; or 

(iii) the period commencing from the date on which the Assessing Officer intimates the Central 
Government or the prescribed authority, the contravention of the provisions of clause (21) or clause 
(22B)  or  clause  (23A)  or  clause  (23B)  or  sub-clause  (iv)  or  sub-clause  (v)  or  sub-clause  (vi)  or  
sub-clause  (via)  of  clause  (23C)  of section  10,  under  clause  (i)  of  the  proviso  to  sub-section  (3) 
of section 143 and ending with the date on which the copy of the order withdrawing the approval or 
rescinding  the  notification,  as  the  case  may  be,  under  those  clauses  is  received  by  the  Assessing 
Officer; or 

1. Ins. by Act 7 of 2017, s. 59 (w.e.f. 1-6-2016). 

590 

                                                           
(iv) the period commencing from the date on which the Assessing Officer directs the assessee to 

get his accounts audited under sub-section (2A) of section 142 and— 

(a) ending with the last date on which the assessee is required to furnish a report of such audit 

under that sub-section; or 

(b) where such direction is challenged before a court, ending with the date on which the order 

setting aside such direction is received by the Principal Commissioner or Commissioner; or 

(v) the period commencing from the date on which the Assessing Officer makes a reference to the 
Valuation Officer under sub-section (1) of section 142A and ending with the date on which the report 
of the Valuation Officer is received by the Assessing Officer; or 

(vi)  the  period  (not  exceeding  sixty  days)  commencing  from  the  date  on  which  the  Assessing 
Officer  received  the  declaration  under  sub-section  (1)  of section  158A and  ending  with  the  date  on 
which the order under sub-section (3) of that section is made by him; or 

(vii)  in  a  case  where  an  application  made  before  the  Income-tax  Settlement  Commission  is 
rejected by it or is not allowed to be proceeded with by it, the period commencing from the date on 
which an application is made before the Settlement Commission under section 245C and ending with 
the  date  on  which  the  order  under  sub-section  (1)  of section  245D is  received  by  the  Principal 
Commissioner or Commissioner under sub-section (2) of that section; or 

(viii) the period commencing from the date on which an application is made before the Authority 
for  Advance  Rulings  under  sub-section  (1)  of section  245Q and  ending  with  the  date  on  which  the 
order  rejecting  the  application  is  received  by  the  Principal  Commissioner  or  Commissioner  under 
sub-section (3) of section 245R; or 

(ix) the period commencing from the date on which an application is made before the Authority 
for  Advance  Rulings  under  sub-section  (1)  of section  245Q and  ending  with  the  date  on  which  the 
advance ruling pronounced by it is received by the Principal Commissioner or Commissioner under 
sub-section (7) of section 245R; or 

(x)  the  period  commencing  from  the  date  on  which  a  reference  or  first  of  the  references  for 
exchange of information is made by an authority competent under an agreement referred to in section 
90 or section 90A and ending with the date on which the information requested is last received by the 
Principal Commissioner or Commissioner or a period of one year, whichever is less; or 

(xi) the period commencing from the date on which a reference for declaration of an arrangement 
to  be  an  impermissible  avoidance  arrangement  is  received  by  the  Principal  Commissioner  or 
Commissioner under sub-section (1) of section 144BA and ending on the date on which a direction 
under  sub-section  (3)  or  sub-section  (6)  or  an  order  under  sub-section  (5)  of  the  said  section  is 
received by the Assessing Officer, 

shall be excluded: 

Provided that where immediately after the exclusion of the aforesaid period, the period of limitation 
referred to in sub-sections (1), (2), (3) and sub-section (8) available to the Assessing Officer for making 
an order of assessment, reassessment or recomputation, as the case may be, is less than sixty days, such 
remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to 
be extended accordingly: 

591 

Provided further that where the period available to the Transfer Pricing Officer  is extended to sixty 
days  in  accordance  with  the  proviso  to  sub-section  (3A)  of section  92CA and  the  period  of  limitation 
available to the Assessing Officer for making an order of assessment, reassessment or recomputation, as 
the case may be, is less than  sixty days, such remaining period shall be extended to sixty days and the 
aforesaid period of limitation shall be deemed to be extended accordingly: 

Provided  also that  where  a  proceeding  before 

the  Settlement  Commission  abates  under  
section 245HA, the period of limitation available under this section to the Assessing Officer for making 
an order of assessment, reassessment or recomputation, as the case may be, shall, after the exclusion of 
the period under sub-section (4) of section 245HA, be not less than one year; and where such period of 
limitation is less than one year, it shall be deemed to have been extended to one year; and for the purposes 
of determining the period of limitation under sections 149,1*** 154, 155 and 158BE and for the purposes 
of payment of interest under section 244A, this proviso shall also apply accordingly. 

Explanation  2.—For  the  purposes  of  this  section,  where,  by  an  order  referred  to  in  clause  (i)  of  

sub-section (6),— 

(a) any income is excluded from the total income of the assessee for an assessment year, then, an 
assessment of such income for another assessment year shall, for the purposes of section 150 and this 
section,  be  deemed  to  be  one  made  in  consequence  of  or  to  give  effect  to  any  finding  or  direction 
contained in the said order; or 

(b)  any  income  is  excluded  from  the  total  income  of  one  person  and  held  to  be  the  income  of 
another  person,  then,  an  assessment  of  such  income  on  such  other  person  shall,  for  the  purposes 
of section 150 and this section, be deemed to be one made in consequence of or to give effect to any 
finding  or  direction  contained  in  the  said  order,  if  such  other  person  was  given  an  opportunity  of 
being heard before the said order was passed.] 

2[153A. Assessment in case of search or requisition.—3[(1)] Notwithstanding anything contained in 
ssection139, section 147, section 148, section 149, section 151 and section 153, in the case of a person 
where  a  search  is  initiated  under  section  132  or  books  of  account,  other  documents  or  any  assets  are 
requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall— 

(a) issue notice to such person requiring him to furnish within such period, as may be specified in 
the notice, the return of income in respect of each assessment year falling within six assessment years 
4[and for the relevant assessment year or years] referred to in clause (b), in the prescribed form and 
verified in the prescribed manner and setting forth such other particulars as may be prescribed and the 
provisions  of  this  Act  shall,  so  far  as  may  be,  apply  accordingly  as  if  such  return  were  a  return 
required to be furnished under  section 139; 

(b)  assess  or  reassess  the  total  income  of  six  assessment  years  immediately  preceding  the 
assessment year relevant to the previous year in which such search is conducted or requisition is made 
4[and for the relevant assessment year or years]: 

Provided that  the  Assessing  Officer  shall  assess  or  reassess  the  total  income  in  respect  of  each 
assessment  year  falling  within  such  six assessment  years   4[and  for  the  relevant assessment  year  or 
years]: 

1. The figures and letter “153B,” omitted by Act 7 of 2017, s. 59 (w.e.f. 1-4-2017). 
2. Ins. by Act 32 of 2003, s. 65 (w.e.f. 1-6-2003). 
3. Section 153A renumbered as sub-section (1) thereof by Act 18 of 2008, s. 36 (w.e.f. 1-6-2003). 
4. Ins. by Act 7 of 2017, s. 60 (w.e.f. 1-4-2017). 

592 

                                                           
Provided further that assessment or reassessment, if any, relating to any assessment year falling 
within the period of six assessment years 1[and for the relevant assessment year or years] 2[referred to 
in  this  sub-section]  pending  on  the  date  of  initiation  of  the  search  under section  132  or  making  of 
requisition under section 132A, as the case may be, shall abate: 

3[Provided also that the Central Government may by rulesmade by it and published in the Official 
Gazette (except in cases where any assessment or reassessment has abated under the second proviso), 
specify  the  class  or  classes  of  cases  in  which  the  Assessing  Officer  shall  not  be  required  to  issue 
notice for assessing or reassessing the total income for six assessment years immediately preceding 
the assessment year relevant to the previous year in which search is conducted or requisition is made 
1[and for the relevant assessment year or years]: 

1[Provided  also that  no  notice  for  assessment  or  reassessment  shall  be  issued  by  the  Assessing 

Officer for the relevant assessment year or years unless— 

(a)  the  Assessing  Officer  has  in  his  possession  books  of  account  or  other  documents  or 
evidence  which  reveal  that  the  income,  represented  in  the  form  of  asset,  which  has  escaped 
assessment  amounts  to  or  is  likely  to  amount  to  fifty  lakh  rupees  or  more  in  the  relevant 
assessment year or in aggregate in the relevant assessment years; 

(b) the income referred to in clause (a) or part thereof has escaped assessment for such year 

or years; and 

(c) the search under section 132 is initiated or requisition under section 132A is made on or 

after the 1st day of April, 2017. 

Explanation 1.—For the purposes of this sub-section, the expression “relevant assessment year” shall 
mean an assessment year preceding the assessment year relevant to the previous year in which search is 
conducted  or  requisition  is  made  which  falls  beyond  six  assessment  years  but  not  later  than  ten 
assessment  years  from  the  end  of  the  assessment  year  relevant  to  the  previous  year  in  which  search  is 
conducted or requisition is made. 

Explanation  2.—For  the  purposes  of  the  fourth  proviso,  “asset”  shall  include  immovable  property 

being land or building or both, shares and securities, loans and advances, deposits in bank account.] 

4[(2)  If  any  proceeding  initiated  or  any  order  of  assessment  or  reassessment  made  under  
sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything 
contained  in  sub-section  (1)  or  section  153,  the  assessment  or  reassessment  relating  to  any  assessment 
year which has abated under the second proviso to sub-section (1), shall stand revived with effect from 
the date of receipt of the order of such annulment by the 5[Principal Commissioner or Commissioner]: 

Provided that such revival shall cease to have effect, if such order of annulment is set aside.] 

Explanation.—For the removal of doubts, it is hereby declared that,— 

(i) save as otherwise provided in this section, section 153B and  section 153C, all other provisions 

of this Act shall apply to the assessment made under this section; 

(ii) in an assessment or reassessment made in respect of an assessment year under this section, the 

tax shall be chargeable at the rate or rates as applicable to such assessment year. 

1. Ins. by Act 7 of 2017, s. 60 (w.e.f. 1-4-2017). 
2. Subs. by Act 18 of 2008, s. 36, for “referred to in this section” (w.e.f. 1-6-2003). 
3. Ins. by Act 23 of 2012, s. 67 (w.e.f. 1-7-2012). 
4. Ins. by Act 18 of 2008, s. 36 (w.e.f. 1-6-2003). 
5. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.e.f. 1-6-2013). 

593 

 
                                                           
1[153B.  Time  limit  for  completion  of  assessment  under section  153A.—(1)  Notwithstanding 
anything  contained  in section  153,  the  Assessing  Officer  shall  make  an  order  of  assessment  or 
reassessment,— 

(a) in respect of each assessment year falling within six assessment years  2[and for the relevant 
assessment year or years] referred to in clause (b) of sub-section (1) of section 153A, within a period 
of  twenty-one  months  from  the  end  of  the financial year  in  which  the  last  of  the  authorisations  for 
search under section 132 or for requisition under section 132A was executed; 

(b) in respect of the assessment year relevant to the previous year in which search is conducted 
under section 132 or requisition is made under section 132A, within a period of twenty-one  months 
from  the  end  of  the  financial  year  in  which  the  last  of  the  authorisations  for  search  under section 
132 or for requisition under section 132A was executed: 

Provided that in case of other person referred to in section 153C, the period of limitation for making 
the  assessment  or  reassessment  shall  be  the  period  as  referred  to  in  clause  (a)  or  clause  (b)  of  this  
sub-section or nine months from the end of the financial year in which books of account or documents or 
assets  seized  or  requisitioned  are  handed  over  under section  153C to  the  Assessing  Officer  having 
jurisdiction over such other person, whichever is later: 

3[Provided further that in the case where the last of the authorisations for search under section 132 or 
for requisition under section 132A was executed during the financial year commencing on the 1st day of 
April, 2018,— 

(i)  the  provisions  of  clause  (a)  or  clause  (b)  of  this  sub-section  shall  have  effect,  as  if  for  the 

words “twenty-one months”, the words “eighteen months” had been substituted; 

(ii)  the  period  of  limitation  for  making  the  assessment  or  reassessment  in  case  of  other  person 
referred to in section 153C, shall be the period of eighteen months from the end of the financial year 
in  which  the  last  of  the  authorisations  for  search  under  section  132  or  for  requisition  under  
section 132A was executed or twelve months from the end of the financial year in which books of 
account  or  documents  or  assets  seized  or  requisitioned  are  handed  over  under  section  153C  to  the 
Assessing Officer having jurisdiction over such other person, whichever is later: 

Provided also that in the case where the last of the authorisations for search under section 132 or for 
requisition under section 132A was executed during the financial year commencing on or after the 1st day 
of April, 2019,— 

(i)  the  provisions  of  clause  (a)  or  clause  (b)  of  this  sub-section  shall  have  effect,  as  if  for  the 

words “twenty-one months”, the words “twelve months” had been substituted; 

(ii) the period of limitation for making the assessment or reassessment in case of other person referred 
to in section 153C, shall be the period of twelve months from the end of the financial year in which the last 
of the authorisations for search under section 132 or for requisition under section 132A was executed or 
twelve months from the end of the financial year in which books of account or documents or assets seized 
or requisitioned are handed over under section 153C to the Assessing Officer having jurisdiction over such 
other person, whichever is later: 

Provided also that in case where the last of the authorisations for search under section 132 or for 
requisition  under  section  132A  was  executed  and  during  the  course  of  the  proceedings  for  the 
assessment or reassessment of total income, a reference under sub-section (1) of section 92CA is made, 
the period available for making an order of assessment or reassessment shall be extended by twelve 
months: 

1. Subs. by Act 28 of 2016, s. 71, for section 153B (w.e.f. 1-6-2016). 
2. Ins. by Act 7 of 2017, s. 61 (w.e.f. 1-4-2017). 
3. Subs by s. 61, ibid., for the second and third provisos (w.e.f. 1-4-2017). 

594 

 
                                                           
Provided  also  that  in  case  where  during  the  course  of  the  proceedings  for  the  assessment  or 
reassessment of total income in case of other person referred to in section 153C, a reference under 
sub-section (1) of section 92CA is made, the period available for making an order of assessment or 
reassessment in case of such other person shall be extended by twelve months:] 

Provided also that in case where the last of the authorisations for search under section 132 or for 
requisition  under section  132A was  executed  and  during  the  course  of  the  proceedings  for  the 
assessment  or  reassessment  of  total  income,  a  reference  under  sub-section  (1)  of section  92CA is 
made, the period available for making an order of assessment or reassessment shall be extended by 
twelve months: 

Provided  also that  in  case  where  during  the  course  of  the  proceedings  for  the  assessment  or 
reassessment  of  total  income  in  case  of  other  person  referred  to in  section 153C,  a  reference  under  
sub-section (1) of section 92CA is made, the period available for making an order of assessment or 
reassessment in case of such other person shall be extended by twelve months.] 

(2) The  authorisation  referred  to  in  clause  (a)  and  clause  (b)  of  sub-section  (1)  shall  be  deemed  to 

have been executed,— 

(a) in the case of search, on the conclusion of search as recorded in the last panchnama drawn in 

relation to any person in whose case the warrant of authorisation has been issued; or 

(b) in the case of requisition under section 132A, on the actual receipt of the books of account or 

other documents or assets by the Authorised Officer. 

(3)  The  provisions  of  this  section,  as  they  stood  immediately  before  the  commencement  of  the 
Finance Act, 2016, shall apply to and in relation to any order of assessment or reassessment made before 
the 1st day of June, 2016: 

1[Provided that where a  notice under section 153A or section 153C has been issued prior to the 1st 
day  of  June,  2016  and  the  assessment  has  not  been  completed  by  such  date  due  to  exclusion  of  time 
referred to in the Explanation, such assessment shall be completed in accordance with the provisions of 
this section as it stood immediately before its substitution by the Finance Act, 2016 (28 of 2016).] 

Explanation.—In computing the period of limitation under this section— 

(i) the period during which the assessment proceeding is stayed by an order or injunction of any 

court; or 

(ii) the period commencing from the date on which the Assessing Officer directs the assessee to 

get his accounts audited under sub-section (2A) of section 142 and— 

(a) ending with the last date on which the assessee is required to furnish a report of such audit 

under that sub-section; or 

(b) where such direction is challenged before a court, ending with the date on which the order 

setting aside such direction is received by the Principal Commissioner or Commissioner; or 

(iii) the period commencing from the date on which the Assessing Officer makes a reference to 
the Valuation  Officer  under  sub-section  (1) of section  142A and  ending  with the  date  on  which  the 
report of the Valuation Officer is received by the Assessing Officer; or 

(iv)  the  time  taken  in  re-opening  the  whole  or  any  part  of  the  proceeding  or  in  giving  an 

opportunity to the assessee of being re-heard under the proviso to section 129; or 

(v) in a case where an application made before the Income-tax Settlement Commission is rejected 
by it or is not allowed to be proceeded with by it, the period commencing from the date on which an 
application is made before the Settlement Commission under section 245C and ending with the date 
on which the order under sub-section (1) of section 245D is received by the Principal Commissioner 
or Commissioner under sub-section (2) of that section; or 

1. Ins. by Act 7 of 2017, s. 61 (w.e.f. 1-6-2016). 

595 

                                                           
(vi) the period commencing from the date on which an application is made before the Authority 
for  Advance  Rulings  under  sub-section  (1)  of section  245Q and  ending  with  the  date  on  which  the 
order  rejecting  the  application  is  received  by  the  Principal  Commissioner  or  Commissioner  under 
sub-section (3) of section 245R; or 

(vii) the period commencing from the date on which an application is made before the Authority 
for  Advance  Rulings  under  sub-section  (1)  of section  245Q and  ending  with  the  date  on  which  the 
advance ruling pronounced by it is received by the Principal Commissioner or Commissioner under 
sub-section (7) of section 245R; or 

(viii) the period commencing from the date of annulment of a proceeding or order of assessment 
or reassessment referred to in sub-section (2) of section 153A, till the date of the receipt of the order 
setting aside the order of such annulment, by the Principal Commissioner or Commissioner; or 

(ix)  the  period  commencing  from  the  date  on  which  a  reference  or  first  of  the  references  for 
exchange  of  information  is  made  by  an  authority  competent  under  an  agreement  referred  to  in  
section  90 or section  90A and  ending  with  the  date  on  which  the  information  requested  is  last 
received by the Principal Commissioner or Commissioner or a period of one year, whichever is less; 
or 

(x) the period commencing from the date on which a reference for declaration of an arrangement 
to  be  an  impermissible  avoidance  arrangement  is  received  by  the  Principal  Commissioner  or 
Commissioner under sub-section (1) of section 144BA and ending on the date on which a direction 
under  sub-section  (3)  or  sub-section  (6)  or  an  order  under  sub-section  (5)  of  the  said  section  is 
received by the Assessing Officer, 

shall be excluded: 

Provided that where immediately after the exclusion of the aforesaid period, the period of limitation 
referred to in clause (a) or clause (b) of this sub-section available to the Assessing Officer for making an 
order of assessment or reassessment, as the case may be, is less than sixty days, such remaining period 
shall  be  extended  to  sixty  days  and  the  aforesaid  period  of  limitation  shall  be  deemed  to  be  extended 
accordingly: 

Provided further that where the period available to the Transfer Pricing Officer is extended to sixty 
days  in  accordance  with  the  proviso  to  sub-section  (3A)  of section  92CA and  the  period  of  limitation 
available to the Assessing Officer for making an order of assessment or reassessment, as the case may be, 
is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of 
limitation shall be deemed to be extended accordingly:] 

1[Provided  also that  where  a  proceeding  before  the  Settlement  Commission  abates  under           

section 245HA, the period of limitation available under this section to the Assessing Officer for making 
an order of assessment or reassessment, as the case may be, shall, after the exclusion of the period under 
sub-section (4) of section 245HA, be not less than one year; and where such period of limitation is less 
than one year, it shall be deemed to have been extended to one year.] 

153C.Assessment  of  income  of  any  other  person.—2[(1)]   3[Notwithstanding  anything  contained 
in section  139, section  147, section  148, section  149, section  151 and section  153,  where  the  Assessing 
Officer is satisfied that,— 

(a)  any  money,  bullion,  jewellery  or  other  valuable  article  or  thing,  seized  or  requisitioned, 

belongs to; or 

(b)  any  books  of  account  or  documents,  seized  or  requisitioned,  pertains  or  pertain  to,  or  any 

information contained therein, relates to, 

a person other than the person referred to in section 153A, then, the books of account or documents or 
assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such 

1. Ins. by Act 7 of 2017, s. 61 (w.e.f. 1-4-2017). 
2. Section 153C renumbered as sub-section (1) thereof by Act 18 of 2005, s. 47 (w.e.f. 1-6-2003). 
3. Subs. by Act 20 of 2015, s. 37, for certain words and figures (w.e.f. 1-6-2015). 

596 

                                                           
other person]  1[and that Assessing Officer shall proceed against each such other person and issue notice 
and assess or reassess the income of the other person in accordance with the provisions of section 153A, 
if,  that  Assessing  Officer  is  satisfied  that  the  books  of  account  or  documents  or  assets  seized  or 
requisitioned  have  a  bearing  on  the  determination  of  the  total  income  of  such  other  person2[for  six 
assessment  years  immediately  preceding  the  assessment  year  relevant  to  the  previous  year  in  which 
search  is  conducted  or  requisition  is  made  and] for  the  relevant  assessment  year  or  years  referred  to in 
sub-section (1) of section 153A]:] 

3[Provided that  in  case  of  such  other  person,  the  reference  to  the  date  of  initiation  of  the  search 
to  
under section  132 or  making  of 
4[sub-section  (1)  of  section 153A] shall  be  construed  as  reference to  the  date of receiving  the books  of 
account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over 
such other person:] 

requisition  under section  132A in 

the  second  proviso 

5[Provided further that the Central Government may by rulesmade by it and published in the Official 
Gazette,  specify  the  class  or  classes  of  cases  in  respect  of  such  other  person,  in  which  the  Assessing 
Officer  shall  not  be  required  to  issue  notice  for  assessing  or  reassessing  the  total  income  for  six 
assessment  years  immediately  preceding  the  assessment  year  relevant  to  the  previous  year  in  which 
search is conducted or requisition is made 2[and for the relevant assessment year or years as referred to in 
sub-section (1) of section 153A] except in cases where any assessment or reassessment has abated.] 

3[(2)  Where  books  of  account  or  documents  or  assets  seized  or  requisitioned  as  referred  to  in  
sub-section (1)  has  or  have  been  received  by  the  Assessing  Officer  having  jurisdiction  over  such  other 
person  after  the  due  date  for  furnishing  the  return  of  income  for  the  assessment  year  relevant  to  the 
previous year in which search is conducted under section 132 or requisition is made under section 132A 
and in respect of such assessment year— 

(a)  no  return  of  income  has  been  furnished  by  such  other  person  and  no  notice  under  

sub-section (1) of section 142 has been issued to him, or 

(b)  a  return  of  income  has  been  furnished  by  such  other  person  but  no  notice  under  
sub-section  (2)  of section  143 has  been  served  and  limitation  of  serving  the  notice  under  
sub-section (2) of section 143 has expired, or 

(c) assessment or reassessment, if any, has been made, 

before the date of receiving the books of account or documents or assets seized or requisitioned by the 
Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice 
and assess or reassess total income of such other person of such assessment year in the manner provided 
in section 153A.] 

6[153D. Prior approval necessary for assessment in cases of search or requisition.—No order of 
assessment  or  reassessment  shall  be  passed  by  an  Assessing  Officer  below  the  rank  of  Joint 
Commissioner 
(b)  of  
7[sub-section  (1)  of section  153A] or  the  assessment  year  referred  to  in  clause  (b)  of  sub-section  (1) 
of section 153B, except with the prior approval of the Joint Commissioner:] 

assessment  year 

respect  of 

referred 

clause 

each 

in 

in 

to 

8[Provided that  nothing  contained  in  this  section  shall  apply  where  the  assessment  or  reassessment 
order, as the case may be, is required to be passed by the Assessing Officer with the prior approval of the 
9[Principal Commissioner or Commissioner] under sub-section (12)of section 144BA.] 

1. Subs. by Act 25 of 2014, s. 55, for “and  that Assessing Officer shall proceed against each such other person and issue 
such other person notice and assess or reassess income of such other person in accordance with the provisons of section 
153A” (w.e.f. 1-10-2014). 

2. Ins. by Act 7 of 2017, s. 62 (w.e.f. 1-4-2017). 
3. Ins. by Act 18 of 2005, s. 47 (w.e.f. 1-6-2003). 
4. Subs. by 18 of 2008, s. 38, for “section 153A” (w.e.f. 1-6-2003). 
5. Ins. by Act 23 of 2012, s. 69 (w.e.f. 1-7-2012). 
6. Ins. by Act 22 of 2007, s. 50 (w.e.f. 1-6-2007). 
7. Subs. by Act 18 of 2008, s. 39, for “section 153A” (w.e.f. 1-6-2007). 
8. Ins. by Act 17 of 2013, s. 43 (w.e.f. 1-4-2016). 
9. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.e.f. 1-6-2013). 

597 

                                                           
154. Rectification of mistake.—1[(1) With a view to rectifying any mistake apparent from the record 

an income-tax authority referred to in section 116 may,— 

(a) amend any order passed by it under the provisions of this Act; 
2[(b) amend any intimation or deemed intimation under sub-section (1) of section 143;]] 
3[(c) amend any intimation under sub-section (1) of section 200A;] 
4[(d) amend any intimation under sub-section (1) of section 206CB.] 

5[(1A)  Where  any  matter  has  been  considered  and  decided  in  any  proceeding  by  way  of  appeal  or 
revision  relating  to  an  order  referred  to  in  sub-section  (1),  the  authority  passing  such  order  may, 
notwithstanding  anything  contained in  any  law  for  the  time  being  in  force,  amend  the  order  under  that 
sub-section in relation to any matter other than the matter which has been so considered and decided.] 

(2) Subject to the other provisions of this section, the authority concerned— 

(a) may make an amendment under sub-section (1) of its own motion, and 

(b)  shall  make  such  amendment  for  rectifying  any  such  mistake  which  has  been  brought  to  its 
notice 6[by the assessee or by the deductor,] 4[or by the collector], and where the authority concerned 
is the 7[8*** Commissioner (Appeals)], by the 9[Assessing Officer] also. 

10* 

* 

* 

* 

* 

(3)  An  amendment,  which  has  the  effect  of  enhancing  an  assessment  or  reducing  a  refund  or 
otherwise increasing the liability of  11[the assessee or the deductor] 4[or the collector], shall not be made 
under this section unless the authority concerned has given notice to  11[the assessee or the deductor] 4[or 
the collector] of its intention so to do and has allowed 11[the assessee or the deductor] 4[or the collector] a 
reasonable opportunity of being heard. 

(4)  Where  an  amendment  is  made  under  this  section,  an  order  shall  be  passed  in  writing  by  the 

income-tax authority concerned. 

12[(5) Where any such amendment has the effect of reducing the assessment or otherwise reducing the 
liability of the assessee or the deductor 4[or the collector], the Assessing Officer shall make any refund 
which may be due to such assessee or the deductor 4[or the collector].] 

(6)  Where  any  such  amendment  has  the  effect  of  enhancing  the  assessment  or  reducing  a  refund 
13[already made or otherwise increasing the liability of the assessee or the deductor 4[or the collector], the 
Assessing  Officer  shall  serve  on  the  assessee  or  the  deductor 4[or  the  collector],  as  the  case  may  be]  a 
notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be 
deemed to be issued under section 156 and the provisions of this Act shall apply accordingly. 

(7) Save as otherwise provided in section 155 or sub-section (4) of section 186 no amendment under 
this section shall be made after the expiry of four years 14[from the end of the financial year in which the 
order sought to be amended was passed]. 

1. Subs. by Act 4 of 1988, s. 60, for sub-section (1) (w.e.f. 1-4-1989). 
2. Subs. by Act 27 of 1999, s. 65, for clause (b) (w.e.f. 1-6-1999). 
3. Ins. by Act 23 of 2012, s. 70(w.e.f. 1-7-2012). 
4. Ins. by Act 20 of 2015, s. 38 (w.e.f. 1-6-2015). 
5. Ins. by Act 31 of 1964, s. 7 (w.e.f. 6-10-1964). 
6. Subs. by Act 23 of 2012, s. 70, for “by the assessee” (w.e.f. 1-7-2012). 
7. Ins. by Act 29 of 1977, s. 39 and the Fifth Schedule (w.e.f. 10-7-1978). 
8.  The  words  “Deputy  Commissioner  (Appeals)  or  the”  omitted  by  Act  21  of  1998,  s.  65  (w.e.f.  1-10-1998).  Earlier  the 

quoted words substituted by Act 4 of 1988, s. 2, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988). 

9. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
10. Omitted by Act 32 of 1994, s. 38 (w.e.f. 1-6-1994). Earlier the proviso inserted by Act 18 of 1992, s. 61 (w.e.f. 14-5-

1992). 

11. Subs. by Act 23 of 2012, s. 70, for “the assessee” (w.e.f. 1-7-2012). 
12. Subs. by s. 70,ibid., for sub-section (5) (w.e.f. 1-7-2012). 
13. Subs. by s. 70,ibid., for “already made, the Assessing Officer shall serve on the assessee” (w.e.f. 1-7-2012). 
14. Subs. by Act 67 of 1984, s. 29, for “from the date of the order sought to be amended” (w.e.f. 1-10-1984). 

598 

 
 
 
 
 
 
 
                                                           
1[(8)  Without  prejudice  to  the  provisions  of  sub-section  (7),  where  an  application  for  amendment 
under this section is made  2[by the assessee or by the deductor] 3[or by the collector] on or after the 1st 
day  of  June,  2001  to  an  income-tax  authority  referred  to  in  sub-section  (1),  the  authority  shall  pass  an 
order, within a period of six months from the end of the month in which the application is received by 
it,— 

(a) making the amendment; or 

(b) refusing to allow the claim.] 

155. Other  amendments.—(1)  4[Where,  in  respect  of  any  completed  assessment  of  a  partner  in  a 
firm for the assessment year commencing on the 1st day of April, 1992, or any earlier assessment year,] it 
is found— 

(a) on the assessment or reassessment of the firm, or 

(b) on any reduction or enhancement made in the income of the firm under this section, section 

154, section 250, section 254, section 260, section 262, section 263 or section 264, 5[or] 

5[(c) on any order passed under sub-section (4) of section 245D on the application made by the 

firm,] 

that  the  share  of  the  partner  in  the  income  of  the  firm  has  not  been  included  in  the  assessment  of  the 
partner or, if included, is not correct, the  6[Assessing Officer] may amend the order of assessment of the 
partner with a view to the inclusion of the share in the assessment or the correction thereof, as the case 
may be; and the provisions of section 154 shall, so far as may be, apply thereto, the period of four years 
specified in sub-section (7) of that section being reckoned  7[from the end of the financial year in which 
the final order was passed] in the case of the firm. 

8[(1A) Where in respect of any completed assessment of a firm it is found— 

(a) on the assessment or reassessment of the firm, or 

(b) on any reduction or enhancement made in the income of the firm under this section, section 

154, section 250, section 254, section 260, section 262, section 263 or section 264, or 

(c)  on  any  order  passed  under  sub-section  (4)  of section  245D on  the  application  made  by  the 

firm, 

that  any  remuneration  to  any  partner  is  not  deductible  under  clause  (b)  of section  40,  the  Assessing 
Officer  may  amend  the  order  of  assessment  of  the  partner  with  a  view  to  adjusting  the  income  of  the 
partner to the extent of the amount not so deductible ; and the provisions of section 154 shall, so far as 
may be, apply thereto, the period of four years specified in sub-section (7) of that section being reckoned 
from the end of the financial year in which the final order was passed in the case of the firm.] 

(2) Where in respect of any completed assessment of a member of an association of persons or of a 

body of individuals it is found— 

(a) on the assessment or reassessment of the association or body, or 

1. Ins. by Act 14 of 2001, s. 65 (w.e.f. 1-6-2001). 
2. Subs. by Act 23 of 2012, s. 70, for “by the assessee” (w.e.f. 1-7-2012). 
3. Ins. by Act 20 of 2015, s. 38 (w.e.f. 1-6-2015). 
4. Subs. by Act 18 of 1992, s. 62, for “Where in respect of any completed assessment of a partner in a firm” (w.e.f. 1-4-
1993). Earlier the quoted words were restoredby Act 3 of 1989, s. 95 (w.e.f. 1-4-1989) and substituted by Act 4 of 1988, 
s. 61 (w.e.f. 1-4-1989). 

5. Ins. by Act 67 of 1984, s. 30 (w.e.f. 1-10-1984). 
6. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
7. Subs. by Act 67 of 1984, s. 30, for “from the date of the final order passed” (w.e.f. 1-10-1984). 
8. Ins. by Act 18 of 1992, s. 62 (w.e.f. 1-4-1993). 

599 

                                                           
(b) on any reduction or enhancement made in the income of the association or body under this 
section, section  154, section  250, section  254, section  260, section  262, section  263 or section  264, 
1[or] 

1[(c) on any order passed under sub-section (4) of section 245D on the application made by the 

association or body,] 

that the share of the member in the income of the association or body, as the case may be, has not been 
included  in  the  assessment  of  the  member  or,  if  included,  is  not  correct,  the  2[Assessing  Officer]  may 
amend the order of assessment of the member with a view to the inclusion of the share in the assessment 
or the correction thereof, as the case may be; and the provisions of section 154 shall, so far as may be, 
apply thereto, the period of four years specified in sub-section (7) of that section being reckoned  3[from 
the end of the financial year in which the final order was passed] in the case of the association or body, as 
the case may be. 

4* 

* 

* 

* 

* 

(4)  Where  as  a  result  of  proceedings  initiated  under section  147,  a  loss  or  depreciation  has  been 
recomputed and in consequence thereof it is necessary to recompute the total income of the assessee for 
the succeeding year or years to which the loss or depreciation allowance has been carried forward and set 
off under the provisions of sub-section (1) of section 72, or sub-section (2) of section 73, or 5[sub-section 
(1)  or sub-section  (3)  of section  74],  6[or  sub-section (3)  of section  74A],  the  2[Assessing  Officer]  may 
proceed  to  recompute  the  total  income  in  respect  of  such  year  or  years  and  make  the  necessary 
amendment; and the provisions of section 154 shall, so far as may be, apply thereto, the period of four 
years specified in sub-section (7) of that section being reckoned  7[from the end of the financial  year in 
which the order was passed] under section 147. 

8[(4A)  Where  an  allowance  by  way  of  investment  allowance  has  been  made  wholly  or  partly  to  an 
assessee in respect of a ship or an aircraft or any machinery or plant in any assessment year under section 
32A and subsequently— 

(a) at any time before the expiry of eight years from the end of the previous year in which the 
ship or aircraft was acquired or the machinery or plant was installed, the ship, aircraft, machinery or 
plant is sold or otherwise transferred by the assessee to any person other than the Government, a local 
authority, a corporation established by a Central, State or Provincial Act or a Government company 
as  defined  in  section  617  of  the  Companies  Act,  1956  (1  of  1956),  or  in  connection  with  any 
amalgamation or succession referred to in sub-section (6) or sub-section (7) of section 32A; or 

(b) at any time before the expiry of ten years from the end of the previous year in which the ship 
or  aircraft  was  acquired  or  the  machinery  or  plant  was  installed,  the  assessee  does  not  utilise  the 
amount  credited  to  the  reserve  account  under  sub-section  (4)  of section  32A for  the  purposes  of 
acquiring a new ship or a new aircraft or new machinery or plant [other than machinery or plant of 
the nature referred to in clauses (a), (b) and (d) of9[the second proviso] to sub-section (1) ofsection 
32A] for the purposes of the business of the undertaking; or 

(c)  at  any  time  before  the  expiry  of  ten  years  referred  to  in  clause  (b)  the  assesseeutilises  the 

amount credited to the reserve account under sub-section (4) of section 32A— 

(i) for distribution by way of dividends or profits; or 

(ii) for remittance outside India as profits or for the creation of any asset outside India ; or 

1. Ins. by Act 67 of 1984, s. 30 (w.e.f. 1-10-1984). 
2. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
3. Subs. by Act 67 of 1984, s. 30, for “from the date of the final order passed” (w.e.f. 1-10-1984). 
4. Sub-section (3) omitted by Act 4 of 1988, s. 61 (w.e.f. 1-4-1989). 
5. Subs. by Act 11 of 1987, s. 74, for “sub-section (1) of section 74” (w.e.f. 1-4-1988). 
6. Ins. by Act 20 of 1974, s. 13 (w.e.f. 1-4-1975). 
7. Subs. by Act 67 of 1984, s. 30, for “from the date of the order passed” (w.e.f. 1-10-1984). 
8. Ins. by Act 66 of 1976, s. 21 (w.e.f. 1-4-1976). 
9. Subs. by Act 3 of 1989, s. 25, for “the proviso” (w.e.f. 1-4-1989). 

600 

 
 
 
 
 
 
 
 
                                                           
(iii) for any other purpose which is not a purpose of the business of the undertaking, 

the  investment  allowance  originally  allowed  shall  be  deemed  to  have  been  wrongly  allowed,  and  the 
1[Assessing Officer] may, notwithstanding anything contained in this Act, recompute the total income of 
the  assessee  for  the  relevant  previous  year  and  make  the  necessary  amendment;  and  the  provisions 
of section 154 shall, so far as may be, apply thereto, the period of four years specified in sub-section (7) 
of that section being reckoned,— 

(i) in a case referred to in clause (a), from the end of the previous year in which the sale or other 

transfer took place; 

(ii) in a case referred to in clause (b), from the end of the ten years referred to in that clause; 

(iii) in a case referred to in clause (c), from the end of the previous year in which the amount was 

utilised. 

Explanation.—For  the  purposes  of  clause  (b),  “new  ship”  or  “new  aircraft”  or  “new  machinery  or 

plant” shall have the same meanings as in the2[Explanation below sub-section (2) of section 32A].] 

(5) Where an allowance by way of development rebate has been made wholly or partly to an assessee 
in respect of a ship, machinery or plant installed after the 31st day of December, 1957, in any assessment 
year under section 33 or under the corresponding provisions of the Indian Income-tax Act, 1922 (11 of 
1922), and subsequently— 

(i) at any time before the expiry of eight years from the end of the previous year in which the ship 
was acquired or the machinery or plant was installed, the ship, machinery or plant is sold or otherwise 
transferred by the assessee to any person other than the Government, a local authority, a corporation 
established by a Central, State or Provincial Act or a Government company as defined in section 617 
of  the  Companies  Act,  1956  (1  of  1956),  or  in  connection  with  any  amalgamation  or  succession 
referred to in sub-section (3) or sub-section (4) of section 33; or 

(ii) at any time before the expiry of the eight years referred to in sub-section (3) of section 34, the 

assesseeutilises the amount credited to the reserve account under clause (a) of that sub-section— 

(a) for distribution by way of dividends or profits; or 

(b) for remittance outside India as profits or for the creation of any asset outside India; or 

(c) for any other purpose which is not a purpose of the business of the undertaking, 

the  development  rebate  originally  allowed  shall  be  deemed  to  have  been  wrongly  allowed,  and  the 
1[Assessing Officer] may, notwithstanding anything contained in this Act, recompute the total income of 
the  assessee  for  the  relevant  previous  year  and  make  the  necessary  amendment;  and  the  provisions 
of section 154 shall, so far as may be, apply thereto, the period of four years specified in sub-section (7) 
of that section being reckoned from the end of the previous year in which the sale or transfer took place or 
the money was so utilised. 

3[(5A) Where an allowance by way of development allowance has been made wholly or partly to an 
assessee  in  respect  of  the  cost  of  planting  in  any  area  in  any  assessment  year  under section  33A and 
subsequently— 

(i) at any time before the expiry of eight years from the end of the previous year in which such 
allowance was made, the land is sold or otherwise transferred by the assessee to any person other than 
the Government, a local authority, a corporation established by a Central, State or Provincial Act or a 
Government  company  as  defined  in  section  617  of  the  Companies  Act,  1956  (1  of  1956),  or  in 
connection with any amalgamation or succession referred to in sub-section (5) or sub-section (6) of 
section 33A; or 

1. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2. Subs. by Act 46 of 1986, s. 32, for “Explanation to clause (vi) of sub-section (1) of section 32” (w.e.f. 1-4-1988).  
3. Ins. by Act 10 of 1965, s. 39 (w.e.f. 1-4-1965). 

601 

                                                           
(ii) at any time before the expiry of the eight years referred to in sub-section (3) of section 33A, 

the assesseeutilises the amount credited to the reserve account under clause (ii) of that sub-section— 

(a) for distribution by way of dividends or profits; or 

(b) for remittance outside India as profits or for the creation of any asset outside India; or 

(c) for any other purpose which is not a purpose of the business of the undertaking; 

the  development  allowance  originally  allowed  shall  be  deemed  to  have  been  wrongly  allowed,  and  the 
1[Assessing Officer] may, notwithstanding anything contained in this Act, recompute the total income of 
the  assessee  for  the  relevant  previous  year  and  make  the  necessary  amendment;  and  the  provisions 
of section 154 shall, so far as may be, apply thereto, the period of four years specified in sub-section (7) 
of that section being reckoned from the end of the previous year in which the sale or transfer took place or 
the money was so utilised.] 

2[Explanation.—For the purposes of this sub-section, where an assessee having any leasehold or other 
right  of  occupancy  in  any  land  transfers  such  right,  he  shall  be  deemed  to  have  sold  or  otherwise 
transferred such land.] 

3[(5B) Where any deduction in respect of any expenditure on scientific research has been made in any 
assessment  year  under  sub-section  (2B)  of section  35 and  the  assessee  fails  to  furnish  a  certificate  of 
completion  of  the  programme  obtained  from  the  prescribed  authority  within  one  year  of  the  period 
allowed for its completion by such authority, the deduction originally made in excess of the expenditure 
actually  incurred  shall  be  deemed  to  have  been  wrongly  made,  and  the  1[Assessing  Officer]  may, 
notwithstanding anything contained in this Act, recompute the total income of the assessee for therelevant 
previous year and make the necessary amendment; and the provisions of section 154 shall, so far as may 
be, apply thereto, the period of four years specified in sub-section (7) of that section being reckoned from 
the  end  of  the  previous  year  in  which  the  period  allowed  for  the  completion  of  the  programme  by  the 
prescribed authority expired.] 

4* 

* 

* 

* 

* 

(7) Where as a result of any proceeding under this Act, in the assessment for any year of a company 
in whose case an order under section 104 has been made for that year, it is necessary to recompute the 
distributable  income  of  that  company,  the  1[Assessing  Officer]  may  proceed  to  recompute  the 
distributable income and determine  5[the tax] payable on the basis of such recomputation and make the 
necessary amendment; and the provisions of section 154 shall, so far as may be, apply thereto, the period 
of four years specified in sub-section (7) of that section being reckoned  6[from the end  of the financial 
year in which the final order was passed] in the case of the company in respect of that proceeding. 

* 

7* 
8[(7B)  Where  in  the  assessment  for  any  year,  the  capital  gain  arising  from  the  transfer  of  a  capital 
asset  is  not  charged  under section  45 by  virtue  of  the  provisions  of  clause  (iv)  or,  as  the  case  may  be, 
clause  (v)  of section  47,  but  is  deemed  under section  47A to  be  income  chargeable  under  the  head 
"Capital gains" of the previous year in which the transfer took place by reason of— 

* 

* 

* 

 (i) such capital asset being converted by the transferee company into, or being treated by it, as 

stock-in-trade of its business; or 

(ii) the parent company or its nominees or, as the case may be, the holding company ceasing to 

hold the whole of the share capital of the subsidiary company, 

1. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2. Ins. by Act 25 of 1975, s. 24 (w.e.f. 1-4-1975). 
3. Restored by Act 3 of 1989, s. 95 (w.e.f. 1-4-1989). Sub-section (5B) omitted by Act 4 of 1988, s. 61 (w.e.f. 1-4-1989) 

which was earlier inserted by Act 44 of 1980, s. 26 (w.e.f. 1-4-1981). 

4. Sub-section (6) omitted by Act 4 of 1988, s. 61 w.e.f. 1-4-1992. 
5. Subs. by Act 10 of 1965, s. 39, for “the super-tax” (w.e.f. 1-4-1965). 
6. Subs. by Act 67 of 1984, s. 30, for “from the date of the final order passed” (w.e.f. 1-10-1984). 
7. Sub-section (7A) omitted by Act 4 of 1988, s. 61 (w.e.f. 1-4-1992).  
8. Ins. by Act 67 of 1984, s. 30 (w.e.f. 1-4-1985). 

602 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
at any time before the expiry of the period of eight years from the date of such transfer, the Assessing 
Officer may, notwithstanding anything contained in this Act, recompute the total income of the transferor 
company for the relevant previous year and make the necessary amendment; and the provisions of section 
154 shall,  so  far  as  may  be,  apply  thereto,  the  period  of  four  years  specified  in  sub-section  (7)  of  that 
section being reckoned from the end of the previous year in which the capital asset was so converted or 
treated  or  in  which  the  parent  company  or  its  nominees  or,  as  the  case  may  be,  the  holding  company 
ceased to hold the whole of the share capital of the subsidiary company.] 

* 

* 

1* 
2[(10A) Where in the assessment for any year, a capital gain arising from the transfer of a 3[long-term 
capital  asset],  is  charged  to  tax  and  within  a  period  of  six  months  after  the  date  of  such  transfer,  the 
assessee  has  made  any  investment  or  deposit  in  any  specified  asset  within  the  meaning  of Explanation 
1 to sub-section (1) of section 54E, the 4[Assessing Officer] shall amend the order of assessment so as to 
exclude  the  amount  of  the  capital  gain  not  chargeable  to  tax  5[under  the  provisions  of  sub-section  (1) 
of section 54E]; and the provisions of section 154 shall, so far as may be, apply thereto, the period of four 
years specified in sub-section (7) of that section being  6[reckoned from the end of the financial year in 
which the assessment was made].] 

* 

* 

* 

* 

7* 
8[(11) Where in the assessment for any year, a capital gain arising from the transfer of any original 
asset as is referred to in section 54H is charged to tax and within the period extended under that section 
the assessee acquires the new asset referred to in that section or, as the case may be, deposits or invests 
the  amount  of  such  capital  gain  within  the  period  so  extended,  the  Assessing  Officer  shall  amend  the 
order of assessment so as to exclude the amount of the capital gain not chargeable to tax under any of the 
sections  referred  to  in section  54H;  and  the  provisions  of section  154 shall,  so  far  as  may  be,  apply 
thereto, the period of four years specified in sub-section (7) of section 154 being reckoned from the end of 
the previous year in which the compensation was received by the assessee. 

* 

* 

9[(11A)  Where  in  the  assessment  for  any  year,  the  deduction  under section  10A or section 
10B or section  10BA has  not  been  allowed  on  the  ground  that  such  income  has  not  been  received  in 
convertible  foreign  exchange  in  India,  or  having  been  received in convertible foreign  exchange  outside 
India, or having been converted into convertible foreign exchange outside India, has not been brought into 
India,  by  or  on  behalf  of  the  assessee  with  the  approval  of  the  Reserve  Bank  of  India  or  such  other 
authority as is authorised under any law for the time being in force for regulating payments and dealings 
in foreign exchange and subsequently such income or part thereof has been or is received in, or brought 
into, India in the manner aforesaid, the Assessing Officer shall amend the order of assessment so as to 
allow deduction under section 10A or section 10B or section 10BA, as the case may be, in respect of such 
income or part thereof as is so received in, or brought into, India, and the provisions of section 154 shall, 
so  far  as  may  be,  apply  thereto,  and  the  period  of  four  years  shall  be  reckoned  from  the  end  of  the 
previous year in which such income is so received in, or brought into, India.] 

(12)  Where  in  the  assessment  for  any  year  commencing  before  the  1st  day  of  April,  1988,  the 
deduction under section 80-O in respect of any income, being the whole or any part of income by way of 
royalty, commission, fees or any similar payment as is referred to in that section, has not been allowed on 
the  ground that  such income  has  not  been  received in  convertible  foreign  exchange  in  India,  or having 
been  received  in  convertible  foreign  exchange  outside  India,  or  having  been  converted into convertible 

1. Sub-sections (8), (8A), (9), (9A) and (10) omitted by Act 4 of 1988, s. 61 (w.e.f. 1-4-1992). 
2. Ins. by Act 29 of 1977, s. 23 (w.e.f. 1-4-1978). 
3. Subs. by Act 11 of 1987, s. 74, for “capital asset, not being a short-term capital asset” (w.e.f. 1-4-1988). 
4. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
5. Subs. by Act 19 of 1978, s. 19, for “under the provisions of section 54E” (w.r.e.f. 1-4-1974). 
6. Subs. by Act 67 of 1984, s. 30, for “reckoned from the date of the assessment” (w.e.f. 1-10-1984). 
7. Sub-section (10B) and (10C) omitted by Act 4 of 1988, s. 61 (w.e.f. 1-4-1992). 
8. Ins. by Act 49 of 1991, s. 48 (w.e.f. 1-10-1991). Sub-section (11) was omitted by Act 32 of 1985, s. 36 (w.e.f. 1-4-1986) 
and  sub-section  (12)  was  omitted  by  Act  11  of  1987,  s. 44  (w.e.f.  1-4-1988)  which  were  earlier  inserted  by  Act  20  of 
1974, s. 13 (w.e.f. 1-4-1974).  

9. Ins. by Act 29 of 2006, s. 14 (w.e.f. 13-7-2006). 

603 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
foreign  exchange  outside  India,  has  not  been  brought  into  India,  by  or  on  behalf  of  the  assessee  in 
accordance  with  any  law  for  the  time  being  in  force  for  regulating  payments  and  dealings  in  foreign 
exchange and subsequently such income or part thereof has been or is received in, or brought into, India 
in  the  manner  aforesaid,  the  Assessing  Officer  shall  amend  the  order  of  assessment  so  as  to  allow 
deduction  under section 80-O in  respect  of such income  or  part thereof  as  is  so  received  in,  or brought 
into,  India;  and  the  provisions  of section  154 shall,  so  far  as  may  be,  apply  thereto,  the  period  of  four 
years  specified  in  sub-section  (7)  of  that  section  being  reckoned  from  the  end  of  the  previous  year  in 
which such income is so received in, or brought into, India; so, however, that the period from the 1st day 
of  April,  1988  to  the  30th  day  of  September,  1991  shall  be  excluded  in  computing  the  period  of  four 
years.] 

1[(13)  Where  in  the  assessment  for  any  year,  the  deduction  under section  80HHB or section 
80HHC or section  80HHD or section  80HHE or section  80-O or section  80R or section  80RR or section 
80RRA has not been allowed on the ground that such income has not been received in convertible foreign 
exchange in India, or having been received in convertible foreign exchange outside India, or having been 
converted  into  convertible  foreign  exchange  outside  India,  has  not  been  brought  into  India,  by  or  on 
behalf  of  the  assessee  with  the  approval  of  the  Reserve  Bank  of  India  or  such  other  authority  as  is 
authorised  under  any  law  for  the  time  being  in  force  for  regulating  payments  and  dealings  in  foreign 
exchange and subsequently such income or part thereof has been or is received in, or brought into, India 
in  the  manner  aforesaid,  the  Assessing  Officer  shall  amend  the  order  of  assessment  so  as  to  allow 
deduction 
section  80-O or section  80R or section  80RR or section  80RRA,  as  the  case  may  be,  in  respect  of  such 
income or part thereof as is so received in, or brought into, India; and the provisions of section 154 shall, 
so  far  as  may  be,  apply  thereto,  and  the  period  of  four  years  shall  be  reckoned  from  the  end  of  the 
previous year in which such income is so received in, or brought into, India. 

80HHD or section 

80HHB or section 

80HHC or section 

under section 

80HHE or                       

2[(14) Where in the assessment for any previous year or in any intimation or deemed intimation under 
sub-section (1) of section 143 for any previous year,  3[credit for tax deducted or collected in accordance 
with the provisions of section 199 or, as the case may be, section 206C] has not been given on the ground 
that  the  certificate  furnished  under 4[section  203 or section  206C] was  not  filed  with  the  return  and 
subsequently such certificate is produced before the Assessing Officer within two years  from the end of 
the assessment year in which such income is assessable, the Assessing Officer shall amend the order of 
assessment or any intimation or deemed intimation under sub-section (1) of section 143, as the case may 
be, and the provisions of section 154 shall, so far as may be, apply thereto: 

Provided that nothing contained in this sub-section shall apply unless the 5[income from which the tax 
has  been  deducted  or  income  on  which  the  tax  has  been  collected]  has  been  disclosed  in  the  return  of 
income filed by the assessee for the relevant assessment year. 

6[(14A)  Where  in  the  assessment  for  any  previous  year  or  in  any  intimation  or  deemed  intimation 
under  sub-section  (1)  of  section  143  for  any  previous  year,  credit  for  income-tax  paid  in  any  country 
outside India or a specified terriotory outside India referred to in section 90, section 90A or section 91 has 
not been given on the ground that the payment of such tax was under dispute, and if subsequently such 
dispute is settled, and the assessee, within six months from the end of the month in which the dispute is 
settled, furnishes to the Assessing Officer evidence of settlement of dispute and evidence of payment of 
such tax along with an undertaking that no credit in respect of such amount has directly or indirectly been 
claimed or shall be claimed for any other assessment year, the Assessing Officer shall amend the order of 
assessment or any intimation or deemed intimation under sub-section (1) of section 143, as the case may 
be, and the provisions of section 154 shall, so far as may be, apply thereto: 

1. Ins. by Act 27 of 1999, s. 66 (w.e.f. 1-6-1999). Sub-section (13) was omitted by Act 4 of 1988, s. 61 (w.e.f. 1-4-1989) 

which was inserted by Act 25 of 1975, s. 24 (w.e.f. 1-4-1975). 

2. Ins. by Act 20 of 2002, s. 62 (w.e.f. 1-6-2002). 
3.  Subs.  by  Act  21  of  2006,  s.  39,  for  “credit  for  tax  deducted  in  accordance  with  the  provisions  of  section  199”                           

(w.e.f. 1-4-2007). 

4. Subs. by s. 39, ibid., for “section 203” (w.e.f. 1-4-2007). 
5. Subs. by Act 21 of 2006, s. 39, for “income from which the tax has been deducted” (w.e.f. 1-4-2007). 
6. Ins. by Act 7 of 2017, s. 63 (w.e.f. 1-4-2018). 

604 

                                                           
Provided that the credit of tax which was under dispute shall be allowed for the year in which such 

income is offered to tax or assessed to tax in India:] 

(15) Where in the assessment for any year, a capital gain arising from the transfer of a capital asset, 
being  land  or  building  or  both,  is  computed  by  taking  the  full  value  of  the  consideration  received  or 
accruing  as  a  result  of  the  transfer  to  be  the  value  adopted  or  assessed  by  any  authority  of  a  State 
Government for the purpose of payment of stamp duty in accordance with sub-section (1) of section 50C, 
and subsequently such value is revised in any appeal or revision or reference referred to in clause (b) of 
sub-section  (2)  of  that  section,  the  Assessing  Officer  shall  amend  the  order  of  assessment  so  as  to 
compute the capital gain by taking the full value of the consideration to be the value as so revised in such 
appeal or revision or reference; and the provisions of section 154 shall, so far as may be, apply thereto, 
and  the  period  of  four  years  shall  be  reckoned  from  the  end  of  the  previous  year  in  which  the  order 
revising the value was passed in that appeal or revision or reference.] 

1[(16) Where in the assessment for any year, a capital gain arising from the transfer of a capital asset, 
being  a  transfer  by  way  of  compulsory  acquisition  under  any  law,  or  a  transfer,  the  consideration  for 
which was determined or approved by the Central Government or the Reserve Bank of India, is computed 
by  taking  the  compensation  or  consideration  as  referred  to  in  clause  (a)  or,  as  the  case  may  be,  the 
compensation or consideration enhanced or further enhanced as referred to in clause (b) of sub-section (5) 
of section 45, to be the full value of consideration deemed to be received or accruing as a result of the 
transfer  of  the  asset  and  subsequently  such  compensation  or  consideration  is  reduced  by  any  court, 
Tribunal or other authority, the Assessing Officer shall amend the order of assessment so as to compute 
the capital gain by taking the compensation or consideration as so reduced by the court, Tribunal or any 
other authority to be the full value of consideration; and the provisions of section 154 shall, so far as may 
be,  apply  thereto,  and  the  period  of  four  years  shall  be  reckoned  from  the  end  of  the  previous  year  in 
which the order reducing the compensation was passed by the court, Tribunal or other authority. 

(17) Where a deduction has been allowed to an assessee in any assessment year under section 80RRB 
in  respect  of  any  patent,  and  subsequently  by  an  order  of  the  Controller  or  the  High  Court  under  the 
Patents Act, 1970 (39 of 1970),— 

 (i) the patent was revoked, or 

(ii) the name of the assessee was excluded from the patents register as patentee in respect of that 

patent, 

the deduction from the income by way of royalty attributable to the period during which the patent had 
been  revoked  or  the  period  for  which  the  assessee’s  name  was  excluded  as  patentee  in  respect  of  that 
patent, shall be deemed to have been wrongly allowed and the Assessing Officer may, notwithstanding 
anything contained in this Act, recompute the total income of the assessee for the relevant previous year 
and make necessary amendment; and the provisions of section 154 shall, so far as may be, apply thereto, 
the period of four years specified in sub-section (7) of that section being reckoned from the end of the 
previous year in which such order of the Controller referred to in clause (b) of sub-section (1), or the High 
Court referred to in clause (i) of sub-section (1) of section 2, of the Patents Act, 1970 (39 of 1970), as the 
case may be, was passed.] 

2[Explanation.—For the purposes of this section,— 

(a)  “additional  compensation”  shall  have  the  meaning  assigned  to  it  in  clause  (1)  of 

the Explanation to sub-section (2) of section 54; 

(b) “additional consideration”, in relation to the transfer of any capital asset the consideration for 
which was determined or approved by the Central Government or the Reserve Bank of India, means 
the  difference  between  the  amount  of  consideration  for  such  transfer  as  enhanced  by  any  court, 
tribunal  or  other  authority  and  the  amount  of  consideration  which  would  have  been  payable  if  such 
enhancement had not been made.] 

1. Ins. by Act 32 of 2003, s. 66 (w.e.f. 1-4-2004). 
2. Ins. by Act 19 of 1978, s. 19 (w.e.f. 1-4-1974). 

605 

                                                           
 
156. Notice  of  demand.—When  any  tax,  interest,  penalty,  fine  or  any  other sum1***  is  payable in 
consequence of any order passed under this Act, the  2[Assessing Officer] shall serve upon the assessee a 
notice of demand in the prescribed formspecifying the sum so payable: 

3[Provided that  where  any  sum  is  determined  to  be  payable  by  the  assessee  or4[the  deductor  or  the 
collector  under  sub-section  (1)  of section  143 or  sub-section  (1)  of section  200A or  sub-section  (1) 
of section 206CB], the intimation under those sub-sections shall be deemed to be a notice of demand for 
the purposes of this section.] 

157. Intimation of loss.—When, in the course of the assessment of the total income of any assessee, 
it is established that a loss has taken place which the assessee is entitled to have carried forward and set 
off under the provisions of sub-section (1) of section 72, sub-section (2) of section 73, 5[ 6[sub-section (1) 
or sub-section (3) of section 74] or sub-section (3) of section 74A], the 2[Assessing Officer] shall notify to 
the  assessee  by  an  order  in  writing  the  amount  of  the  loss  as  computed  by  him  for  the  purposes  of  
sub-section  (1)  of section  72,  sub-section  (2)  of section  73,  5[6[sub-section  (1)  or  sub-section  (3)  of  
section 74] or sub-section (3) of section 74A]. 

158. Intimation of assessment of firm.—7[Whenever, in respect of the assessment year commencing 
on  the  1st  day  of  April,  1992,  or  any  earlier  assessment  year,  a  registered  firm  is  assessed],  or  an 
unregistered firm is assessed under the provisions of clause (b) of section 183, the  2[Assessing Officer] 
shall  notify  to  the  firm  by  an  order  in  writing  the  amount  of  its  total  income  assessed  and  the 
apportionment thereof between the several partners. 

8[CHAPTER XIVA 

SPECIAL PROVISION FOR AVOIDING REPETITIVE APPEALS 

158A. Procedure when assessee claims identical question of law is pending before High Court or 
Supreme Court.—(1) Notwithstanding anything contained in this Act, where an assessee claims that any 
question  of  law  arising  in  his  case  for  an  assessment  year  which  is  pending  before  the  2[Assessing 
Officer]  or  any  appellate  authority  (such  case  being  hereafter  in  this  section  referred  to  as  the  relevant 
case) is identical with a question of law arising in his case for another assessment year which is pending 
before  the  High  Court  on  a  reference  under section  256 or  9[before  the  Supreme  Court  on  a  reference 
under section  257 or  in  appeal  under section  260A before  the  High  Court  or  in  appeal  under  
section 261 before the Supreme Court] (such case being hereafter in this section referred to as the other 
case),  he  may  furnish  to  the  2[Assessing  Officer]  or  the  appellate  authority,  as  the  case  may  be,  a 
declaration in the prescribed form and verifiedin the prescribed manner, that if the 2[Assessing Officer] or 
the appellate authority, as the case may be, agrees to apply in the relevant case the final decision on the 
question of  law in the other case, he shall not raise such question of law in the relevant case in appeal 
before  any  appellate  authority  or  10[in  appeal  before  the  High  Court  under section  260A or  in  appeal 
before the Supreme Court under section 261]. 

1. The brackets, words, figures and letter “(including annuity deposit referred to in Chapter XXII-A)” omitted by Act 13 of 

1966, s. 32 and The Third Schedule (w.e.f. 1-4-1967). 

2. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
3. Subs. by Act 23 of 2012, s. 71, for the proviso (w.e.f. 1-7-2012). 
4. Subs. by  Act 20 of 2015, s. 39, for “by the deductor under sub-section (1) of section 143 or sub-section (1) of section 

200A” (w.e.f. 1-6-2015). 

5. Subs. by Act 20 of 1974, s. 13, for “or sub-section (1) of section 74” (w.e.f. 1-4-1975). 
6. Subs. by Act 11 of 1987, s. 74, for “sub-section (1) of section 74” (w.e.f. 1-4-1988). 
7. Subs. by Act 18 of 1992, s. 63, for “Whenever a registered firm is assessed” (w.e.f. 1-4-1993). 
8. Ins. by Act 67 of 1984, s. 31 (w.e.f. 1-10-1984). 
9. Subs. by Act 20 of 2002, s. 63, for “before the Supreme Court on a reference under section 257 or in appeal under section 

261” (w.e.f. 1-6-2002). 

10. Subs. by s. 63, ibid., for “for a reference before the High Court under section 256 or the Supreme Court under section 

257 or in appeal before the Supreme Court under section 261” (w.e.f. 1-6-2002). 

606 

                                                           
(2)  Where  a  declaration  under  sub-section  (1)  is  furnished  to  any  appellate  authority,  the  appellate 
authority shall call for a report from the 1[Assessing Officer] on the correctness of the claim made by the 
assessee  and,  where  the  1[Assessing  Officer]  makes  a  request  to  the  appellate  authority  to  give  him  an 
opportunity of being heard in the matter, the appellate authority shall allow him such opportunity. 

(3)  The  1[Assessing  Officer]  or  the  appellate  authority,  as  the  case  may  be,  may,  by  order  in 

writing,— 

(i)  admit the claim of the assessee if he or it is satisfied that the question of law arising in the 

relevant case is identical with the question of law in the other case; or 

(ii)  reject the claim if he or it is not so satisfied. 

(4) Where a claim is admitted under sub-section (3),— 

(a)  the  1[Assessing Officer] or, as the case may be, the appellate authority may  make an order 
disposing of the relevant case without awaiting the final decision on the question of law in the other 
case; and 

(b)  the assessee shall not be entitled to raise, in relation to the relevant case, such question of law 
in appeal before any appellate authority or  2[in appeal before the High Court under section 260A or 
the Supreme Court undersection 261]. 

(5) When the decision on the question of law in the other case becomes final, it shall be applied to the 
relevant  case  and  the  1[Assessing  Officer]  or  the  appellate  authority,  as  the  case  may  be,  shall,  if 
necessary, amend the order referred to in clause (a) of sub-section (4) conformably to such decision. 

(6) An order under sub-section (3) shall be final and shall not be called in question in any proceeding 

by way of appeal, reference or revision under this Act. 

Explanation.— In this section,— 

(a)  “appellate  authority”  means  the  3[Deputy  Commissioner  (Appeals)],  the  Commissioner 

(Appeals) or the Appellate Tribunal; 

(b) ”case”, in relation to an assessee, means any proceeding under this Act for the assessment of 

the total income of the assessee or for the imposition of any penalty or fine on him.] 

4[158AA.  Procedure  when  in  an  appeal  by  revenue  an  identical  question  of  law  is  pending 
before Supreme Court.—(1) Notwithstanding anything contained in this Act, where the Commissioner 
or Principal Commissioner is of the opinion that any question of law arising in the case of an assessee for 
any assessment year (such case being herein referred to as relevant case) is identical with a question of 
law  arising  in  his  case  for  another  assessment  year  which  is  pending  before  the  Supreme  Court,  in  an 
appeal under section 261 or in a special leave petition under article 136 of the Constitution, against the 
order of the High Court in favour of the assessee (such case being herein referred to as the other case), he 
may, instead of directing the Assessing Officer to appeal to the Appellate Tribunal under sub-section (2) 
or sub-section (2A) of section 253, direct the Assessing Officer to make an application to the Appellate 
Tribunal  in  the  prescribed  form  within  sixty  days  from  the  date  of  receipt  of  the  order  of  the 
Commissioner (Appeals) stating that an appeal on the question of law arising in the relevant case may be 
filed when the decision on the question of law becomes final in the other case. 

1. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2. Subs. by Act 20 of 2002, s. 63, for “for a reference before the High Court under section 256 or the Supreme Court under 

section 257 or in appeal before the Supreme Court under section 261” (w.e.f. 1-6-2002). 
3. Subs. by Act 4 of 1988, s. 2, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988). 
4. Ins. by Act 20 of 2015, s. 40 (w.e.f. 1-6-2015). 

607 

                                                           
(2)  The  Commissioner  or  Principal  Commissioner  shall  direct  the  Assessing  Officer  to  make  an 
application under sub-section (1) only if an acceptance is received from the assessee to the effect that the 
question  of  law  in  the  other  case  is  identical  to  that  arising  in  the  relevant  case;  and  in  case  no  such 
acceptance  is  received,  the  Commissioner  or  Principal  Commissioner  shall  proceed  in  accordance  with 
the provisions contained in sub-section (2) or sub-section (2A) of section 253. 

(3) Where the order of the Commissioner (Appeals) referred to in sub-section (1) is not in conformity 
with  the  final  decision  on  the  question  of  law  in  the  other  case,  the  Commissioner  or  Principal 
Commissioner  may  direct  the  Assessing  Officer  to  appeal to  the  Appellate  Tribunal  against  such  order 
and save as otherwise provided in this section all other provisions of Part B of Chapter XX shall apply 
accordingly. 

(4)  Every  appeal  under  sub-section  (3)  shall  be  filed  within  sixty  days  from  the  date  on  which  the 
order  of  the  Supreme  Court  in  the  other  case  is  communicated  to  the  Commissioner  or  Principal 
Commissioner.] 

1[CHAPTER XIVB 

SPECIAL PROCEDURE FOR ASSESSMENT OF SEARCH CASES 

158B.Definitions.—In this Chapter, unless the context otherwise requires,— 

2[(a) “block period” means the period comprising previous years relevant to six assessment years 
preceding the previous year in which the search was conducted under section 132 or any requisition 
was made under section 132A and also includes the period up to the date of the commencement of 
such search or date of such requisition in the previous year in which the said search was conducted or 
requisition was made: 

Provided that where the search is initiated or the requisition is made before the 1st day of June, 
2001,  the  provisions of this  clause  shall  have  effect as  if for the  words  “six assessment  years”, the 
words “ten assessment years” had been substituted;] 

(b)   “undisclosed  income”  includes  any  money,  bullion,  jewellery  or  other  valuable  article  or 
thing or any income based on any entry in the books of account or other documents or transactions, 
where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other 
document or transaction represents wholly or partly income or property which has not been or would 
not  have  been  disclosed  for  the  purposes  of  this  Act3[,  or  any  expense,  deduction  or  allowance 
claimed under this Act which is found to be false]. 

158BA.  Assessment  of  undisclosed  income  as  a  result  of  search.—(1)  Notwithstanding  anything 
contained in any other provisions of this Act, where after the 30th day of June, 1995 a search is initiated 
under section  132 or  books  of  account,  other  documents  or  any  assets  are  requisitioned  under section 
132A in  the  case  of  any  person,  then,  the  Assessing  Officer  shall  proceed  to  assess  the  undisclosed 
income in accordance with the provisions of this Chapter. 

(2)  The  total  undisclosed  income  relating  to  the  block  period  shall  be  charged  to  tax,  at  the  rate 
specified in section 113, as income of the block period irrespective of the previous year or years to which 
such income relates and irrespective of the fact whether regular assessment for any one or more of the 
relevant assessment years is pending or not. 

4[Explanation.—For the removal of doubts, it is hereby declared that— 

(a)   the  assessment  made  under  this  Chapter  shall  be  in  addition  to  the  regular  assessment  in 

respect of each previous year included in the block period; 

1. Ins. by Act 22 of 1995, s. 32 (w.e.f. 1-7-1995). 
2. Subs. by 14 of 2001, s. 66, for clause (a) (w.e.f. 1-6-2001). 
3. Ins. by Act 20 of 2002, s. 64 (w.e.f. 1-7-1995). 
4. Ins. by Act 21 of 1998, s. 44 (w.e.f. 1-7-1995). 

608 

                                                           
(b) the total undisclosed income relating to the block period shall not include the income assessed 

in any regular assessment as income of such block period; 

(c) the  income  assessed  in  this  Chapter  shall  not  be  included  in  the  regular  assessment  of  any 

previous year included in the block period.] 

(3)  Where  the  assessee  proves  to  the  satisfaction  of  the  Assessing  Officer  that  any  part  of  income 
referred to in sub-section (1) relates to an assessment year for which the previous year has not ended or 
the date of filing the return of income under sub-section (1) of section 139 for any previous year has not 
expired, and such income or the transactions relating to such income are recorded on or before the date of 
the  search  or  requisition  in  the  books  of  account  or  other  documents  maintained  in  the  normal  course 
relating to such previous years, the said income shall not be included in the block period. 

158BB. Computation of undisclosed income of the block period.—(1) The undisclosed income of 
the block period shall be the aggregate of the total income of the previous years falling within the block 
period  computed,  1[in  accordance  with  the  provisions  of  this  Act,  on  the  basis  of  evidence  found  as  a 
result  of  search  or  requisition  of  books  of  account  or  other  documents  and  such  other  materials  or 
information as are available with the Assessing Officer and relatable to such evidence], as reduced by the 
aggregate of the total income, or as the case may be, as increased by the aggregate of the losses of such 
previous years, determined,— 

(a)  where  assessments  under section  143 or section  144 or section  147 2[have  been  concluded 
prior  to  the  date  of  commencement  of  the  search  or  the  date  of  requisition],  on  the  basis  of  such 
assessments; 

(b)  where returns of income have been filed under section 139 3[or in response to a notice issued 
under sub-section (1) of section 142 or section 148] but assessments have not been made till the date 
of search or requisition, on the basis of the income disclosed in such returns; 

4[(c)  where the  due date  for  filing  a  return  of income  has expired,  but  no return  of income  has 

been filed,— 

(A)   on  the  basis  of  entries  as  recorded  in  the  books  of  account  and  other  documents 
maintained  in  the  normal  course  on  or  before  the  date  of  the  search  or  requisition  where  such 
entries result in computation of loss for any previous year falling in the block period; or 

(B)   on  the  basis  of  entries  as  recorded  in  the  books  of  account  and  other  documents 
maintained  in  the  normal  course  on  or  before  the  date  of  the  search  or  requisition  where  such 
income does not exceed the maximum amount not chargeable to tax for any previous year falling 
in the block period; 

(ca)  where  the  due  date  for  filing  a  return  of  income  has  expired,  but  no  return  of  income  has 

been filed, as nil, in cases not falling under clause (c);] 

(d)   where  the  previous  year  has  not  ended  or  the  date  of  filing  the  return  of  income  under  
sub-section  (1)  of section  139 has  not  expired,  on  the  basis  of  entries  relating  to  such  income  or 
transactions  as  recorded  in  the  books  of  account  and  other  documents  maintained  in  the  normal 
course on or before the date of the search or requisition relating to such previous years; 

(e)  where any order of settlement has been made under sub-section (4) of section 245D, on the 

basis of such order; 

1. Subs. by Act 20 of 2002, s. 65, for certain words and figure (w.e.f. 1-7-1995). 
2. Subs. by s. 65, ibid., for “have been concluded” (w.e.f. 1-7-1995). 
3. Subs. by s. 65, ibid., for “or section 147” (w.e.f. 1-7-1995). 
4. Subs. by s. 65, ibid., for clause (c) (w.e.f. 1-7-1995). 

609 

                                                           
(f)  where  an  assessment  of  undisclosed  income  had  been  made  earlier  under  clause  (c)  of  

section 158BC, on the basis of such assessment. 

Explanation.—For the purposes of determination of undisclosed income,— 

(a) the total income or loss of each previous year shall, for the purpose of aggregation, be taken 
as the total income or loss computed in accordance with the provisions of  1[this Act] without giving 
effect  to  set  off  of  brought  forward  losses  under  Chapter  VI  or  unabsorbed  depreciation  under  
sub-section (2) of section 32: 

2[Provided that  in  computing  deductions  under  Chapter  VIA  for  the  purposes  of  the  said 
aggregation, effect shall be given to set off of brought forward losses under Chapter VI or unabsorbed 
depreciation under sub-section (2) of section 32;] 

3[(b) of a firm, returned income and total income assessed for each of the previous years falling 
within the block period shall be the income determined before allowing deduction of salary, interest, 
commission,  bonus  or remuneration  by  whatever  name  called  4[to  any  partner not  being  a  working 
partner]: 

Provided that undisclosed income of the firm so determined shall not be chargeable to tax in the 

hands of the partners, whether on allocation or on account of enhancement;] 

(c)  assessment  under section  143 includes  determination  of  income  under  sub-section  (1)  or  

sub-section (1B) of section 143. 

(2) 

In  computing 

the  provisions  of  
income  of 
sections  68, 69, 69A, 69B and 69C shall,  so  far  as  may  be,  apply  and  references  to  “financial  year”  in 
those sections  shall  be  construed  as  references  to  the  relevant  previous  year falling  in  the  block  period 
including the previous year ending with the date of search or of the requisition. 

the  block  period, 

the  undisclosed 

(3) The  burden  of  proving  to the  satisfaction  of the Assessing  Officer that  any  undisclosed  income 
had  already  been  disclosed  in  any  return  of income  filed  by  the  assessee  before  the  commencement  of 
search or of the requisition, as the case may be, shall be on the assessee. 

(4) For the purpose of assessment under this Chapter, losses brought forward from the previous year 
under  Chapter  VI  or  unabsorbed  depreciation  under  sub-section  (2)  of section  32 shall  not  be  set  off 
against the undisclosed income determined in the block assessment under this Chapter, but may be carried 
forward for being set off in the regular assessments. 

158BC.  Procedure  for  block  assessment.—Where  any  search  has  been  conducted  under  
 section 132 or books of account, other documents or assets are requisitioned under section 132A, in the 
case of any person, then,— 

5[(a) the Assessing Officer shall— 

(i)  in  respect  of  search  initiated  or  books  of  account  or  other  documents  or  any  assets 
requisitioned after the 30th day of June, 1995, but before the 1st day of January, 1997, serve a 
notice to such person requiring him to furnish within such time not being less than fifteen days; 

(ii)  in  respect  of  search  initiated  or  books  of  account  or  other  documents  or  any  assets 
requisitioned on or after the 1st day of January, 1997, serve a notice to such person requiring him 
to furnish within such time not being less than fifteen days but not more than forty-five days, 

1. Subs. by Act 20 of 2002, s. 65, for “Chapter IV” (w.e.f. 1-7-1995). 
2. Ins. by s. 65, ibid. (w.e.f. 1-7-1995). 
3. Subs. by Act 33 of 1996, s. 46, for clause (b) (w.e.f. 1-7-1995). 
4. Ins. by Act 21 of 1998, s. 45 (w.e.f. 1-4-1999). 
5. Subs. by Act 14 of 1997, s. 4, for clause (a) (w.e.f. 1-1-1997).  

610 

                                                           
as may be specified in the notice a return in the prescribed formand verified in the same manner as a 
return under clause (i) of sub-section (1) of section 142, setting forth his total income including the 
undisclosed income for the block period: 

Provided that no notice under section 148 is required to be issued for the purpose of proceeding 

under this Chapter: 

Provided further that a person who has furnished a return under this clause shall not be entitled to 

file a revised return;] 

(b) the Assessing Officer shall proceed to determine the undisclosed income of the block period 
in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) 
of section 1431[, section 144 and section 145] shall, so far as may be, apply; 

(c)  the  Assessing  Officer,  on  determination  of  the  undisclosed  income  of  the  block  period  in 
accordance with this Chapter, shall pass an order of assessment and determine the tax payable by him 
on the basis of such assessment; 

2[(d) the assets seized under section 132 or requisitioned under section 132A shall be dealt with in 

accordance with the provisions of section 132B.] 

158BD.  Undisclosed  income  of  any  other  person.—Where  the  Assessing  Officer  is  satisfied  that 
any undisclosed income belongs to any person, other than the person with respect to whom search was 
made under section 132 or whose books of account or other documents or any assets were requisitioned 
under section 132A, then, the books of account, other documents or assets seized or requisitioned shall be 
handed  over  to  the  Assessing  Officer  having  jurisdiction  over  such  other  person  and  that  Assessing 
Officer shall proceed 3[under section 158BC] against such other person and the provisions of this Chapter 
shall apply accordingly. 

158BE. Time 

limit  for  completion  of  block  assessment.—4[(1)  The  order  under section 

158BC shall be passed— 

(a) within one year from the end of the month in which the last of the authorisations for search 
under section  132 or for  requisition under section 132A,  as the case  may  be,  was  executed in  cases 
where  a  search  is  initiated  or  books  of  account  or  other  documents  or  any  assets  are  requisitioned 
after the 30th day of June, 1995, but before the 1st day of January, 1997; 

(b) within two years from the end of the month in which the last of the authorisations for search 
under section  132 or for  requisition under section 132A,  as the case  may  be,  was  executed in  cases 
where a search is initiated or books of account or other documents or any assets are requisitioned on 
or after the 1st day of January, 1997. 

(2)  The  period  of  limitation  for  completion  of  block  assessment  in  the  case  of  the  other  person 

referred to in section 158BD shall be— 

(a) one year from the end of the month in which the notice under this Chapter was served on such 
other  person  in  respect  of  search  initiated  or  books  of  account  or  other  documents  or  any  assets 
requisitioned after the 30th day of June, 1995, but before the 1st day of January, 1997; and 

(b) two years from the end of the month in which the notice under this Chapter was served on 
such other person in respect of search initiated or books of account or other documents or any assets 
are requisitioned on or after the 1st day of January, 1997.] 

1. Subs. by Act 20 of 2002, s. 66, for “and section 144” (w.e.f. 1-7-1995). 
2. Subs. by s. 66, ibid., for clause (d) (w.e.f. 1-6-2002). 
3. Ins. by s. 67, ibid. (w.e.f. 1-6-2002). 
4. Subs. by Act 14 of 1997, s. 5, for sub-sections (1) and (2) (w.e.f. 1-1-1997). 

611 

                                                           
1[Explanation 1.—In computing the period of limitation for the purposes of this section,— 

(i) the period during which the assessment proceeding is stayed by an order or injunction of any 

court; or 

(ii) the period commencing from the day on which the Assessing Officer directs the assessee to 
get his accounts audited  under sub-section (2A) of section 142 and ending on the day on which the 
assessee is required to furnish a report of such audit under that sub-section; or 

(iii) the time taken in reopening the whole or any part of the proceeding or giving an opportunity 

to the assessee to be re-heard under the proviso to section 129; or 

(iv) in a case where an application made before the Settlement Commission under section 245C is 
rejected  by  it  or  is  not  allowed  to  be  proceeded  with  by  it,  the  period  commencing  on  the  date  on 
which  such  application  is made  and  ending  with the date on  which  the  order  under sub-section  (1) 
of section 245D is received by the 2[Principal Commissioner or Commissioner] under sub-section (2) 
of that section, 

shall be excluded: 

Provided that where immediately after the exclusion of the aforesaid period, the period of limitation 
referred  to  in  sub-section  (1)  or  sub-section  (2)  available  to  the  Assessing  Officer  for  making  an  order 
under clause (c) ofsection 158BC is less than sixty days, such remaining period shall be extended to sixty 
days and the aforesaid period of limitation shall be deemed to be extended accordingly.] 

3[Explanation 2.—For the removal of doubts, it is hereby declared that the authorisation referred to in 

sub-section (1) shall be deemed to have been executed,— 

(a) in the case of search, on the conclusion of search as recorded in the last panchnama drawn in 

relation to any person in whose case the warrant of authorisation has been issued; 

(b) in the case of requisition under section 132A, on the actual receipt of the books of account or 

other documents or assets by the Authorised Officer.] 

158BF.  Certain  interests  and  penalties  not  to  be  levied  or  imposed.—No  interest  under  the 
provisions of section 234A, 234B or 234C or penalty under the provisions of clause (c) of sub-section (1) 
of section 271 or section 271A or section 271B shall be levied or imposed upon the assessee in respect of 
the undisclosed income determined in the block assessment. 

4[158BFA.  Levy  of  interest  and  penalty  in  certain  cases.—(1)  Where  the  return  of  total  income 
including  undisclosed  income  for  the  block  period,  in  respect  of  search  initiated  under section  132 or 
books of account, other documents or any assets requisitioned under section 132A on or after the 1st day 
of January, 1997, as required by a notice under clause (a) of section 158BC, is furnished after the expiry 
of the period specified in such notice, or is not furnished, the assessee shall be liable to pay simple interest 
at  the  rate  of  5[one  per  cent.]  of  the  tax  on  undisclosed  income,  determined  under  clause  (c)  of  
section  158BC,  for  every  month  or  part  of  a  month  comprised  in  the  period  commencing  on  the  day 
immediately following the expiry of the time specified in the notice, and— 

(a)  where  the  return  is  furnished  after  the  expiry  of  the  time  aforesaid,  ending  on  the  date  of 

furnishing the return; or 

1. Subs. by Act 20 of 2002, s. 68, for Explanation 1 (w.e.f. 1-6-2002). 
2. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.e.f. 1-6-2013). 
3. Ins. by Act 21 of 1998, s. 46 (w.e.f. 1-7-1995). 
4. Ins. by Act 14 of 1997, s. 6 (w.e.f. 1-1-1997). 
5. Subs. by Act 54 of 2003, s. 7, for “one and one-fourth per cent.” (w.e.f. 8-9-2003). 

612 

                                                           
(b) where no return has been furnished, on the date of completion of assessment under clause (c) 

of section 158BC. 

(2) The Assessing Officer or the Commissioner (Appeals) in the course of any proceedings under this 
Chapter,  may  direct  that  a  person  shall  pay  by  way  of  penalty  a  sum  which  shall  not  be  less  than  the 
amount of tax leviable but which shall not exceed three times the amount of tax so leviable in respect of 
the undisclosed income determined by the Assessing Officer under clause (c) of section 158BC: 

Provided that no order imposing penalty shall be made in respect of a person if— 

(i) such person has furnished a return under clause (a) of section 158BC; 

(ii)  the  tax  payable  on  the  basis  of  such  return  has  been  paid  or,  if  the  assets  seized  consist  of 

money, the assessee offers the money so seized to be adjusted against the tax payable; 

(iii) evidence of tax paid is furnished along with the return; and 

(iv)  an  appeal  is  not  filed  against  the  assessment  of  that  part  of  income  which  is  shown  in  the 

return: 

Provided  further that  the  provisions  of  the  preceding  proviso  shall  not  apply  where  the 
undisclosed  income  determined  by  the  Assessing  Officer  is  in  excess  of  the  income  shown  in  the 
return  and  in  such  cases  the  penalty  shall  be  imposed  on  that  portion  of  undisclosed  income 
determined which is in excess of the amount of undisclosed income shown in the return. 

(3) No order imposing a penalty under sub-section (2) shall be made,— 

(a) unless an assessee has been given a reasonable opportunity of being heard; 

(b)  by  the  1[Assistant  Commissioner  or  Deputy  Commissioner]  or  the  2[Assistant  Director  or 
Deputy Director], as the case may be, where the amount of penalty exceeds twenty thousand rupees 
except with the previous approval of the  3[Joint Commissioner] or the  4[Joint Director], as the case 
may be; 

(c)  in  a  case  where  the  assessment  is  the  subject-matter  of  an  appeal  to  the  Commissioner 
(Appeals) under section 246 5[or section 246A] or an appeal to the Appellate Tribunal under section 
253, after the expiry of the financial year in which the proceedings, in the course of which action for 
the imposition of penalty has been initiated, are completed, or six months from the end of the month 
in which the order of the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is 
received  by  the  6[Principal  Chief  Commissioner  or  Chief  Commissioner]  or  the  7[Principal 
Commissioner or Commissioner], whichever period expires later; 

(d) in a  case  where the  assessment is the  subject-matter  of revision under section  263,  after the 

expiry of six months from the end of the month in which such order of revision is passed; 

1. Subs. by Act 21 of 1998, s. 3, for “Assistant Commissioner” (w.e.f. 1-10-1998). 
2. Subs. by s. 3, ibid., for “Assistant Director” (w.e.f. 1-10-1998). 
3. Subs. by s. 3, ibid., for “Deputy Commissioner” (w.e.f. 1-10-1998). 
4. Subs. by s. 3, ibid., for “Deputy Director” (w.e.f. 1-10-1998). 
5. Ins. by Act 10 of 2000, s. 59 (w.e.f. 1-6-2000). 
6. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). 
7. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2012). 

613 

                                                           
(e) in any case other than those mentioned in clauses (c) and (d), after the expiry of the financial 
year in which the proceedings, in the course of which action for the imposition of penalty has been 
initiated, are completed, or six months from the end of the month in which action for imposition of 
penalty is initiated, whichever period expires later; 

(f) in respect of search initiated under section 132 or books of account, other documents or any 
assets  requisitioned  under section  132A,  after  the  30th  day  of  June,  1995  but  before  the  1st  day  of 
January, 1997. 

Explanation.—In computing the period of limitation for the purpose of this section,— 

(i)  the  time  taken  in  giving  an  opportunity  to  the  assessee  to  be  reheard  under  the  proviso 

to section 129; 

(ii) the period during which the immunity granted under section 245H remained in force; and 

(iii)  the  period  during  which  the  proceedings  under  sub-section  (2)  are  stayed  by  an  order  or 

injunction of any court, 

shall be excluded. 

(4) An income-tax authority on making an order under sub-section (2) imposing a penalty, unless he 

is himself an Assessing Officer, shall forthwith send a copy of such order to the Assessing Officer.] 

1[158BG.  Authority  competent  to make  the  block assessment.—The  order  of  assessment  for  the 
block period shall be passed by an Assessing Officer not below the rank of an  2[Assistant Commissioner 
or Deputy Commissioner] or an 3[Assistant Director or Deputy Director], as the case may be: 

Provided that no such order shall be passed without the previous approval of— 

(a) the  4[Principal  Commissioner  or  Commissioner]  or  5[Principal  Director  or  Director],  as  the 
case may be, in respect of search initiated under section 132 or books of account, other documents or 
any assets requisitioned under section 132A, after the 30th day of June, 1995 but before the 1st day of 
January, 1997; 

(b) the  6[Joint  Commissioner]  or  the  7[Joint  Director],  as  the  case  may  be,  in  respect  of  search 
initiated  under section  132 or  books  of  account,  other  documents  or  any  assets  requisitioned 
under section 132A, on or after the 1st day of January, 1997.] 

158BH. Application of other provisions of this Act.—Save as otherwise provided in this Chapter, 

all other provisions of this Act shall apply to assessment made under this Chapter.] 

8[158BI. Chapter not to apply after certain date.—The provisions of this Chapter shall not apply 
where  a  search  is  initiated  under section  132,  or  books  of  account,  other  documents  or  any  assets  are 
requisitioned under section 132A after the 31st day of May, 2003.] 

1.  Subs. by Act 13 of 1997, s. 7, for section 158BG (w.e.f. 1-1-1997). 
2. Subs. by Act 21 of 1998, s. 3, for “Assistant Commissioner” (w.e.f. 1-10-1998). 
3. Subs. by s. 3, ibid., for “Assistant Director” (w.e.f. 1-10-1998). 
4. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.e.f. 1-6-2013). 
5. Subs. by s. 4, ibid., for “Director” (w.e.f. 1-6-2013). 
6. Subs. by Act 21 of 1998, s. 3, for “Deputy Commissioner” (w.e.f. 1-10-1998). 
7. Subs. by s. 3, ibid., for “Deputy Director” (w.e.f. 1-10-1998). 
8. Ins. by Act 32 of 2003, s. 67 (w.e.f. 1-6-2003). 

614 

                                                           
CHAPTER XV 

LIABILITY IN SPECIAL CASES 

A.—Legal representatives 

159. Legal representatives.—(1) Where a person dies, his legal representative shall be liable to pay 
any sum which the deceased would have been liable to pay if he had not died, in the like manner and to 
the same extent as the deceased. 

(2)  For  the  purpose  of  making  an  assessment  (including  an  assessment,  reassessment  or 
recomputation under section 147) of the income of the deceased and for the purpose of levying any sum 
in the hands of the legal representative in accordance with the provisions of sub-section (1),— 

(a)  any  proceeding  taken  against  the  deceased  before  his  death  shall  be  deemed  to  have  been 
taken against the legal representative and may be continued against the legal representative from the 
stage at which it stood on the date of the death of the deceased; 

(b) any proceeding which could have been taken against the deceased if he had survived, may be 

taken against the legal representative; and 

(c) all the provisions of this Act shall apply accordingly. 

(3) The legal representative of the deceased shall, for the purposes of this Act, be deemed to be an 

assessee. 

(4) Every legal representative shall be personally liable for any tax payable by him in his capacity as 
legal representative if, while his liability for tax remains undischarged, he creates a charge on or disposes 
of or parts with any assets of the estate of the deceased, which are in, or may come into, his possession, 
but such liability shall be limited to the value of the asset so charged, disposed of or parted with. 

(5) The provisions of sub-section (2) of section 161, section 162, and section 167, shall, so far as may 
be and to the extent to which they are not inconsistent with the provisions of this section, apply in relation 
to a legal representative. 

(6)  The  liability  of  a  legal  representative  under  this  section  shall,  subject  to  the  provisions  of  sub-
section  (4)  and  sub-section  (5),  be  limited  to  the  extent  to  which  the  estate  is  capable  of  meeting  the 
liability. 

B.—Representative assessees - General provisions 

160. Representative assessee.—(1) For the purposes of this Act, “representative assessee” means— 

(i) in respect of the income of a non-resident specified in  1*** sub-section (1) of section 9, the 

agent of the non-resident, including a person who is treated as an agent under section 163; 

(ii) in respect of the income of a minor, lunatic or idiot, the guardian or manager who is entitled 

to receive or is in receipt of such income on behalf of such minor, lunatic or idiot; 

(iii)  in  respect  of  income  which  the  Court  of  Wards,  the  Administrator-General,  the  Official 
Trustee  or  any  receiver  or  manager  (including  any  person,  whatever  his  designation,  who  in  fact 
manages  property  on  behalf  of  another)  appointed  by  or  under  any  order  of  a  court,  receives  or  is 
entitled to receive, on behalf or for the benefit of any person, such Court of Wards, Administrator-
General, Official Trustee, receiver or manager; 

1. The words, brackets and figure “clause (i) of” omitted by Act 66 of 1976, s. 26 (w.e.f. 1-6-1976). 

615 

                                                           
(iv)  in  respect  of  income  which  a  trustee  appointed  under  a  trust  declared  by  a  duly  executed 
instrument  in  writing  whether  testamentary  or  otherwise  [including  any  wakf  deed  which  is  valid 
under the Mussalman Wakf Validating Act, 1913 (6 of 1913),] receives or is entitled to receive on 
behalf or for the benefit of any person, such trustee or trustees; 

1[(v) in respect of income which a trustee appointed under an oral trust receives or is entitled to 

receive on behalf or for the benefit of any person, such trustee or trustees. 

Explanation  1.—A  trust  which  is  not  declared  by  a  duly  executed  instrument  in  writing  [including 
any  wakf  deed  which  is  valid  under  the  Mussalman  Wakf  Validating  Act,  1913  (6  of  1913),]  shall  be 
deemed, for the purposes of clause (iv), to be a trust declared by a duly executed instrument in writing if a 
statement  in  writing,  signed  by  the  trustee  or  trustees,  setting  out  the  purpose  or  purposes  of  the  trust, 
particulars as to the trustee or trustees, the beneficiary or beneficiaries and the trust property, is forwarded 
to the 2[Assessing Officer],— 

(i) where the trust has been declared before the 1st day of June, 1981, within a period of three 

months from that day; and 

(ii) in any other case, within three months from the date of declaration of the trust. 

Explanation 2.—For the purposes of clause (v), “oral trust” means a trust which is not declared by a 
duly executed instrument in writing [including any wakf deed which is valid under the Mussalman Wakf 
Validating Act, 1913 (6 of 1913),] and which is not deemed under Explanation 1 to be a trust declared by 
a duly executed instrument in writing.] 

(2) Every representative assessee shall be deemed to be an assessee for the purposes of this Act. 

161. Liability of representative assessee.—(1) Every representative assessee, as regards the income 
in respect of which he is a representative assessee, shall be subject to the same duties, responsibilities and 
liabilities as if the income were income received by or accruing to or in favour of him beneficially, and 
shall be liable to assessment in his own name in respect of that income; but any such assessment shall be 
deemed to be made upon him in his representative capacity only, and the tax shall, subject to the other 
provisions contained in this Chapter, be levied upon and recovered from him in like manner and to the 
same extent as it would be leviable upon and recoverable from the person represented by him. 

3[(1A) Notwithstanding anything contained in sub-section (1), where any income in respect of which 
the person mentioned in clause (iv) of sub-section (1) of section 160 is liable as representative assessee 
consists of, or includes, profits and gains of business, tax shall be charged on the whole of the income in 
respect of which such person is so liable at the maximum marginal rate: 

Provided that  the  provisions  of  this  sub-section  shall  not  apply  where  such  profits  and  gains  are 
receivable  under  a  trust  declared  by  any  person  by  will  exclusively  for  the  benefit  of  any  relative 
dependent on him for support and maintenance, and such trust is the only trust so declared by him. 

4* 

* 

* 

* 

*] 

(2) Where any person is, in respect of any income, assessable under this Chapter in the capacity of a 
representative assessee, he shall not, in respect of that income, be assessed under any other provision of 
this Act. 

1. Ins. by Act 16 of 1981, s. 14 (w.e.f. 1-4-1981). 
2. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
3. Ins. by Act 21 of 1984, s. 20 (w.e.f. 1-4-1985). 
4. The Explanation omitted by Act 49 of 1991, s. 49 (w.e.f. 1-4-1991). 

616 

 
 
 
 
 
 
 
 
                                                           
162. Right of representative assessee to recover tax paid.—(1) Every representative assessee who, 
as  such,  pays  any  sum  under  this  Act,  shall  be  entitled  to  recover  the  sum  so  paid  from  the  person  on 
whose behalf it is paid, or to retain out of any moneys that may be in his possession or may come to him 
in his representative capacity, an amount equal to the sum so paid. 

(2)  Any  representative  assessee,  or  any  person  who  apprehends  that  he  may  be  assessed  as  a 
representative assessee, may retain out of any money payable by him to the person on whose behalf he is 
liable  to  pay  tax  (hereinafter  in  this  section  referred  to  as  the  principal),  a  sum  equal  to  his  estimated 
liability  under  this  Chapter,  and  in  the  event  of  any  disagreement  between  the  principal  and  such 
representative  assessee  or  person  as  to  the  amount  to  be  so  retained,  such  representative  assessee  or 
person may secure from the 1[Assessing Officer] a certificate stating the amount to be so retained pending 
final  settlement  of  the  liability,  and  the  certificate  so  obtained  shall  be  his  warrant  for  retaining  that 
amount. 

(3) The amount recoverable from such representative assessee or person at the time of final settlement 
shall not exceed the amount specified in such certificate, except to the extent to which such representative 
assessee or person may at such time have in his hands additional assets of the principal. 

C.—Representative assessees—Special cases 

163. Who  may  be  regarded  as  agent.—(1)  For  the  purposes  of  this  Act,  “agent”,  in  relation  to  a 

non-resident, includes any person in India— 

(a) who is employed by or on behalf of the non-resident; or 

(b) who has any business connection with the non-resident; or 

(c)  from  or  through  whom  the  non-resident  is  in  receipt  of  any  income,  whether  directly  or 

indirectly; or 

(d) who is the trustee of the non-resident; 

and includes also any other person who, whether a resident or non-resident, has acquired by means of a 
transfer, a capital asset in India: 

Provided that a broker in India who, in respect of any transactions, does not deal directly with or on 
behalf of a non-resident principal but deals with or through a non-resident broker shall not be deemed to 
be  an  agent  under  this  section  in  respect  of  such  transactions,  if  the  following  conditions  are  fulfilled, 
namely:— 

(i) the transactions are carried on in the ordinary course of business through the first-mentioned 

broker; and 

(ii) the non-resident broker is carrying on such transactions in the ordinary course of his business 

and not as a principal. 

2[Explanation.—For the purposes of this sub-section, the expression “business connection” shall have 

the meaning assigned to it in Explanation 2 to clause (i) of sub-section (1) of section 9 of this Act.] 

(2) No person shall be treated as the agent of a non-resident unless he has had an opportunity of being 

heard by the 1[Assessing Officer] as to his liability to be treated as such. 

1. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2. Ins. by Act 32 of 2003, s. 68 (w.e.f. 1-4-2004). 

617 

                                                           
1[164. Charge  of  tax  where  share  of  beneficiaries  unknown.—2[(1)  Subject  to  the  provisions  of 
sub-sections (2) and (3), where] any income in respect of which the persons mentioned in clauses (iii) and 
(iv)  of  sub-section  (1)  of section  160 are  liable  as  representative  assessees  or  any  part  thereof  is  not 
specifically receivable on behalf or for the benefit of any one person or where the individual shares of the 
persons  on  whose  behalf  or  for  whose  benefit  such  income  or  such  part  thereof  is  receivable  are 
indeterminate or unknown (such income, such part of the income and such persons being hereafter in this 
section  referred  to  as  “relevant  income”,  “part  of  relevant  income”  and  “beneficiaries”,  respectively), 
3[tax shall be charged on the relevant income or part of relevant income at the maximum marginal rate]: 

Provided that in a case where— 

4[(i)  none  of  the  beneficiaries  has  any  other  income  chargeable  under  this  Act  exceeding  the 
maximum amount not chargeable to tax in the case of an 5[association of persons] or is a beneficiary 
under any other trust; or] 

(ii) the relevant income or part of relevant income is receivable  6[under a trust declared by any 

person by will and such trust is the only trust so declared by him]; or 

(iii) the relevant income or part of relevant income is receivable under a trust created before the 
1st day of March, 1970, by a non-testamentary instrument and the  7[Assessing Officer] is satisfied, 
having  regard  to  all the  circumstances existing  at  the relevant  time,  that the trust  was  created bona 
fide exclusively for the benefit of the relatives of the settlor, or where the settlor is a Hindu undivided 
family,  exclusively  for  the  benefit  of  the  members  of  such  family,  in  circumstances  where  such 
relatives or members were mainly dependent on the settlor for their support and maintenance; or 

(iv)  the  relevant  income  is  receivable  by  the  trustees  on  behalf  of  a  provident  fund, 
superannuation  fund,  gratuity  fund,  pension  fund  or  any  other  fund  created bona  fide by  a  person 
carrying on a business or profession exclusively for the benefit of persons employed in such business 
or profession, 

tax shall be charged 8[on the relevant income or part of relevant income as if it] were the total income of 
an 5[association of persons]:] 

9[Provided further that where any income in respect of which the person mentioned  in clause (iv) of 
sub-section (1) of section 160 is liable as representative assessee consists of, or includes, profits and gains 
of business, the preceding proviso shall apply only if such profits and gains are receivable under a trust 
declared by any person by will exclusively for the benefit of any relative dependent on him for support 
and maintenance, and such trust is the only trust so declared by him.] 

1. Subs. by Act 19 of 1970, s. 21, for section 164 (w.e.f. 1-4-1971). 
2. Restored by Act 3 of 1989, s. 95 (w.e.f. 1-4-1989). Earlier the words “(1) Subject to the provisions of sub-sections (2) and 

(3), where” substituted by Act 4 of 1988, s. 64 (w.e.f. 1-4-1989). 

3. Subs. by Act 44 of 1980, s. 27, for the portion beginning with the words “tax shall be charged—” and ending with the 

words “more beneficial to the revenue” (w.e.f. 1-4-1980). 

4. Subs. by s. 27, ibid., for clause (i) (w.e.f. 1-4-1980). 
5.  Restored by Act 3 of 1989, s. 95 (w.e.f. 1-4-1989). Earlier the words “association of persons” substituted by Act 4 of 

1988, s. 64 (w.e.f. 1-4-1989). 

6. Subs. by Act 44 of 1980, s. 27, for “under a trust declared by will” (w.e.f. 1-4-1980). 
7. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
8. Subs. by Act 44 of 1980, s. 27, for “as if the relevant income or part of relevant income” (w.e.f. 1-4-1980). 
9. Ins. by Act 21 of 1984, s. 21 (w.e.f. 1-4-1985). 

618 

                                                           
1[(2)  In  the  case  of  relevant  income  which  is  derived  from  property  held  under  trust  wholly  for 
charitable or religious purposes,  2[or which is of the nature referred to in sub-clause (iia) of clause (24) 
of section 2, 3[or which is of the nature referred to in sub-section (4A) of section 11,] tax shall be charged 
on  so  much  of  the  relevant  income  as  is  not  exempt  under section  11 or section  12],  as  if  the  relevant 
income not so exempt were the income of an association of persons: 

4[Provided that  in  a  case  where  the  whole  or  any  part  of  the  relevant  income  is  not  exempt 
under section  11 or section  12 by  virtue  of  the  provisions  contained  in  clause  (c)  or  clause  (d)  of  sub-
section (1) of section 13, tax shall be charged [on the relevant income or part of relevant income at the 
maximum marginal rate.]] 

(3)  5[In a case where the relevant income is derived from property held under trust in part only for 
charitable or religious purposes or is of the nature referred to in sub-clause (iia) of clause (24) of section 
2] 3[or  is  of  thenature  referred  to  in  sub-section  (4A)  of section  11,]  and  either  the  relevant  income 
applicable to purposes other than charitable or religious purposes (or any part thereof) 6[is not specifically 
receivable on behalf or for the benefit of any one person or the individual shares of the beneficiaries in the 
income so applicable are indeterminate or unknown, the tax chargeable on the relevant income shall be 
the aggregate of— 

(a) the tax which would be chargeable on that part of the relevant income which is applicable to 
charitable or religious purposes (as reduced by the income, if any, which is exempt under section 11) 
as if such part (or such part as so reduced) were the total income of an association of persons; and 

(b)  the  tax  on  that  part  of  the  relevant  income  which  is  applicable  to  purposes  other  than 
charitable or religious purposes, and which is either not specifically receivable on behalf or for the 
benefit of any one person or in respect of which the shares of the beneficiaries are indeterminate or 
unknown, at the maximum marginal rate:] 

Provided that in a case where— 

7[(i)  none  of  the  beneficiaries  in  respect  of  the  part  of  the  relevant  income  which  is  not 
applicable  to  charitable  or  religious  purposes  has  any  other  income  chargeable  under  this  Act 
exceeding the maximum amount not chargeable to tax in the case of an association of persons or 
is a beneficiary under any other trust; or] 

(ii) the relevant income is receivable 8[under a trust declared by any person by will and such 

trust is the only trust so declared by him]; or 

(iii) the relevant income is receivable under a trust created before the 1st day of March, 1970, 
by a non-testamentary instrument and the 9[Assessing Officer] is satisfied, having regard to all the 
circumstances existing at the relevant time, that the trust, to the extent it is not for charitable or 
religious purposes, was created bona fide exclusively for the benefit of the relatives of the settlor, 
or where the settlor is a Hindu undivided family, exclusively for the benefit of the members of 
such  family,  in  circumstances  where  such  relatives  or  members  were  mainly  dependent  on  the 
settlor for their support and maintenance, 

1.  Restored  by  Act  3  of  1989,  s.  95  (w.e.f.  1-4-1989).  Earlier  sub-section  (2)  and  (3)  were  omitted  by  Act  4  of  1988,                      

s. 64 (w.e.f. 1-4-1989). 

2. Subs. by Act 16 of 1972, s. 27, for “tax shall be charged on so much of the relevant income as is not exempt under section 

11” (w.e.f. 1-4-1973). 

3. Ins. by Act 11 of 1983, s. 37 (w.e.f. 1-4-1984). 
4. The proviso added by Act 21 of 1984, s. 21 (w.e.f. 1-4-1985). 
5. Subs. by Act 16 of 1972, s. 27, for “In a case where the relevant income is derived from  property held under trust in part 

only in charitable or religious purposes” (w.e.f. 1-4-1973). 

6. Subs. by Act 44 of 1980, s. 27, for the portion beginning with the words “is not specifically receivable” and ending with 

the words “whichever course would be more beneficial to the revenue:” (w.e.f. 1-4-1980). 

7. Subs. by s. 27, ibid., for clause (i) (w.e.f. 1-4-1980). 
8. Subs. by s. 27, ibid., for “under a trust declared by will” (w.e.f. 1-4-1980). 
9. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 

619 

                                                           
tax shall be charged 1[on the relevant income as if the relevant income] (as reduced by the income, if any, 
which is exempt under section 11) were the total income of an association of persons:] 

2[Provided  further that  where  the  relevant  income  consists  of,  or  includes,  profits  and  gains  of 
business, the preceding proviso shall apply only if the income is receivable under a trust declared by any 
person by will exclusively for the benefit of any relative dependent on him for support and maintenance, 
and such trust is the only trust so declared by him: 

Provided  also that  in  a  case  where  the  whole  or  any  part  of  the  relevant  income  is  not  exempt 
under section  11 or section  12 by  virtue  of  the  provisions  contained  in  clause  (c)  or  clause  (d)  of  sub-
section  (1)  of section  13,  tax  shall  be charged  on the  relevant income  or part  of  relevant  income  at the 
maximum marginal rate.]] 

3[Explanation 1.—For the purposes of this section,— 

  (i) any income in respect of which the persons mentioned in clause (iii) and clause (iv) of sub-
section (1) of section 160 are liable as representative assessee or any part thereof shall be deemed as 
being not specifically receivable on behalf or for the benefit of any one person unless the person on 
whose behalf or for whose benefit such income or such part thereof is receivable during the previous 
year is expressly stated in the order of the court or the instrument of trust or wakf deed, as the case 
may be, and is identifiable as such on the date of such order, instrument or deed; 

 (ii)  the  individual  shares  of  the  persons  on  whose  behalf  or  for  whose  benefit  such  income  or 
such part thereof is received shall be deemed to be indeterminate or unknown unless the individual 
shares  of  the  persons  on  whose  behalf  or  for  whose  benefit  such  income  or  such  part  thereof  is 
receivable, are expressly stated in the order of the court or the instrument of trust or wakf deed, as the 
case may be, and are ascertainable as such on the date of such order, instrument or deed. 

4* 

* 

* 

* 

*] 

5[164A. Charge of tax in case of oral trust.—Where a trustee receives or is entitled to receive any 
income  on  behalf  or  for  the  benefit  of  any  person  under  an  oral  trust,  then,  notwithstanding  anything 
contained  in  any  other  provision  of  this  Act,  tax  shall  be  charged  on  such  income  at  the  maximum 
marginal rate. 

Explanation.—For the purposes of this section,— 

 6* 
* 

* 

* 

* 

 (ii)  “oral  trust”  shall  have  the  meaning  assigned  to  it  in Explanation  2 below  sub-section  (1) 

of section 160.] 

165. Case where part of trust income is chargeable.—Where part only of the income of a trust is 
chargeable under this Act, that proportion only of the income receivable by a beneficiary from the trust 
which the part so chargeable bears to the whole income of the trust shall be deemed to have been derived 
from that part. 

1. Subs. by Act 44 of 1980, s. 27, for “as if the relevant income” (w.e.f. 1-4-1980). 
2. Ins. by Act 21 of 1984, s. 21 (w.e.f. 1-4-1985). 
3. Ins. by Act 44 of 1980, s. 27 (w.e.f. 1-4-1980). 
4. Explanation 2 omitted by Act 4 of 1988, s. 64 (w.e.f. 1-4-1989). 
5. Ins. by Act 16 of 1981, s. 15 (w.e.f. 1-4-1981). 
6. Clause (i) omitted by Act 4 of 1988, s. 65 (w.e.f. 1-4-1989). 

620 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
D.—Representative assessees—Miscellaneous provisions 

166.Direct assessment or recovery not barred.—Nothing in the foregoing sections in this Chapter 
shall  prevent  either  the  direct  assessment  of  the  person  on  whose  behalf  or  for  whose  benefit  income 
therein referred to is receivable, or the recovery from such person of the tax payable in respect of such 
income. 

167. Remedies  against  property  in  cases  of  representative  assessees.—The  1[Assessing  Officer] 
shall  have  the  same  remedies  against  all  property  of  any  kind  vested  in  or  under  the  control  or 
management of any representative assessee as he would have against the property of any person liable to 
pay any tax, and in as full and ample a manner, whether the demand is raised against the representative 
assessee or against the beneficiary direct. 

2[DD.—Firms, association of persons and body of individuals 

167A.Charge of tax in the case of a firm.—In the case of a firm which is assessable as a firm, tax 

shall be charged on its total income at the 3[rate as specified in the Finance Act of the relevant year].] 

4[167B.Charge of tax where shares of members in association of persons or body of individuals 
unknown, etc.—(1) Where the individual shares of the members of an association of persons or body of 
individuals  (other  than  a  company  or  a  co-operative  society  or  a  society  registered  under  the  Societies 
Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of 
India) in the whole or any part of the income of such association or body are indeterminate or unknown, 
tax shall be charged on the total income of the association or body at the maximum marginal rate: 

Provided that, where the total income of any member of such association or body is chargeable to tax 
at a rate which is higher than the maximum marginal rate, tax shall be charged on the total income of the 
association or body at such higher rate. 

(2) Where, in the case of an association of persons or body of individuals as aforesaid [not being a 

case falling under sub-section (1)],— 

(i)  the total income of any member thereof for the previous year (excluding his share from such 
association or body) exceeds the maximum amount which is not chargeable to tax in the case of that 
member under the Finance Act of the relevant year, tax shall be charged on the total income of the 
association or body at the maximum marginal rate; 

(ii)  any member or members thereof is or are chargeable to tax at a rate or rates which is or are 
higher than the maximum marginal rate, tax shall be charged on that portion or portions of the total 
income of the association or body which is or are relatable to the share or shares of such member or 
members at such higher rate or rates, as the case may be, and the balance of the total income of the 
association or body shall be taxed at the maximum marginal rate. 

Explanation.—For the purposes of this section, the individual shares of the members of an association 
of persons or body of individuals in the whole or any part of the income of such association or body shall 
be deemed to be indeterminate or unknown if such shares (in relation to the whole or any part of such 
income) are indeterminate or unknown on the date of formation of such association or body or at any time 
thereafter.] 

1. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988).  

2. Subs. by Act 18 of 1992, s. 64, for the sub-heading “DD.—Association of persons and body of individuals” (w.e.f. 1-4-

1993). 

3. Subs. by Act 26 of 1997, s. 44, for “maximum marginal rate” (w.e.f. 1-4-1998). 

4.Ins. by Act 3 of 1989, s. 28 (w.e.f. 1-4-1989). 

621 

                                                           
1[167C.  Liability  of  partners  of  limited  liability  partnership  in  liquidation.—Notwithstanding 
anything contained in the Limited Liability Partnership Act, 2008 (6 of 2009), where any tax due from a 
limited liability  partnership  in  respect of  any  income  of  any  previous  year  or  from  any  other  person in 
respect  of  any  income  of  any  previous  year  during  which  such  other  person  was  a  limited  liability 
partnership  cannot  be  recovered,  in  such  case,  every  person  who  was  a  partner  of  the  limited  liability 
partnership  at  any  time  during  the  relevant  previous  year,  shall  be  jointly  and  severally  liable  for  the 
payment  of  such  tax  unless  he  proves  that  the  non-recovery  cannot  be  attributed  to  any  gross  neglect, 
misfeasance or breach of duty on his part in relation to the affairs of the limited liability partnership.] 

2[Explanation.—For the purposes of this section, the expression “tax due” includes penalty, interest 

or any other sum payable under the Act.] 

E.—Executors 

168.Executors.—(1) Subject as hereinafter provided, the income of the estate of a deceased person 

shall be chargeable to tax in the hands of the executor,— 

(a)  if there is only one executor, then, as if the executor were an individual; or 

(b)  if there are more executors than one, then, as if the executors were an association of persons; 

and for the purposes of this Act, the executor shall be deemed to be resident or non-resident according as 
the deceased person was a resident or non-resident during the previous year in which his death took place. 

(2) The assessment of an executor under this section shall be made separately from any assessment 

that may be made on him in respect of his own income. 

(3)  Separate  assessments  shall  be  made  under  this  section  on  the  total  income  of  each  completed 
previous year or part thereof as is included in the period from the date of the death to the date of complete 
distribution to the beneficiaries of the estate according to their several interests. 

(4) In computing the total income of any previous year under this section, any income of the estate of 
that previous year distributed to, or applied to the benefit of, any specific legatee of the estate during that 
previous year shall be excluded; but the income so excluded shall be included in the total income of the 
previous year of such specific legatee. 

Explanation.—In this section, “executor” includes an administrator or other person administering the 

estate of a deceased person. 

169. Right of executor to recover tax paid.—The provisions of section 162 shall, so far as may be, 
apply in the case of an executor in respect of tax paid or payable by him as they apply in the case of a 
representative assessee. 

F.—Succession to business or profession 

170. Succession  to  business  otherwise  than  on  death.—(1)  Where  a  person  carrying  on  any 
business  or  profession (such  person  hereinafter in this  section  being  referred to as the  predecessor)  has 
been succeeded therein by any other person (hereinafter in this section referred to as the successor) who 
continues to carry on that business or profession,— 

(a)  the predecessor shall be assessed in respect of the income of the previous year in which the 

succession took place up to the date of succession; 

1. Ins. by Act 33 of 2009, s. 59 (w.e.f. 1-4-2010). 
2. Ins. by Act 17 of 2013, s. 44 (w.e.f. 1-6-2013). 

622 

                                                           
(b) the successor shall be assessed in respect of the income of the previous year after the date of 

succession. 

(2) Notwithstanding anything contained in sub-section (1), when the predecessor cannot be found, the 
assessment  of  the  income  of  the  previous  year  in  which  the  succession  took  place  up  to  the  date  of 
succession and of the previous year preceding that year shall be made on the successor in like manner and 
to the same extent as it would have been made on the predecessor, and all the provisions of this Act shall, 
so far as may be, apply accordingly. 

(3) When any sum payable under this section in respect of the income of such business or profession 
for the previous year in which the succession took place up to the date of succession or for the previous 
year  preceding  that  year,  assessed  on  the  predecessor,  cannot  be  recovered  from  him,  the  1[Assessing 
Officer] shall record a finding to that effect and the sum payable by the predecessor shall thereafter be 
payable  by  and  recoverable  from  the  successor,  and  the  successor shall  be  entitled  to recover from  the 
predecessor any sum so paid. 

(4) Where any business or profession carried on by a Hindu undivided family is succeeded to, and 
simultaneously with the succession or after the succession there has been a partition of the joint family 
property between the members or groups of members, the tax due in respect of the income of the business 
or profession succeeded to, up to the date of succession, shall be assessed and recovered in the manner 
provided in section 171, but without prejudice to the provisions of this section. 

Explanation.—For  the  purposes  of  this  section,  “income”  includes  any  gain  accruing  from  the 

transfer, in any manner whatsoever, of the business or profession as a result of the succession. 

G.—Partition 

171.  Assessment  after  partition  of  a  Hindu  undivided  family.—(1)  A  Hindu  family  hitherto 
assessed as undivided shall be deemed for the purposes of this Act to continue to be a Hindu undivided 
family, except where and in so far as a finding of partition has been given under this section in respect of 
the Hindu undivided family. 

(2) Where, at the time of making an assessment under section 143 or section 144, it is claimed by or 
on behalf of any member of a Hindu family assessed as undivided that a partition, whether total or partial, 
has  taken  place  among  the  members  of  such  family,  the  1[Assessing  Officer]  shall  make  an  inquiry 
thereinto after giving notice of the inquiry to all the members of the family. 

(3)  On  the  completion  of  the  inquiry,  the  1[Assessing  Officer]  shall  record  a  finding  as  to  whether 
there  has  been  a  total  or  partial  partition  of  the  joint  family  property,  and,  if  there  has  been  such  a 
partition, the date on which it has taken place. 

(4) Where a finding of total or partial partition has been recorded by the  1[Assessing Officer] under 

this section, and the partition took place during the previous year,— 

(a)  the total income of the joint family in respect of the period up to the date of partition shall be 

assessed as if no partition had taken place; and 

(b)  each  member  or  group  of  members  shall,  in addition to  any  tax  for  which he  or it  may  be 
separately  liable  and  notwithstanding  anything  contained  in  clause  (2)  of section  10,  be  jointly  and 
severally liable for the tax on the income so assessed. 

(5) Where a finding of total or partial partition has been recorded by the  1[Assessing Officer] under 
this  section,  and  the  partition  took  place  after  the  expiry  of  the  previous  year,  the  total  income  of  the 

1. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 

623 

                                                           
previous year of the joint family shall be assessed as if no partition had taken place; and the provisions of  
clause (b) of sub-section (4) shall, so far as may be, apply to the case. 

(6)  Notwithstanding  anything  contained  in  this  section,  if  the  1[Assessing  Officer]  finds  after 
completion of the assessment of a Hindu undivided family that the family has already effected a partition, 
whether total or partial, the  1[Assessing Officer] shall proceed to recover the tax from every person who 
was  a  member  of  the  family  before  the  partition,  and  every  such  person  shall  be  jointly  and  severally 
liable for the tax on the income so assessed. 

(7)  For  the  purposes  of  this  section,  the  several  liability  of  any  member  or  group  of  members 
thereunder shall be computed according to the portion of the joint family property allotted to him or it at 
the partition, whether total or partial. 

(8) The provisions of this section shall, so far as may be, apply in relation to the levy and collection of 
any penalty, interest, fine or other sum in respect of any period up to date of the partition, whether total or 
partial, of a Hindu undivided family as they apply in relation to the levy and collection of tax in respect of 
any such period. 

2[(9) Notwithstanding anything contained in the foregoing provisions of this section, where a partial 
partition has taken place after the 31st day of December, 1978, among the members of a Hindu undivided 
family hitherto assessed as undivided,— 

(a)  no claim that such partial partition has taken place shall be inquired into under sub-section (2) 
and no finding shall be recorded under sub-section (3) that such partial partition had taken place and 
any finding recorded under sub-section (3) to that effect whether before or after the 18th day of June, 
1980, being the date of introduction of the Finance (No. 2) Bill, 1980, shall be null and void; 

(b)   such  family  shall  continue  to  be  liable  to  be  assessed  under  this  Act  as  if  no  such  partial 

partition had taken place; 

(c)  each member or group of members of such family immediately before such partial partition 
and  the  family  shall  be  jointly  and  severally  liable  for  any  tax,  penalty,  interest,  fine  or  other  sum 
payable  under  this  Act  by  the  family  in  respect  of  any  period,  whether  before  or  after  such  partial 
partition; 

(d)   the  several  liability  of  any  member  or  group  of  members  aforesaid  shall  be  computed 

according to the portion of the joint family property allotted to him or it at such partial partition, 

and the provisions of this Act shall apply accordingly.] 

Explanation.—In this section,— 

(a)  “partition” means— 

(i)  where the property admits of a physical division, a physical division of the property, but a 
physical division of the income without a physical division of the property producing the income 
shall not be deemed to be a partition; or 

(ii)   where  the  property  does  not  admit  of  a  physical  division,  then  such  division  as  the 

property admits of, but a mere severance of status shall not be deemed to be a partition; 

(b)   “partial  partition”  means  a  partition  which is  partial  as  regards  the  persons constituting  the 

Hindu undivided family, or the properties belonging to the Hindu undivided family, or both. 

1. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2. Ins. by Act 44 of 1980, s. 28 (w.e.f. 1-4-1980). 

624 

                                                           
H.—Profits of non-residents from occasional shipping business 

172. Shipping business of non-residents.—(1) The provisions of this section shall, notwithstanding 
anything contained in the other provisions of this Act, apply for the purpose of the levy and recovery of 
tax  in  the  case  of  any  ship,  belonging  to  or  chartered  by  a  non-resident,  which  carries  passengers, 
livestock, mail or goods shipped at a port in India1***. 

(2) Where such a ship carries passengers, livestock, mail or goods shipped at a port in India,  2[seven 
and  a  half  per  cent.]  of  the  amount  paid  or  payable  on  account  of  such  carriage  to  the  owner  or  the 
charterer or to any person on his behalf, whether that amount is paid or payable in or out of India, shall be 
deemed to be income accruing in India to the owner or charterer on account of such carriage. 

(3) Before the departure from any port in India of any such ship, the master of the ship shall prepare 
and  furnish  to  the  3[Assessing  Officer]  a  return  of  the  full  amount  paid  or  payable  to  the  owner  or 
charterer  or  any  person  on  his  behalf,  on  account  of  the  carriage  of  all  passengers,  livestock,  mail  or 
goods shipped at that port since the last arrival of the ship thereat: 

Provided that where the  3[Assessing Officer] is satisfied that it is not possible for the master of the 
ship to furnish the return required by this sub-section before the departure of the ship from the port and 
provided  the  master  of  the  ship  has  made  satisfactory  arrangements  for  the  filing  of  the  return  and 
payment of the tax by any other person on his behalf, the  3[Assessing Officer] may, if the return is filed 
within thirty days of the departure of the ship, deem the filing of the return by the person so authorised by 
the master as sufficient compliance with this sub-section. 

(4)  On  receipt  of  the  return,  the  3[Assessing  Officer]  shall  assess  the  income  referred  to  in  
sub-section (2) and determine the sum payable as tax thereon at the  4[rate or rates in force] applicable to 
the total income of a company which has not made the arrangements referred to in section 194 and such 
sum shall be payable by the master of the ship. 

5[(4A) No order assessing the income and determining the sum of tax payable thereon shall be made 
under  sub-section  (4)  after  the  expiry  of  nine  months  from  the  end  of  the  financial  year  in  which  the 
return under sub-section (3) is furnished: 

Provided that where the return under sub-section (3) has been furnished before the 1st day of April, 

2007, such order shall be made on or before the 31st day of December, 2008.] 

(5)  For  the  purpose  of  determining  the  tax  payable  under  sub-section  (4),  the  3[Assessing  Officer] 

may call for such accounts or documents as he may require. 

(6) A port clearance shall not be granted to the ship until the Collector of Customs, or other officer 
duly authorised to grant the same, is satisfied that the tax assessable under this section has been duly paid 
or that satisfactory arrangements have been made for the payment thereof. 

(7) Nothing in this section shall be deemed to prevent the owner or charterer of a ship from claiming 
before the expiry of the assessment year relevant to the previous year in which the date of departure of the 
ship from the Indian port falls, that an assessment be made of his total income of the previous year and 
the tax payable on the basis thereof be determined in accordance with the other provisions of this Act, and 
if he so claims, any payment made under this section in respect of the passengers, livestock, mail or goods 
shipped  at  Indian  ports  during  that  previous  year  shall  be  treated  as  a  payment  in  advance  of  the  tax 

1. The certain words omitted by Act 25 of 1975, s. 19 (w.e.f. 1-6-1975). 
2. Subs. by s. 19, ibid., for “one-sixth” (w.e.f. 1-6-1975). 
3. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
4. Subs. by Act 20 of 1967, s. 29, for “rate or rates for the time being” (w.e.f. 1-4-1967). 
5. Ins. by Act 22 of 2007, s. 51 (w.e.f. 1-4-2007). 

625 

                                                           
leviable for that assessment year, and the difference between the sum so paid and the amount of tax found 
payable by him on such assessment shall be paid by him or refunded to him, as the case may be. 

1[(8)  For  the  purposes  of  this  section,  the  amount  referred  to  in  sub-section  (2)  shall  include  the 
amount paid or payable by way of demurrage charge or handling charge or any other amount of similar 
nature.] 

I.—Recovery of tax in respect of non-residents 

173. Recovery  of  tax  in  respect  of  non-resident  from  his  assets.—Without  prejudice  to  the 
provisions  of  sub-section  (1)  of section  161 or  of section  167,  where  the  person  entitled  to  the  income 
referred  to  in  clause  (i)  of  sub-section  (1)  of section  9 is  a  non-resident,  the  tax  chargeable  thereon, 
whether  in  his  name  or  in  the  name  of  his  agent  who  is  liable  as  a  representative  assessee,  may  be 
recovered  by  deduction  under  any  of  the  provisions  of  Chapter  XVII-B  and  any  arrears  of  tax  may  be 
recovered also in accordance with the provisions of this Act from any assets of the non-resident which 
are, or may at any time come, within India. 

J.—Persons leaving India 

174. Assessment  of  persons  leaving  India.—(1)  Notwithstanding  anything  contained  in section  4, 
when  it  appears  to  the  2[Assessing  Officer]  that  any  individual  may  leave  India  during  the  current 
assessment year or shortly after its expiry and that he has no present intention of returning to  India, the 
total income  of  such individual for the  period from  the  expiry  of the  previous year  for  that  assessment 
year up to the probable date of his departure from India shall be chargeable to tax in that assessment year. 

(2) The total income of each completed previous year or part of any previous year included in such 
period  shall  be  chargeable  to  tax  at  the  rate  or  rates  in  force  in  that  assessment  year,  and  separate 
assessments shall be made in respect of each such completed previous year or part of any previous year. 

(3) The  2[Assessing Officer] may estimate the income of such individual for such period or any part 

thereof, where it cannot be readily determined in the manner provided in this Act. 

(4)  For  the  purpose  of  making  an  assessment  under  sub-section  (1),  the  2[Assessing  Officer]  may 
serve a notice upon such individual requiring him to furnish within such time, not being less than seven 
days, as may be specified in the notice, a return in the same form and verified in the same manner  3[as a 
return under clause (i) of sub-section (1) of section 142], setting forth his total income for each completed 
previous year comprised in the period referred to in sub-section (1) and his estimated total income for any 
part of the previous year comprised in that period; and the provisions of this Act shall, so far as may be, 
and subject to the provisions of this section, apply as if the notice were  4[a notice issued under clause (i) 
of sub-section (1) of section 142]. 

(5) The tax chargeable under this section shall be in addition to the tax, if any, chargeable under any 

other provision of this Act. 

(6)  Where  the  provisions  of  sub-section  (1)  are  applicable,  any  notice  issued  by  the  2[Assessing 
Officer]  under  5[clause  (i)  of  sub-section  (1)  of section  142 or] section  148 in  respect  of  any  tax 
chargeable under any other provision of this Act may, notwithstanding anything contained in  5[clause (i) 
of sub-section (1) of section 142 or] section 148, as the case may be, require the furnishing of the return 
by  such  individual  within such  period,  not  being  less  than  seven  days, as the  2[Assessing  Officer]  may 
think proper. 

1. Ins. by Act 26 of 1997, s. 45 (w.e.f. 1-4-1976). 
2. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
3. Subs. by s. 126, ibid., for “as a return under sub-section (2) of section 139” (w.e.f. 1-4-1989). 
4. Subs. by s. 126, ibid., for “a notice issued under sub-section (2) of section 139” (w.e.f. 1-4-1989). 
5. Subs. by s. 126, ibid., for “sub-section (2) of section 139 or sub-section (1) of” (w.e.f. 1-4-1989). 

626 

 
                                                           
1[JA.—Association of persons or body of individuals or  
artificial juridical person formed for a particular event or purpose 

174A. Assessment of association of persons or body of individuals or artificial juridical person 
formed for a particular event or purpose.—Notwithstanding anything contained in section 4, where it 
appears to the Assessing Officer that any association of persons or a body of individuals or an artificial 
juridical  person,  formed  or  established  or  incorporated  for  a  particular  event  or  purpose  is  likely  to  be 
dissolved  in  the  assessment  year  in  which  such  association  of  persons  or  a  body  of  individuals  or  an 
artificial juridical person was formed or established or incorporated or immediately after such assessment 
year, the total income of such association or body or juridical person for the period from the expiry of the 
previous year for that assessment year up to the date of its  dissolution shall be chargeable to tax in that 
assessment year, and the provisions of sub-sections (2) to (6) of section 174 shall, so far as may be, apply 
to any proceedings in the case of any such person as they apply in the case of persons leaving India.] 

K.—Persons trying to alienate their assets 

175.  Assessment of  persons  likely to transfer  property to  avoid  tax.—Notwithstanding  anything 
contained  in section  4, if it  appears to  the  2[Assessing  Officer]  during  any  current  assessment  year  that 
any person is likely to charge, sell, transfer, dispose of or otherwise part with any of his assets with a view 
to avoiding payment of any liability under the provisions of this Act, the total income of such person for 
the  period  from  the  expiry  of  the  previous  year  for  that  assessment  year  to  the  date  when  the 
2[AssessingOfficer]  commences  proceedings  under  this  section  shall  be  chargeable  to  tax  in  that 
assessment year, and the provisions of sub-sections (2), (3), (4), (5) and (6) of section 174 shall, so far as 
may  be,  apply  to  any  proceedings  in  the  case  of  any  such  person  as  they  apply  in  the  case  of  persons 
leaving India 

L.—Discontinuance of business, or dissolution 

176.  Discontinued  business.—(1)  Notwithstanding  anything  contained  in section  4,  where  any 
business or profession is discontinued in any assessment year, the income of the period from the expiry of 
the previous year for that assessment year up to the date of such discontinuance may, at the discretion of 
the 2[Assessing Officer], be charged to tax in that assessment year. 

(2) The total income of each completed previous year or part of any previous year included in such 
period  shall  be  chargeable  to  tax  at  the  rate  or  rates  in  force  in  that  assessment  year,  and  separate 
assessments shall be made in respect of each such completed previous year or part of any previous year. 

(3) Any person discontinuing any business or profession shall give to the  2[Assessing Officer] notice 

of such discontinuance within fifteen days thereof. 

3[(3A)  Where  any  business  is  discontinued  in  any  year,  any  sum  received  after  the  discontinuance 
shall be deemed to be the income of the recipient and charged to tax accordingly in the year of receipt, if 
such sum would have been included in the total income of the person who carried  on the business had 
such sum been received before such discontinuance.] 

(4) Where any profession is discontinued in any year on account of the cessation of the profession by, 
or  the  retirement  or  death  of,  the  person  carrying  on  the  profession,  any  sum  received  after  the 
discontinuance shall be deemed to be the income of the recipient and charged to tax accordingly in the 
year of receipt, if such sum would have been included in the total income of the aforesaid person had it 
been received before such discontinuance. 

1. Ins. by Act 20 of 2002, s. 69 (w.e.f. 1-4-2002). 
2. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
3. Ins. by Act 41 of 1975, s. 49 (w.e.f. 1-4-1976). 

627 

                                                           
(5) Where an assessment is to be made under the provisions of this section, the  1[Assessing Officer] 
may serve on the person whose income is to be assessed or, in the case of a firm, on any person who was 
a  partner  of  such  firm  at  the  time  of  its  discontinuance  or,  in  the  case  of  a  company,  on  the  principal 
officer  thereof,  a  notice  containing  all  or  any  of  the  requirements  which  may  be  included  in  a  notice 
2[under clause (i) of sub-section (1) ofsection 142] and the provisions of this Act shall, so far as may be, 
apply  accordingly  as  if  the  notice  were  a  notice  issued  2[under  clause  (i)  of  sub-section  (1)  of  
section 142]. 

(6) The tax chargeable under this section shall be in addition to the tax, if any, chargeable under any 

other provision of this Act. 

(7)  Where  the  provisions  of  sub-section  (1)  are  applicable,  any  notice  issued  by  the  1[Assessing 
Officer]  under  3[clause  (i)  of  sub-section  (1)  of section  142 or] section  148 in  respect  of  any  tax 
chargeable under any other provisions of this Act may, notwithstanding anything contained in 3[clause (i) 
of sub-section (1) of section 142 or] section 148, as the case may be, require the furnishing of the return 
by the person to whom the aforesaid notices are issued within such period, not being less than seven days, 
as the 1[Assessing Officer] may think proper. 

177. Association dissolved or business discontinued.—(1) Where any business or profession carried 
on by an association of persons has been discontinued or where an association of persons is dissolved, the 
1[Assessing Officer] shall make an assessment of the total income of the association of persons as if no 
such  discontinuance  or  dissolution  had  taken  place,  and  all  the  provisions  of  this  Act,  including  the 
provisions relating to the levy of a penalty or any other sum chargeable under any provision of this Act 
shall apply, so far as may be, to such assessment. 

(2) Without prejudice to the generality of the foregoing sub-section, if the 1[Assessing Officer] or the 
4[***  Commissioner  (Appeals)]  in  the  course  of  any  proceeding  under  this  Act  in  respect  of  any  such 
association of persons as is referred to in that sub-section is satisfied that the association of persons was 
guilty of any of the acts specified in Chapter XXI, he may impose or direct the imposition of a penalty in 
accordance with the provisions of that Chapter. 

(3)  Every  person  who  was  at  the  time  of  such  discontinuance  or  dissolution  a  member  of  the 
association of persons, and the legal representative of any such person who is deceased, shall be jointly 
and severally liable for the amount of tax, penalty or other sum payable, and all the provisions of this Act, 
so far as may be, shall apply to any such assessment or imposition of penalty or other sum. 

(4)  Where  such  discontinuance  or  dissolution  takes  place  after  any  proceedings  in  respect  of  an 
assessment year have commenced, the proceedings may be continued against the persons referred to in 
sub-section  (3)  from  the  stage  at  which  the  proceedings  stood  at  the  time  of  such  discontinuance  or 
dissolution, and all the provisions of this Act shall, so far as may be, apply accordingly. 

(5) Nothing in this section shall affect the provisions of sub-section (6) of section 159. 

1. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 

2. Subs. by Act 4 of 1988, s. 126, for “under sub-section (2) of section 139” (w.e.f. 1-4-1989). 

3. Subs. by s. 126, ibid., for “sub-section (2) of section 139 or sub-section (1) of” (w.e.f. 1-4-1989).  

4. The words and brackets “Deputy Commissioner (Appeals) or the” omitted by Act 21 of 1998, s. 65 (w.e.f. 1-10-1998). 
Which was earlier  substituted  as “Deputy Commissioner (Appeals)” for “Appellate Assistant Commissioner” by Act 4 
of 1988, s. 2 (w.e.f. 1-4-1988) and The words and brackets “or the commissioner (Appeals)” were inserted by Act 22 of 
1977, s. 39 and the Fifth Schedule (w.e.f. 1-4-1977). 

628 

                                                           
178. Company in liquidation.—(1) Every person— 

(a)  who is the liquidator of any company which is being wound up, whether under the orders of a 

court or otherwise; or 

(b)  who has been appointed the receiver of any assets of a company, 

(hereinafter referred to as the liquidator) shall, within thirty days after he has become such liquidator, give 
notice of his appointment as such to the  1[Assessing Officer] who is entitled to assess the income of the 
company. 

(2) The  1[Assessing Officer] shall, after making such inquiries or calling for such information as he 
may deem fit, notify to the liquidator within three months from the date on which he receives notice of 
the appointment of the liquidator the amount which, in the opinion of the  1[Assessing Officer], would be 
sufficient to provide for any tax which is then, or is likely thereafter to become, payable by the company. 

2[(3) The liquidator— 

(a)  shall not, without the leave of the 3[4[Principal Chief Commissioner or Chief Commissioner] 
or  5[Principal  Commissioner  or  Commissioner]],  part with  any  of  the  assets  of the  company  or  the 
properties in his hands until he has been notified by the  1[Assessing Officer] under sub-section (2); 
and 

(b)  on being so notified, shall set aside an amount, equal to the amount notified and, until he so 
sets aside such amount, shall not part with any of the assets of the company or the properties in his 
hands: 

Provided that nothing contained in this sub-section shall debar the liquidator from parting with such 
assets or properties for the purpose of the payment of the tax payable by the company or for making any 
payment to secured creditors whose debts are entitled under law to priority of payment over debts due to 
Government on the date of liquidation or for meeting such costs and expenses of the winding up of the 
company  as  are  in  the  opinion  of  the  3[4[Principal  Chief  Commissioner  or  Chief  Commissioner]  or 
5[Principal Commissioner or Commissioner]] reasonable. 

(4) If the liquidator fails to give the notice in accordance with sub-section (1) or fails to set aside the 
amount as required by sub-section (3) or parts with any of the assets of the company or the properties in 
his  hands  in  contravention  of  the  provisions  of  that  sub-section,  he  shall  be  personally  liable  for  the 
payment of the tax which the company would be liable to pay: 

Provided that if the amount of any tax payable by the company is notified under sub-section (2), the 

personal liability of the liquidator under this sub-section shall be to the extent of such amount.] 

(5) Where there are more liquidators than one, the obligations and liabilities attached to the liquidator 

under this section shall attach to all the liquidators jointly and severally. 

(6) The provisions of this section shall have effect notwithstanding anything to the contrary contained 
in  any  other  law  for  the  time  being  in  force  6[except  the  provisions  of  the  Insolvency  and  Bankruptcy 
Code, 2016]. 

1. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2. Subs. by Act 10 of 1965, s. 41, for sub-sections (3) and (4) (w.e.f. 1-4-1965). 
3. Subs. by Act 4 of 1988, s. 2, for “Commissioner” (w.e.f. 1-4-1988). 
4. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). 
5. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 
6. Ins. by Act 31 of 2016, s. 247 and the Third Schedule (w.e.f. 1-11-2016). 

629 

                                                           
1[M.—Private companies] 

179.  Liability  of  directors  of  private  company  in  liquidation.—2[(1)]3[Notwithstanding  anything 
contained in the Companies Act, 1956 (1 of 1956), where any tax due from a private company in respect 
of any income of any previous year or from any other company in respect of any income of any previous 
year during which such other company was a private company] cannot be recovered, then, every person 
who was a director of the private company at any time during the relevant previous year shall be jointly 
and  severally  liable  for  the  payment  of  such  tax  unless  he  proves  that  the  non-recovery  cannot  be 
attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the 
company. 

4[(2) Where a private company is converted into a public company and the tax assessed in respect of 
any  income  of  any  previous  year  during  which  such  company  was  a  private  company  cannot  be 
recovered, then, nothing contained in sub-section (1) shall apply to any person who was a director of such 
private company in relation to any tax due in respect of any income of such private company assessable 
for any assessment year commencing before the 1st day of April, 1962.] 

5[Explanation.—For the purposes of this section, the expression “tax due” includes penalty, interest 

or any other sum payable under the Act.] 

N.—Special provisions for certain kinds of income 

180. Royalties or copyright fees for literary or artistic work.—Where the time taken by the author 
of a literary or artistic work in the making thereof is more than twelve months, the amount received or 
receivable by him during any previous year on account of any lump sum consideration for the assignment 
or  grant  of  any  of  his interests  in the  copyright  of  that  work  or  of  royalties  or  copyright  fees  (whether 
receivable  in  lump  sum  or  otherwise),  in  respect  of  that  work,  shall,  if  he  so  claims,  be  allocated  for 
purposes of assessment in such manner and to such period as may be prescribed: 

6[Provided that nothing contained in this section shall apply in relation to the previous year relevant to 

the assessment year commencing on or after the 1st day of April, 2000.] 

Explanation.—For the purposes of this section, the expression “author” includes a joint author, and 
the  expression  “lump  sum”,  in  regard  to  royalties  or  copyright  fees,  includes  an  advance  payment  on 
account of such royalties or copyright fees which is not returnable. 

7[180A. Consideration for know-how.—Where the time taken by an individual, who is resident in 
India, for developing any know-how is more than twelve months, he may elect that the gross amount of 
any  lump  sum  consideration  received  or  receivable  by  him  8[during  the  previous  year  relevant  to  the 
assessment year commencing on the 1st day of April, 2000 or earlier assessment years] for allowing use 
of such know-how shall be treated for the purposes of charging income-tax for that year and for each of 
the  two  immediately  preceding  previous  years  as  if  one-third  thereof  were  included  in  his  income 
chargeable  to  tax  for  each  of  those  years  respectively  and  if  he  so  elects,  notwithstanding  anything 
contained in any other provision of this Act,— 

(a)  such gross amount shall be so treated, and 

(b)  the assessments for each of the two preceding previous years shall, if made, be accordingly 
rectified under section 154, the period of four years specified in sub-section (7) of that section being 
reckoned from the end of the financial year in which the assessment relating to the previous year in 
which the amount was received or receivable by such individual is made. 

1. Subs. by Act 41 of 1975, s. 50, for “M.—Private company in liquidation” (w.e.f. 1-10-1975). 
2. Section 179 re-numbered as sub-section (1) thereof by s. 50, ibid. (w.e.f. 1-10-1975). 
3. Subs. by s. 50, ibid., for certain words (w.e.f. 1-10-1975). 
4. Ins. by s. 50, ibid. (w.e.f. 1-10-1975). 
5. Ins. by Act 17 of 2013, s. 45 (w.e.f. 1-6-2013). 
6. Ins. by Act 27 of 1999, s. 67 (w.e.f. 1-4-2000). 
7. Ins. by Act 32 of 1985, s. 31 (w.e.f. 1-4-1986). 
8. Subs. by Act 27 of 1999, s. 68, for “during the previous year” (w.e.f. 1-4-2000). 

630 

                                                           
Explanation.—For the purposes of this section, the expression “know-how” has the meaning assigned 

to it in section 35AB.] 

1*** 

CHAPTER XVI 

SPECIAL PROVISIONS APPLICABLE TO FIRMS 
2[A.—Assessment of firms 

182. [Assessment  of  registered  firms.]—Omitted  by  the  Finance  Act,  1992,  (18  of  1992),  s.  65 

(w.e.f. 1-4-1993). 

183. [Assessment  of  unregistered  firms.]—Omitted  by  the  Finance  Act,  1992,  (18  of  1992),  s.  65 

(w.e.f. 1-4-1993).] 

3[184. Assessment as a firm.—(1) A firm shall be assessed as a firm for the purposes of this Act, if— 

  (i) the partnership is evidenced by an instrument; and 

 (ii) the individual shares of the partners are specified in that instrument. 

(2) A certified copy of the instrument of partnership  referred to in sub-section (1) shall accompany 
the return of income of the firm of the previous year relevant to the assessment year commencing on or 
after the 1st day of April, 1993 in respect of which assessment as a firm is first sought. 

Explanation.—For the purposes of this sub-section, the copy of the instrument of partnership shall be 
certified in writing by all the partners (not being minors) or, where the return is made after the dissolution 
of  the  firm,  by  all  persons  (not  being  minors)  who  were  partners  in  the  firm  immediately  before  its 
dissolution and by the legal representative of any such partner who is deceased. 

(3)  Where  a  firm  is  assessed  as  such  for  any  asses9+sment  year,  it  shall  be  assessed  in  the  same 
capacity for every subsequent year if there is no change in the constitution of the firm or the shares of the 
partners as evidenced by the instrument of partnership on the basis of which the assessment as a firm was 
first sought. 

(4)  Where  any  such  change  had  taken  place  in  the  previous  year,  the  firm  shall  furnish  a  certified 
copy  of  the  revised  instrument  of  partnership  along  with  the  return  of  income for  the  assessment  year 
relevant to such previous year and all the provisions of this section shall apply accordingly. 

4[(5) Notwithstanding anything contained in any other provision of this Act, where, in respect of any 
assessment year, there is on the part of a firm any such failure as is mentioned in section 144, the firm 
shall be so assessed that no deduction by way of any payment of interest, salary, bonus, commission or 
remuneration, by whatever name called, made by such firm to any partner of such firm shall be allowed in 
computing the income chargeable under the head "Profits and gains of business or profession" and such 
interest, salary, bonus, commission or remuneration shall not be chargeable to income-tax under clause 
(v) of section 28.] 

5[185. Assessment  when section  184 not  complied  with.—Notwithstanding  anything  contained  in 
any other provision of this Act, where a firm does not comply with the provisions of section 184 for any 
assessment year, the firm shall be so assessed that no deduction by way of any payment of interest, salary, 
bonus, commission or remuneration, by whatever name called, made by such firm to any partner of such 
firm shall be allowed in computing the income chargeable under the head “Profits and gains of business 
or  profession”  and  such  interest,  salary,  bonus,  commission  or  remuneration  shall  not  be  chargeable  to 
income-tax under clause (v) of section 28.]] 

1. Section 181 and sub-heading “O.—Liability of State Governments” omitted by Act 26 of 1988, s. 36 (w.e.f. 1-4-1989). 
2.  Restored  by  Act  3  of  1989,  s.  95  (w.e.f.  1-4-1989).  Earlier  sub-heading  “A.—Assessment  of  firms”  and  sections  182                     

and 183 omitted by Act 4 of 1988, s. 67 (w.e.f. 1-4-1989). 

3. Subs. by Act 18 of 1992, s. 66, for “sub-heading “B.—Registration of firms” and sections 184, 185 and 86” (w.e.f. 1-4-

1993). 

4. Subs. by Act 32 of 2003, s. 69, for sub-section (5) (w.e.f. 1-4-2004). 
5. Subs. by s. 70,ibid., for section 185 (w.e.f. 1-4-2004). 

631 

                                                           
C.—Changes in constitution, succession and dissolution 

187.Change  in  constitution  of  a  firm.—(1)  Where  at  the  time  of  making  an  assessment 
under section 143 or section 144 it is found that a change has occurred in the constitution of a firm, the 
assessment shall be made on the firm as constituted at the time of making the assessment. 

1* 

* 

* 

* 

* 

(2) For the purposes of this section, there is a change in the constitution of the firm— 

 (a) if one or more of the partners cease to be partners or one or more new partners are admitted, 
in  such  circumstances  that  one  or  more  of  the  persons  who  were  partners  of  the  firm  before  the 
change continue as partner or partners after the change ; or 

 (b)  where  all the  partners continue  with  a change  in their  respective  shares  or  in  the  shares  of 

some of them: 

2[Provided that nothing contained in clause (a) shall apply to a case where the firm is dissolved on the 

death of any of its partners.] 

188. Succession of one firm by another firm.—Where a firm carrying on a business or profession is 
succeeded by another firm, and the case is not one covered by section 187, separate assessments shall be 
made on the predecessor firm and the successor firm in accordance with the provisions of section 170. 

3[188A. Joint and several liability of partners for tax payable by firm.—Every person who was, 
during  the  previous  year,  a  partner  of  a  firm,  and  the  legal  representative  of  any  such  person  who  is 
deceased, shall be jointly and severally liable along with the firm for the amount of tax, penalty or other 
sum  payable  by  the  firm  for  the  assessment  year  to  which  such  previous  year  is  relevant,  and  all  the 
provisions of this Act, so far as may be, shall apply to the assessment of such tax or imposition or levy of 
such penalty or other sum.] 

189. Firm dissolved or business discontinued.—(1) Where any business or profession carried on by 
a  firm  has  been  discontinued  or  where  a  firm  is  dissolved,  the  4[Assessing  Officer]  shall  make  an 
assessment of the total income of the firm as if no such discontinuance or dissolution had taken place, and 
all the provisions of this Act, including the provisions relating to the levy of a penalty or any other sum 
chargeable under any provision of this Act, shall apply, so far as may be, to such assessment. 

(2) Without prejudice to the generality of the foregoing sub-section, if the 4[Assessing Officer] or the 
5[Commissioner (Appeals)] in the course of any proceeding under this Act in respect of any such firm as 
is referred to in that sub-section is satisfied that the firm was guilty of any of the acts specified in Chapter 
XXI,  he  may  impose  or  direct  the  imposition  of  a  penalty  in  accordance  with  the  provisions  of  that 
Chapter. 

(3) Every person who was at the time of such discontinuance or dissolution a partner of the firm, and 
the legal representative of any such person who is deceased, shall be jointly and severally liable for the 
amount of tax, penalty or other sum payable, and all the provisions of this Act, so far as may be, shall 
apply to any such assessment or imposition of penalty or other sum. 

6* 

* 

* 

* 

* 

1. The proviso omitted by Act 18 of 1992, s. 67 (w.e.f. 1-4-1993). Earlier the proviso was restored by Act 3 of 1989, s. 95             

(w.e.f. 1-4-1989) which was omitted by Act 4 of 1988, s. 69 (w.e.f. 1-4-1989).  

2. The proviso added by Act 67 of 1984, s. 33 (w.e.f. 1-4-1975). 
3. Ins. by Act 4 of 1988, s. 70 (w.e.f. 1-4-1989). 
4. Subs. by s. 2, ibid.,for “Income-tax Officer” (w.e.f. 1-4-1988). 
5.  The  words  “Deputy  Commissioner  (Appeals)”  omitted  by  Act  21  of  1998,  s.  65  (w.e.f.  1-4-1998).  Earlier  “Deputy 
Commissioner (Appeals)” substituted by Act 4 of 1988, s. 2, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988). 

6.  The  Explanation  omitted  by  Act  18  of  1992,  s.  68  (w.e.f.  1-4-1993).  Earlier  the  Explanation  reintroduced  by                  

Act 3 of 1989, s. 95 (w.e.f. 1-4-1989) and omitted by Act 4 of 1989, s. 71 (w.e.f. 1-4-1989) which was earlier inserted by 
Act 41 of 1975, s. 52 (w.e.f. 1-10-1975)  

632 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
(4)  Where  such  discontinuance  or  dissolution  takes  place  after  any  proceedings  in  respect  of  an 
assessment  year  have  commenced,  the  proceedings  may  be  continued  against  the  person  referred  to  in 
sub-section  (3)  from  the  stage  at  which  the  proceedings  stood  at  the  time  of  such  discontinuance  or 
dissolution, and all the provisions of this Act shall, so far as may be, apply accordingly. 

(5) Nothing in this section shall affect the provisions of sub-section (6) of section 159. 

1[189A. Provisions applicable to past assessments of firms.—In relation to the assessment of any 
firm  and  its  partners  for  the  assessment  year  commencing  on the  1st  day  of  April, 1992, or any earlier 
assessment  year,  the  provisions  of  this  Chapter  as  they  stood  immediately  before  the  1st  day  of  April, 
1993, shall continue to apply.] 

CHAPTER XVII 

COLLECTION AND RECOVERY OF TAX 

A.—General 

190. Deductionat source and advance payment.—(1) Notwithstanding that the regular assessment 
in respect of any income is to be made in a later assessment year, the tax on such income shall be payable 
by  deduction  2[or  collection]  at  source  3[or  by  advance  payment  or  by  payment  under  sub-section (1A) 
of section 192], as the case may be, in accordance with the provisions of this Chapter. 

(2) Nothing in this section shall prejudice the charge of tax on such income under the provisions of 

sub-section (1) of section 4. 

191. Direct payment.—4*** In the case of income in respect of which provision is not made under 
this Chapter for deducting income-tax at the time of payment, and in any case where income-tax has not 
been  deducted  in  accordance  with  the  provisions  of  this  Chapter,  income-tax  shall  be  payable  by  the 
assessee direct. 

5* 

* 

* 

* 

* 

6[Explanation.—For  the  removal  of  doubts,  it  is  hereby  declared  that  if  any  person  including  the 

principal officer of a company,— 

(a)  who is required to deduct any sum in accordance with the provisions of this Act; or 

(b)  referred to in sub-section (1A) of section 192, being an employer, 

does not deduct, or after so deducting fails to pay, or does not pay, the whole or any part of the tax, as 
required by or under this Act, and where the assessee has also failed to pay such tax directly, then, such 
person  shall,  without  prejudice  to  any  other  consequences  which  he  may  incur,  be  deemed  to  be  an 
assessee in default within the meaning of sub-section (1) of section 201, in respect of such tax.] 

1. Ins. by Act 18 of 1992, s. 69 (w.e.f. 1-4-1993). Earlier section 189A was inserted by Act 4 of 1988, s. 72 (w.e.f. 1-4-1989) 

which was later omitted by Act 3 of 1989, s. 95 (w.e.f. 1-4-1989). 

2. Ins. by Act 3 of 1989, s. 29 (w.e.f. 1-6-1988). 
3. Ins. by Act 20 of 2002, s. 70 (w.e.f. 1-6-2002). 
4. The brackets and figure “(1)” omitted by Act 10 of 1965, s. 43 (w.e.f. 1-4-1965). 
5. Sub-section (2) omitted by s. 43, ibid. (w.e.f. 1-4-1965). 
6. The Explanation substituted by Act 18 of 2008, s. 41 (w.e.f. 1-6-2003). Earlier inserted by 32 of 2003, s. 71 (w.e.f. 1-6-

2003). 

633 

 
 
 
 
 
 
 
 
                                                           
B.—Deduction at source 

192.  Salary.—(1)  Any  person  responsible  for  paying  any  income  chargeable  under  the  head 
“Salaries” shall, at the time of payment, deduct income-tax1*** on the amount payable at the average rate 
of  income-tax2***  computed  on  the  basis  of  the  3[rates  in  force]  for  the  financial  year  in  which  the 
payment is made, on the estimated income of the assessee under this head for that financial year. 

4[(1A)  Without  prejudice  to  the  provisions  contained  in  sub-section  (1),  the  person  responsible  for 
paying any income in the nature of a perquisite which is not provided for by way of monetary payment, 
referred to in clause (2) of section 17, may pay, at his option, tax on the whole or part of such income 
without making any deduction therefrom at the time when such tax was otherwise deductible under the 
provisions of sub-section (1). 

(1B) For the purpose of paying tax under sub-section (1A), tax shall be determined at the average of 
income-tax computed on the basis of the rates in force for the financial year, on the income chargeable 
under  the  head  “Salaries”  including  the  income  referred  to  in  sub-section  (1A),  and  the  tax  so  payable 
shall be construed as if it were, a tax deductible at source, from the income under the head “Salaries” as 
per the provisions of sub-section (1), and shall be subject to the provisions of this Chapter.] 

5[(2) Where, during the financial year, an assessee is employed simultaneously under more than one 
employer, or where he has held successively employment under more than one employer, he may furnish 
to  the  person  responsible  for  making  the  payment  referred  to  in  sub-section  (1)  (being  one  of  the  said 
employers as the assessee may, having regard to the circumstances of his case, choose), such details of 
the income under the head “Salaries” due or received by him from the other employer or employers, the 
tax deducted at source therefrom and such other particulars, in such form and verified in such manner as 
may be prescribed, and thereupon the person responsible for making the payment referred to above shall 
take into account the details so furnished for the purposes of making the deduction under sub-section (1). 

(2A) Where the assessee, being a Government servant or an employee in a  6[company, co-operative 
society,  local  authority,  university,  institution,  association  or  body]  is  entitled  to  the  relief  under  
sub-section (1) of section 89, he may furnish to the person responsible for making the payment referred to 
in sub-section (1), such particulars, in such form and verified in such manner as may be prescribed, and 
thereupon the person responsible as aforesaid shall compute the relief on the basis of such particulars and 
take it into account in making the deduction under sub-section (1). 

7[Explanation.—For the purposes of this sub-section, “University” means a University established or 
incorporated  by  or  under  a  Central,  State  or  Provincial  Act,  and  includes  an  institution  declared  under 
section 3 of the University Grants Commission Act, 1956 (3 of 1956), to be a University for the purposes 
of that Act.] 

8[(2B)  Where  an  assessee  who  receives  any  income  chargeable  under  the  head  “Salaries”  has,  in 
addition, any income chargeable under any other head of income (not being a loss under any such head 
other  than  the  loss  under the  head “Income  from  house  property”)  for  the  same  financial  year, he  may 
send to the person responsible for making the payment referred to in sub-section (1) the particulars of— 

(a)  such other income and of any tax deducted thereon under any other provision of this Chapter; 

1. The words “and super tax” omitted by Act 10 of 1965, s. 44 (w.e.f. 1-4-1965). 
2. The words “and average rate of super-tax respectively” omitted by s. 44, ibid (w.e.f. 1-4-1965). 
3. Subs. by Act 19 of 1968, s. 13, for “rates of tax in force” (w.e.f. 1-4-1968). 
4. Ins. by Act 20 of 2002, s. 71 (w.e.f. 1-6-2002). 
5. Ins. by Act 11 of 1987, s. 45 (w.e.f. 1-6-1987). 
6. Subs. by Act 13 of 1989, s. 21, for “public sector undertaking” (w.e.f. 1-6-1989). 
7. Ins. by s. 21, ibid. (w.e.f. 1-6-1989). 
8. Subs. by Act 21 of 1998, s. 47, for sub-section (2B) (w.e.f. 1-8-1998). 

634 

                                                           
(b)  the loss, if any, under the head “Income from house property”, 

in such form and verified in such manner as may be prescribed, and thereupon the person responsible as 
aforesaid shall take— 

 (i)  such other income and tax, if any, deducted thereon; and 

(ii)  the loss, if any, under the head “Income from house property”, 

also into account for the purposes of making the deduction under sub-section (1): 

Provided that  this  sub-section  shall  not  in  any  case  have  the  effect  of  reducing  the  tax  deductible 
except where the loss under the head “Income from house property” has been taken into account, from 
income under the head “Salaries” below the amount that would be so deductible if the other income and 
the tax deducted thereon had not been taken into account.]] 

1[(2C) A person responsible for paying any income chargeable under the head “Salaries” shall furnish 
to  the  person  to  whom  such  payment  is  made  a  statement  giving  correct  and  complete  particulars  of 
perquisites or profits in lieu of salary provided to him and the value thereof in such form and manner as 
may be prescribed.] 

2[(2D)  The  person  responsible  for  making  the  payment  referred  to  in  sub-section  (1)  shall,  for  the 
purposes of estimating income of the assessee or computing tax deductible under sub-section (1), obtain 
from the assessee the evidence or proof or particulars of prescribed claims (including claim for set-off of 
loss) under the provisions of the Act in such form and manner as may be prescribed.] 

(3)  The  person  responsible  for  making  the  payment  referred  to  in  sub-section  (1)  3[or  sub-section 
(1A)]4[or  sub-section  (2)  or  sub-section  (2A)  or  sub-section  (2B)]  may,  at  the  time  of  making  any 
deduction, increase or reduce the amount to be deducted under this section for the purpose of adjusting 
any excess or deficiency arising out of any previous deduction or failure to deduct during the financial 
year. 

(4) The  trustees  of  a recognised provident  fund,  or  any  person  authorised  by  the  regulations  of the 
fund to make payment of accumulated balances  due to employees, shall, in cases where sub-rule (1) of 
rule 9 of Part A of the Fourth Schedule applies, at the time an accumulated balance due to an employee is 
paid, make therefrom the deduction provided in rule 10 of Part A of the Fourth Schedule. 

 (5) Where any contribution made by an employer, including interest on such contributions, if any, in 
an approved superannuation fund is paid to the employee,  5[tax] on the amount so paid shall be deducted 
by the trustees of the fund to the extent provided in rule 6 of Part B of the Fourth Schedule. 

(6) For the purposes of deduction of tax on salary payable in foreign currency, the value in rupees of 

such salary shall be calculated at the prescribedrate of exchange. 

6* 

* 

* 

* 

* 

7[192A.  Payment  of  accumulated  balance  due  to  an  employee.—Notwithstanding  anything 
contained  in  this  Act,  the  trustees  of  the  Employees’  Provident  Fund  Scheme,  1952,  framed  under  
section 5 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952) or any 

1. Ins. by Act 14 of 2001, s. 68 (w.e.f. 1-6-2001). 
2. Ins. by Act 20 of 2015, s. 41 (w.e.f. 1-6-2015). 
3. Ins. by Act 20 of 2002, s. 71 (w.e.f. 1-6-2002). 
4. Ins. by Act 11 of 1987, s. 45 (w.e.f. 1-6-1987). 
5. Subs. by Act 10 of 1965, s. 44, for “Income-tax and super-tax” (w.e.f. 1-4-1965). 
6. The Explanation omitted by s. 44, ibid (w.e.f. 1-4-1965). 
7. Ins. by Act 20 of 2015, s. 42 (w.e.f. 1-6-2015).  

635 

 
 
 
 
 
 
 
                                                           
person authorised under the scheme to make payment of accumulated balance due to employees, shall, in 
a case where the accumulated balance due to an employee participating in a recognised provident fund is 
includible in his total income owing to the provisions of rule 8 of Part A of the Fourth Schedule not being 
applicable, at the time of payment of the accumulated balance due to the employee, deduct income-tax 
thereon at the rate of ten per cent: 

Provided that no deduction under this section shall be made where the amount of such payment or, as 

the case may be, the aggregate amount of such payment to the payee is less than1[fifty thousand rupees]: 

Provided further that any person entitled to receive any amount on which tax is deductible under this 
section  shall  furnish  his  Permanent  Account  Number  to  the  person  responsible  for  deducting  such  tax, 
failing which tax shall be deducted at the maximum marginal rate.] 

193. Interest on securities.—2[The person responsible for paying to a residentany income] 3[by way 
of interest on securities] shall, 4[at the time of credit of such income to the account of the payee or at the 
time  of  payment  thereof  in  cash  or  by  issue  of  a  cheque  or  draft  or  by  any  other  mode,  whichever  is 
earlier], deduct income-tax5*** at the rates in force on the amount of the interest payable: 

6* 

* 

* 

* 

* 

7[Provided 8*** that no tax shall be deducted from— 

(i)  any interest payable on 4¼ per cent National Defence Bonds, 1972, where the bonds are held 

by an individual, not being a non-resident; or 

9[(ia) any interest payable to an individual on 4¼ per cent National Defence Loan, 1968, or 4¾ 

per cent. National Defence Loan, 1972; or] 

10[(ib) any interest payable on National Development Bonds; or] 

11* 

* 

* 

* 

* 

12[(iia) any interest payable on 7-Year National Savings Certificates (IV Issue); or 

13[(iib)  any  interest  payable  on  such  debentures,  issued  by  any  institution  or  authority,  or  any 
public sector company, or any co-operative society (including a co-operative land mortgage bank or a 
co-operative land development bank), as the Central Government may, by notification in the Official 
Gazette, specify in this behalf;]] 

14*   

* 

* 

* 

* 

(iii)  any  interest  payable  on  6½  per  cent  Gold  Bonds,  1977,  or  7  per  cent.  Gold  Bonds,  1980, 
where the Bonds are held by an individual not being a non-resident, and the holder thereof makes a 

1. Subs. by Act 28 of 2016, s. 72, for “thirty thousand rupees” (w.e.f. 1-6-2016). 
2. Subs. by Act 32 of 2003, s. 72, for “The person responsible for paying any income” (w.e.f. 1-6-2003). 
3. Subs. by Act 26 of 1988, s. 37, for ‘chargeable under the head “Interest on securities”’ (w.e.f. 1-4-1989). 
4.Subs. by Act 13 of 1989, s. 22, for “at the time of payment” (w.e.f. 1-6-1989). 
5. The words “and super-tax” omitted by Act 10 of 1965, s. 45 (w.e.f. 1-4-1965). 
6. The first proviso omitted by Act 18 of 1992, s. 70 (w.e.f. 1-6-1992). 
7. Subs. by Act 15 of 1965, s. 13, for the proviso (w.e.f. 11-9-1965). 
8. The word “further” omitted by Act 18 of 1992, s. 70 (w.e.f. 1-6-1992). 
9. Ins. by Act 41 of 1965, s. 4 (w.e.f. 4-12-1965). 
10. Ins. by Act 19 of 1978, s. 20 (w.e.f. 1-4-1978). 
11. Clause (ii) omitted by Act 26 of 1988, s. 37 (w.e.f. 1-4-1989). 
12. Ins. by Act 19 of 1970, s. 22 (w.e.f. 1-4-1970). 
13. Subs. by Act 28 of 1986, s. 29, for clause (iib) (w.e.f. 1-6-1986). 
14. The Explanation omitted by Act 11 of 1987, s. 74 (w.e.f. 1-4-1987). 

636 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
declaration in writing before the person responsible for paying the interest that the total nominal value 
of the 6½ per cent Gold Bonds, 1977, or, as the case may be, the 7 per cent. Gold Bonds, 1980, held 
by him (including such bonds, if any, held on his behalf by any other person) did not in either case 
exceed ten thousand rupees at any time during the period to which the interest relates;] 

1* 

* 

* 

* 

* 

2[(iv) any interest payable on any security of the Central Government or a State Government:] 

3[Provided that  nothing  contained in this  clause  shall apply  to the  interest  exceeding  rupees ten 
thousand payable on 8% Savings (Taxable) Bonds, 2003 4[or 7.75% Savings (Taxable) Bonds, 2018] 
during the financial year;] 

5[(v) any interest payable to an individual or a Hindu undivided family, who is resident in India, 

on any debenture issued by a company in which the public are substantially interested, if— 

(a)  the amount of interest or, as the case may be, the aggregate amount of such interest paid 
or likely to be paid on such debenture during the financial year by the company to such individual 
or Hindu undivided family does not exceed five thousand rupees; and 

 (b)  such interest is paid by the company by an account payee cheque;] 

6[(vi) any interest payable to the Life Insurance Corporation of India established under the Life 
Insurance Corporation Act, 1956 (31 of 1956), in respect of any securities owned by it or in which it 
has full beneficial interest; or 

(vii) any interest payable to the General Insurance Corporation of India (hereafter in this clause 
referred to as the Corporation) or to any of the four companies (hereafter in this clause referred to as 
such company), formed by virtue of the schemes framed under sub-section (1) of section 16 of the 
General  Insurance  Business  (Nationalisation)  Act,  1972  (57  of  1972),  in  respect  of  any  securities 
owned  by  the  Corporation or  such company  or  in  which the  Corporation  or such  company  has full 
beneficial interest; or 

(viii) any interest payable to any other insurer in respect of any securities owned by it or in which 

it has full beneficial interest;] 

7[(ix)  any  interest  payable  on  any  security  issued  by  a  company,  where  such  security  is  in 
dematerialised  form  and  is  listed  on  a  recognised  stock  exchange  in  India  in  accordance  with  the 
Securities Contracts (Regulation) Act, 1956 (42 of 1956) and the rules made thereunder.] 

8[Explanation  9***.—For  the  purposes  of  this  section,  where  any  income  by  way  of  interest  on 
securities is credited to any account, whether called “Interest payable account” or “Suspense account” or 
by any other name, in the books of account of the person liable to pay such income, such crediting shall 
be deemed to be credit of such income to the account of the payee and the provisions of this section shall 
apply accordingly.] 

10*   

* 

* 

* 

* 

1. Clause (iiia) omitted by Act 26 of 1997, s. 46 (w.e.f. 1-6-1997). 
2. Subs. by s. 46, ibid., for clause (iv) (w.e.f. 1-6-1997). 
3. Ins. by Act 22 of 2007, s. 52 (w.e.f. 1-6-2007). 
4. Ins. by Act 13 of 2018, s. 48 (w.e.f. 1-4-2018). 
5. Subs. by Act 23 of 2012, s. 72, for clause (v) (w.e.f. 1-7-2012). 
6. Ins. by Act 20 of 2002, s. 72 (w.e.f. 1-6-2002). 
7. Ins. by Act 18 of 2008, s. 42 (w.e.f. 1-6-2008). 
8. Ins. by Act 13 of 1989, s. 22 (w.e.f. 1-6-1989). 
9. The figure “1” omitted by Act 18 of 1992, s. 70 (w.e.f. 1-6-1992). 
10. Explanation 2 omitted by s. 70, ibid (w.e.f. 1-6-1992). 

637 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
194.  Dividends.—The  principal  officer  of  an  Indian  company  or  a  company  which  has  made  the 
prescribed arrangements for the declaration and payment of dividends (including dividends on preference 
shares) within India, shall, before making any payment in cash or before issuing any cheque or warrant in 
respect of any dividend or before making any distribution or payment to a shareholder, 1[who is resident 
in  India,]  of  any  dividend  within  the  meaning  of  sub-clause  (a)  or  sub-clause  (b)  or  sub-clause  (c)  or  
sub-clause  (d)  or  sub-clause  (e)  of  clause  (22)  of section  2,  deduct  from  the  amount  of  such  dividend, 
income-tax 2*** at the rates in force: 

3[Provided that no such deduction shall be made in the case of a shareholder, being an individual, if— 

(a)  the dividend is paid by the company by an account payee cheque; and 

(b)  the  amount  of  such  dividend  or,  as  the  case  may  be,  the  aggregate  of  the  amounts  of  such 
dividend  distributed  or  paid  or  likely  to  be  distributed  or  paid  during  the  financial  year  by  the 
company to the shareholder, does not exceed 4[two thousand five hundred rupees]: 

Provided further that the provisions of this section shall not apply to such income credited or paid 

to— 

(a)  the Life Insurance Corporation of India established under the Life Insurance Corporation 
Act,  1956  (31  of  1956),  in  respect  of  any  shares  owned  by  it  or  in  which  it  has  full  beneficial 
interest; 

(b)  the  General  Insurance  Corporation  of  India  (hereafter  in  this  proviso  referred  to  as  the 
Corporation)  or  to  any  of  the  four  companies  (hereafter  in  this  proviso  referred  to  as  such 
company),  formed  by  virtue  of  the  schemes  framed  under  sub-section  (1)  of  section  16  of  the 
General  Insurance  Business  (Nationalisation)  Act,  1972  (57  of  1972),  in  respect  of  any  shares 
owned by the Corporation or such company or in which the Corporation or such company has full 
beneficial interest; 

(c)  any other insurer in respect of any shares owned by it or in which it has full beneficial  

interest:] 

5[Provided also that no such deduction shall be made in respect of any dividends referred to 

in section 115-O.] 

6[194A. Interest other than “Interest on securities”.—(1) Any person, not being an individual or a 
Hindu undivided family, who is responsible for paying to a resident any income by way of interest other 
than income by way of interest on securities, shall, at the time of credit of such income to the account of 
the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, 
whichever is earlier, deduct income-tax thereon at the rates in force: 

7[Provided that  an  individual  or  a  Hindu  undivided  family,  whose  total  sales,  gross  receipts  or 
turnover  from  the  business  or  profession  carried  on  by  him  exceed the  monetary  limits specified  under 
clause  (a)  or  clause  (b)  of section  44AB during  the  financial  year  immediately  preceding  the  financial 
year in which such interest is credited or paid, shall be liable to deduct income-tax under this section.] 

8[Explanation.—For the purposes of this section, where any income by way of interest as aforesaid is 
credited to any account, whether called “Interest payable account” or “Suspense account” or by any other 
name, in the books of account of the person liable to pay such income, such crediting shall be deemed to 
be  credit  of  such  income  to  the  account  of  the  payee  and  the  provisions  of  this  section  shall  apply 
accordingly.] 

1. Ins. by Act 49 of 1991, s. 51 (w.e.f. 1-10-1991). 
2. The words “and super-tax” omitted by Act 10 of 1965 (w.e.f. 1-4-1965). 
3. Subs. by Act 20 of 2002, s. 73, for the first and second provisos (w.e.f. 1-6-2002). 
4.Subs. by Act 32 of 2003, s. 73, for “one thousand rupees” (w.e.f. 1-8-2002). 
5. Ins. by s. 73, ibid. (w.e.f. 1-4-2003). 
6. Ins. by Act 20 of 1967, s. 30 (w.e.f. 1-4-1967). 
7. Ins. by Act 20 of 2002, s. 74 (w.e.f. 1-6-2002). 
8. Ins. by Act 11 of 1987, s. 47 (w.e.f. 1-6-1987). 

638 

                                                           
1* 

* 

* 

* 

* 

(3) The provisions of sub-section (1) shall not apply— 

2[(i)  where the amount of such income or, as the case may be, the aggregate of the amounts of 
such income credited or paid or likely to be credited or paid during the financial year by the person 
referred to in sub-section (1) to the account of, or to, the payee, 3[does not exceed— 

(a) 4[forty  thousand]  rupees,  where  the  payer  is  a  banking  company  to  which  the  Banking 
Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution, referred to 
in section 51 of that Act); 

(b) 4[forty  thousand]  thousand rupees,  where  the  payer is a  co-operative  society  engaged  in 

carrying on the business of banking; 

(c) 4[forty thousand] rupees, on any deposit with post office under any scheme framed by the 

Central Government and notified by it in this behalf; and 

(d) five thousand rupees in any other case]:] 

5[Provided that in respect of the income credited or paid in respect of— 

(a)  time deposits with a banking company to which the Banking Regulation Act, 1949  
(10 of 1949) applies (including any bank or banking  institution referred to in section 51 of 
that Act); or 

(b)   time  deposits  with  a  co-operative  society  engaged  in  carrying  on  the  business  of 

banking; 

(c)  deposits with a public company which is formed and registered in India with the main 
object of carrying on the business of providing long-term finance for construction or purchase 
of houses in India 6[for residential purposes and which is eligible for deduction under clause 
(viii) of sub-section (1) of section 36] 7***; 

8*** the aforesaid amount shall be computed with reference to the income credited or paid by a branch of 
the banking company or the co-operative society or the public company, as the case may be:] 

9[Provided further that the amount referred to in the first proviso shall be computed with reference to 
the income credited or paid by the banking company or the co-operative society or the public company, as 
the  case  may  be,  where  such  banking  company  or  the  co-operative  society  or  the  public  company  has 
adopted core banking solutions;] 

1. Sub-section (2) omitted by Act 18 of 1992, s. 71 (w.e.f. 1-6-1992). 
2. Subs. by Act 25 of 1975, s. 20, for clause (i) (w.e.f. 1-4-1975). 
3. Subs. by Act 22 of 2007, s. 53, for “does not exceed five thousand rupees” (w.e.f. 1-6-2007). 
4. Subs. by Act 7 of 2019, s. 9, for “ten thousand” (w.e.f. 1-4-2019). 
5. Subs. by Act 33 of 1996, s. 49, for the proviso (w.e.f. 1-10-1996). 
6. Subs. by Act 10 of 2000, s. 60, for “for residential purposes” (w.e.f. 1-4-2000). 
7. The certain words, brackets and figures omitted by Act 27 of 1999, s. 69 (w.e.f. 1-4-2000). 
8. The certain words omitted by Act 14 of 2001, s. 69 (w.e.f. 1-6-2001). 
9. Ins. by Act 20 of 2015, s. 43 (w.e.f. 1-6-2015). 

639 

 
 
 
 
 
 
 
 
                                                           
1[Provided  also  that  in  case  of  payee  being  a  senior  citizen,  the  provisions  of  sub-clause  (a),          

sub-clause  (b),  and  sub-clause  (c)  shall  have  effect  as  if  for  the  words  “2[forty  thousand]  thousand 
rupees”, the words “fifty thousand rupees” had been substituted. 

Explanation.—For  the  purposes  of  this  clause,  “senior  citizen”  means  an  individual  resident  in 

India who is of the age of sixty years or more at any time during the relevant previous year;] 

3* 

* 

* 

* 

* 

(iii) to such income credited or paid to— 

(a)  any banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies, 
or  any  co-operative  society  engaged  in  carrying  on  the  business  of  banking  (including  a 
co-operative land mortgage bank), or 

(b)  any financial corporation established by or under a Central, State or Provincial Act, or 

(c)  the Life Insurance Corporation of India established under the Life Insurance Corporation 

Act, 1956 (31 of 1956), or 

(d)  the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963), 

or 

(e)  any company or co-operative society carrying on the business of insurance, or 

(f)  such other institution, association or body 4[or class of institutions, associations or bodies] 
which the Central Government may, for reasons to be recorded in writing, notify in this behalf in 
the Official Gazette; 

5[(iv) to such income credited or paid by a firm to a partner of the firm;] 

(v)  to such income credited or 6[paid by a co-operative society (other than a co-operative bank) to 
a  member  thereof  or  to  such  income  credited  or  paid  by  a  co-operative  society]  to  any  other  
co-operative society;] 

7[Explanation.—For the purposes of this clause, “co-operative bank” shall have the same meaning as 

assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949);] 

8[(vi)  to  such  income  credited  or  paid  in  respect  of  deposits  under  any  scheme  framed  by  the 

Central Government and notified by it in this behalf in the Official Gazette; 

9[(vii) to such income credited or paid in respect of deposits (other than time deposits made on or 
after the 1st day of July, 1995) with a banking company to which the Banking Regulation Act, 1949 
(10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); 

1. Ins. by Act 13 of 2018, s. 49 (w.e.f. 1-4-2018). 
2. Subs. by Act 7 of 2019, s. 9, for “ten thousand” (w.e.f. 1-4-2019). 
3. Clause (ii) omitted by Act 27 of 1999, s. 69 (w.e.f. 1-4-2000). 
4. Ins. by Act 19 of 1968, s. 14 (w.e.f. 1-4-1968). 
5.  Ins. by  Act  3  of  1989,  s. 30  (w.e.f.  1-4-1988).  Which  was  omitted by  Act  4  of  1988,  s. 73  (w.e.f.  1-4-1988).  Original 

clause (iv) was inserted by Act 19 of 1968, s. 14 (w.e.f. 1-4-1968). 

6. Subs. by Act 20 of 2015, s. 43, for “paid by co-operative society to a member thereof or” (w.e.f. 1-6-2015). 
7. Ins. by s. 43, ibid. (w.e.f. 1-6-2015). 
8. Ins. by Act 19 of 1970, s. 23 (w.e.f. 1-4-1970). 
9. Subs. by Act 22 of 1995, s. 33, for clause (vii) (w.e.f. 1-7-1995). 

640 

 
 
 
 
 
 
 
                                                           
(viia) to such income credited or paid in respect of,— 

(a)   deposits  with  a  primary  agricultural  credit  society  or  a  primary  credit  society  or  a  co-

operative land mortgage bank or a co-operative land development bank; 

(b)  deposits (other than time deposits made on or after the 1st day of July, 1995) with a co-
operative society, other than a co-operative society or bank referred to in sub-clause (a), engaged 
in carrying on the business of banking;]] 

1[(viii) to  such  income  credited  or  paid  by  the  Central  Government  under  any  provision  of  this 
Act or the Indian Income-tax Act, 1922 (11 of 1922), or the Estate Duty Act, 1953 (34 of 1953), or 
the Wealth-tax Act, 1957 (27 of 1957), or the Gift-tax Act, 1958 (18 of 1958), or the Super Profits 
Tax  Act,  1963  (14  of  1963),  or  the  Companies  (Profits)  Surtax  Act,  1964  (7  of  1964),  or  the  
Interest-tax Act, 1974 (45 of 1974);] 

2[(ix)  to  such  income  credited  by  way  of  interest  on  the  compensation  amount  awarded  by  the 

Motor Accidents Claims Tribunal; 

(ixa) to such income paid by way of interest on the compensation amount awarded by the Motor 
Accidents Claims Tribunal where the amount of such income or, as the case may be, the aggregate of 
the amounts of such income paid during the financial year does not exceed fifty thousand rupees;] 

3[(x)   to  such  income  which  is  paid  or  payable  by  an  infrastructure  capital  company  or 
infrastructure  capital  fund  or  a  public  sector  company  4[or  scheduled  bank]  in  relation  to  a  zero 
coupon bond issued on or after the 1st day of June, 2005 by such company or fund or public sector 
company 4[or scheduled bank];] 

5[(xi) to any income by way of interest referred to in clause (23FC) of section 10.] 

6[Explanation  1.—For  the  purposes  of  clauses  (i),  (vii)  and  (viia),  “time  deposits”  means  deposits  

(7[including] recurring deposits) repayable on the expiry of fixed periods. 

8* 

* 

* 

* 

*] 

1[(4) The person responsible for making the payment referred to in sub-section (1) may, at the time of 
making any deduction, increase or reduce the amount to be deducted under this section for the purpose of 
adjusting any excess or deficiency arising out of any previous  deduction or failure to deduct during the 
financial year.] 

9* 

* 

* 

* 

* 

1. Ins. by Act 25 of 1975, s. 20 (w.e.f. 1-4-1975). 
2. Subs. by Act 20 of 2015, s. 43, for clause (ix) (w.e.f. 1-6-2015). 
3. Ins. by Act 18 of 2005, s. 48 (w.e.f. 1-6-2005). 
4. Ins. by Act 33 of 2009, s. 60 (w.e.f. 1-4-2009). 
5. Ins. by Act 25 of 2014, s. 56 (w.e.f. 1-10-2014). 
6. Subs. by Act 18 of 2005, s. 48, for the Explanation (w.e.f. 1-6-2005). 
7. Subs. by Act 20 of 2015, s. 43, for “excluding” (w.e.f. 1-6-2015). 
8. Explanation 2 omitted by Act 21 of 2006 s. 40 (w.e.f. 1-4-2006). 

9. The Explanation omitted by Act 18 of 1992, s. 71 (w.e.f. 1-6-1992). 

641 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
1[194B. Winnings  from  lottery  or  crossword  puzzle.―The  person  responsible  for  paying  to  any 
person any income by way of winnings from any lottery or crossword puzzle  2[or card game and other 
game of any sort] in an amount exceeding  3[ten thousand rupees] shall, at the time of payment thereof, 
deduct income-tax thereon at the rates in force: 

4* 

* 

* 

* 

*] 

5[6[Providedthat] in a case where the winnings are wholly in kind or partly in cash and partly in kind 
but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of the 
winnings, the person responsible for paying shall, before releasing the winnings, ensure that tax has been 
paid in respect of the winnings.] 

7[194BB. Winnings  from  horse  race.―Any  person,  being  a  bookmaker  or  a  person  to  whom  a 
licence has been granted by the Government under any law for the time being in force for horse racing in 
any race course or for arranging for wagering or betting in any race course, who is responsible for paying 
to any person any income by way of winnings from any horse race in an amount exceeding 8[ten thousand 
rupees] shall, at the time of payment thereof, deduct income-tax thereon at the rates in force. 

4* 

* 

* 

* 

*] 

9[194C. Payments to contractors.—(1) Any person responsible for paying any sum to any resident 
(hereafter  in  this  section  referred  to  as  the  contractor)  for  carrying  out  any  work  (including  supply  of 
labour for carrying out any work) in pursuance of a contract between the contractor and a specified person 
shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in 
cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal 
to— 

(i) one per cent where the payment is being made or credit is being given to an individual or a 

Hindu undivided family; 

(ii) two per cent where the payment is being made or credit is being given to a person other than 

an individual or a Hindu undivided family, 

of such sum as income-tax on income comprised therein. 

(2) Where any sum referred to in sub-section (1) is credited to any account, whether called “Suspense 
account”  or  by  any  other  name,  in  the  books  of  account  of the  person  liable  to  pay  such  income,  such 
crediting shall be deemed to be credit of such income to the account of the payee and the provisions of 
this section shall apply accordingly. 

(3) Where any sum is paid or credited for carrying out any work mentioned in sub-clause (e) of clause 

(iv) of the Explanation, tax shall be deducted at source— 

(i) on the invoice value excluding the value of material, if such value is mentioned separately in 

the invoice; or 

(ii) on the whole of the invoice value, if the value of material is not mentioned separately in the 

invoice. 

1. Ins. by Act 16 of 1972, s. 28 (w.e.f. 1-4-1975). 
2. Ins. by Act 14 of 2001, s. 70 (w.e.f. 1-6-2001). 
3. Subs. by Act 14 of 2010, s.  35,  for “five thousands rupees” (w.e.f. 1-7-2010). Earlier substituted by Act 26 of 1986, s. 

30, for “one thousands rupees” (w.e.f.  1-6-1986). 

4. The proviso omitted by Act 27 of 1999, s. 70 (w.e.f. 1-4-2000). 
5. Ins. by Act 26 of 1997, s. 48 (w.e.f. 1-6-1997). 
6. Subs. by Act 27 of 1999, s. 70, “Provided futher that”  (w.e.f. 1-4-2000). 
7. Ins. by Act 19 of 1978, s. 21 (w.e.f. 1-4-1978). 
8. Subs. by Act 28 of 2016, s. 73, for “five thousand rupees” (w.e.f. 1-6-2016). 
9. Subs. by Act 33 of 2009, s. 61, for section 194C (w.e.f. 1-10-2009). 

642 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
(4) No individual or Hindu undivided family shall be liable to deduct income-tax on the sum credited 
or  paid  to  the  account  of  the  contractor  where  such  sum  is  credited  or  paid  exclusively  for  personal 
purposes of such individual or any member of Hindu undivided family. 

(5) No deduction shall be made from the amount of any sum credited or paid or likely to be credited 

or paid to the account of, or to, the contractor, if such sum does not exceed 1[thirty thousand rupees]: 

Provided that  where  the  aggregate  of  the  amounts  of  such  sums  credited  or  paid  or  likely  to  be 
credited  or  paid  during  the  financial  year  exceeds 2[one  lakh rupees],  the  person responsible for  paying 
such sums referred to in sub-section (1) shall be liable to deduct income-tax under this section. 

(6) No deduction shall be made from any sum credited or paid or likely to be credited or paid during 
the previous year to the account of a contractor during the course of business of plying, hiring or leasing 
goods carriages, 3[where such contractor owns ten or less goods carriages at any time during the previous 
year and furnishes a declaration to that effect along with] his Permanent Account Number, to the person 
paying or crediting such sum. 

(7) The person responsible for paying or crediting any sum to the person referred to in sub-section (6) 
shall  furnish,  to  the  prescribed  income-tax  authority  or  the  person  authorised  by  it,  such  particulars,  in 
such form and within such time as may be prescribed. 

Explanation.—For the purposes of this section,— 

(i) “specified person” shall mean,— 

(a) the Central Government or any State Government; or 

(b) any local authority; or 

(c) any corporation established by or under a Central, State or Provincial Act; or 

(d) any company; or 

(e) any co-operative society; or 

(f) any authority, constituted in India by or under any law, engaged either for the purpose of 
dealing with and satisfying the need for housing accommodation or for the purpose of planning, 
development or improvement of cities, towns and villages, or for both; or 

(g) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under 

any law corresponding to that Act in force in any part of India; or 

(h) any trust; or 

(i) any university established or incorporated by or under a Central, State or Provincial Act 
and  an  institution  declared  to  be  a  university  under  section  3  of  the  University  Grants 
Commission Act, 1956 (3 of 1956); or 

(j)  any  Government  of  a  foreign  State  or  a  foreign  enterprise  or  any  association  or  body 

established outside India; or 

(k) any firm; or 

1. Subs. by Act 14 of 2010, s. 37, for “twenty thousand rupees” (w.e.f. 1-7-2010). 
2.  Subs.  by  Act  28  of  2016,  s.  74,  for  “seventy-five  thousand  rupees”  (w.e.f.  1-6-2016).  Earlier  the  quoted  words  were 

substituted for “fifty thousand rupees” (w.e.f. 1-7-2010). 

3. Subs. by Act 20 of 2015, s. 44, for “on furnishing of” (w.e.f. 1-6-2015). 

643 

                                                           
(l) any person, being an individual or a Hindu undivided family or an association of persons 

or a body of individuals, if such person,— 

(A) does not fall under any of the preceding sub-clauses; and 

(B) is liable to audit of accounts under clause (a) or clause (b) of section 44AB during the 
financial year immediately preceding the financial year in which such sum is credited or paid 
to the account of the contractor; 

(ii) “goods carriage” shall have the meaning assigned to it in the Explanation to sub-section (7) 

of section 44AE; 

(iii) “contract” shall include sub-contract; 

(iv) “work” shall include— 

(a) advertising; 

(b)  broadcasting  and  telecasting  including  production of  programmes  for  such  broadcasting 

or telecasting; 

(c) carriage of goods or passengers by any mode of transport other than by railways; 

(d) catering; 

(e) manufacturing or supplying a product according to the requirement or specification of a 

customer by using material purchased from such customer, 

but does not include manufacturing or supplying a product according to the requirement or specification 
of a customer by using material purchased from a person, other than such customer.] 

1[194D. Insurance  commission.—Any  person  responsible  for  paying  to  a  resident  any  income  by 
way of remuneration or reward, whether by way of commission or otherwise, for soliciting or procuring 
insurance  business  (including  business  relating  to  the  continuance,  renewal  or  revival  of  policies  of 
insurance) shall, at the time of credit of such income to the account of the payee or at the time of payment 
thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-
tax thereon at the rates in force : 

Provided that no deduction shall be made under this section from any such income credited or paid 

before the 1st day of June, 1973:] 

2[Provided further that no deduction shall be made under this section in a case where the amount of 
such  income  or,  as  the  case  may  be,  the  aggregate  of  the  amounts  of  such  income  credited  or  paid  or 
likely  to  be  credited  or  paid  during  the  financial  year  to  the  account  of,  or  to,  the  payee,  does  not 
exceed 3[fifteen thousand rupees].] 

4[194DA. Payment  in  respect  of  life  insurance  policy.—Any  person  responsible  for  paying  to  a 
resident  any  sum  under  a  life  insurance  policy,  including  the  sum  allocated  by  way  of  bonus  on  such 
policy, other than the amount not includible in the total income under clause (10D) of section 10, shall, at 
the time of payment thereof, deduct income-tax thereon at the rate of 5[one per cent.]: 

1. Ins. by Act 21 of 1973, s. 17 (w.e.f. 1-4-1973). 
2. Ins. by Act 11 of 1987, s. 48 (w.e.f. 1-6-1987). 
3. Subs. by Act 28 of 2016, s. 75, for “twenty thousand rupees” (w.e.f. 1-6-2016). Earlier the quoted words were substituted 

by Act 14 of 2010, s. 38, for “five thousand rupees” (w.e.f. 1-7-2010). 

4. Ins. by Act 25 of 2014, s. 57 (w.e.f. 1-10-2014). 
5. Subs. by Act 28 of 2016, s. 76, for “two per cent.” (w.e.f. 1-6-2016). 

644 

                                                           
Provided that no deduction under this section shall be made where the amount of such payment or, as 
the case may be, the aggregate amount of such payments to the payee during the financial year is less than 
one hundred thousand rupees.] 

1[194E. Payments to non-resident sportsmen or sports associations.—Where any income referred 
to  in section  115BBA is  payable  to  a  non-resident  sportsman  (including  an  athlete)  2[or  an  entertainer] 
who is not a citizen of India or a non-resident sports association or institution, the person responsible for 
making the payment shall, at the time of credit of such income to the account of the payee or at the time 
of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, 
deduct income-tax thereon at the rate of 3[twenty per cent.].] 

4[194EE. Payments  in  respect  of  deposits  under  National  Savings  Scheme,  etc.—The  person 
responsible  for  paying  to  any  person  any  amount  referred  to  in  clause  (a)  of  sub-section  (2)  of section 
80CCA shall, at the time of payment thereof, deduct income-tax thereon at the rate of 5[ten per cent.]: 

Provided that no deduction shall be made under this section where the amount of such payment or, as 
the case may be, the aggregate amount of such payments to the payee during the financial year is less than 
two thousand five hundred rupees : 

Provided further that nothing contained in this section shall apply to the payment of the said amount 

to the heirs of the assessee.] 

6[194F. Payments on account of repurchase of units by Mutual Fund or Unit Trust of India.—
The  person  responsible  for  paying  to  any  person  any  amount  referred  to  in  sub-section  (2)  of section 
80CCB shall, at the time of payment thereof, deduct income-tax thereon at the rate of twenty per cent.] 

7[194G. Commission, etc., on the sale of lottery tickets.—8[(1)] Any person who is responsible for 
paying, on or after the 1st day of October, 1991 to any person, who is or has been stocking, distributing, 
purchasing  or  selling  lottery  tickets,  any  income  by  way  of  commission,  remuneration  or  prize  (by 
whatever name called) on such tickets in an amount exceeding9[fifteen thousand rupees] shall, at the time 
of credit of such income to the account of the payee or at the time of payment of such income in cash or 
by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at 
the rate of 10[five per cent.].] 

11*   

* 

* 

* 

* 

Explanation.—For the purposes of this section, where any income is credited to any account, whether 
called "Suspense Account" or by any other name, in the books of account of the person liable to pay such 
income, such crediting shall be deemed to be credit of such income to the account of the payee and the 
provisions of this section shall apply accordingly.] 

1. Ins. by  Act 36 of 1989, s. 22 (w.e.f. 1-11-1989). Earlier section 194D was omitted by  Act 3 of 1989, s. 31(w.e.f. 1-4-

1988) which was inserted by Act 4 of 1988, s. 74 (w.e.f. 1-4-1988). 

2. Ins. by Act 23 of 2012, s. 73 (w.e.f. 1-7-2012). 
3. Subs. by s. 73, ibid., for “ten per cent.” (w.e.f. 1-7-2012). 
4. Ins. by Act 49 of 1991, s. 54 (w.e.f. 1-10-1991). 
5. Subs. by Act 28 of 2016, s. 77, for “twenty per cent.” (w.e.f. 1-6-2016). 
6. Ins. by Act 12 of 1990, s. 40 (w.e.f. 1-4-1991). 
7. Ins. by Act 49 of 1991, s. 55 (w.e.f. 1-10-1991). 
8. Section 73 renumbered as sub-section (1) thereof by Act 18 of 1992, s. 73 (w.e.f. 1-6-1992). 
9. Subs. by Act 28 of 2016, s. 78, for “one thousand rupees” (w.e.f. 1-6-2016). 
10. Subs. by s. 78, ibid., for “ten per cent.” (w.e.f. 1-6-2016). 
11. Sub-sections (2) and (3) omitted by Act 32 of 2003, s. 76 (w.e.f. 1-6-2003). Earlier sub-sections (2) and (3) were inserted 

by Act 18 of 1992, s. 73 (w.e.f. 1-6-1992). 

645 

 
 
 
 
 
 
 
                                                           
1[194H.  Commission  or  brokerage.—Any  person,  not  being  an  individual  or  a  Hindu  undivided 
family, who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by 
way of commission (not being insurance commission referred to in section 194D) or brokerage, shall, at 
the time of credit of such income to the account of the payee or at the time of payment of such income in 
cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax 
thereon at the rate of 2[five per cent.]: 

Provided that  no  deduction  shall  be  made  under  this  section  in  a  case  where  the  amount  of  such 
income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to 
be credited or paid during the financial year to the account of, or to, the payee, does not exceed  3[fifteen 
thousand rupees]: 

4[Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or 
turnover  from  the  business  or  profession  carried  on  by  him  exceed the  monetary  limits specified  under 
clause  (a)  or  clause  (b)  of section  44AB during  the  financial  year  immediately  preceding  the  financial 
year  in  which  such  commission  or  brokerage  is  credited  or  paid,  shall  be  liable  to  deduct  income-tax 
under this section:] 

5[Provided also that no deduction shall be made under this section on any commission or brokerage 
payable by Bharat Sanchar Nigam Limited or Mahanagar Telephone Nigam Limited to their public call 
office franchisees.] 

Explanation.—For the purposes of this section,— 

(i) “commission or brokerage” includes any payment received or receivable, directly or indirectly, 
by a person acting on behalf of another person for services rendered (not being professional services) 
or for any services in the course of buying or selling of goods or in relation to any transaction relating 
to any asset, valuable article or thing, not being securities; 

(ii)  the expression “professional services” means services rendered by a person in the course of 
carrying on a legal, medical, engineering or architectural profession or the profession of accountancy 
or technical consultancy or interior decoration or such other profession as is notified by the Board for 
the purposes of section 44AA; 

(iii) the expression “securities” shall have the meaning assigned to it in clause (h) of section 2 of 

the Securities Contracts (Regulation) Act, 1956 (42 of 1956); 

(iv) where any income is credited to any account, whether called “Suspense account” or by any 
other name, in the books of account of the person liable to pay such income, such crediting shall be 
deemed to be credit of such income to the account of the payee and the provisions of this section shall 
apply accordingly.] 

1. Section 194H reinserted by Act 14 of 2001, s. 71 (w.e.f. 1-6-2001). Earlier section 194H was omitted by Act 27 of 1999, 
s.  72  (w.e.f.  1-4-2000).  Amended  by  Act  18  of  1992,  s.  74  (w.e.f.  1-6-1992)  and  prior  its  omission  section  194H  was 
inserted by Act 49 of 1991, s. 55 (w.e.f. 1-10-1991). 

2. Subs. by Act 28 of 2016, s. 79, for “ten per cent.” (w.e.f. 1-6-2016). 
3. Subs. by s. 79, ibid., for “five thousand rupees” (w.e.f. 1-6-2016). 
4. Ins. by Act 20 of 2002, s. 76 (w.e.f. 1-6-2002). 
5. Ins. by Act 22 of 2007, s. 55 (w.e.f. 1-6-2007). 

646 

                                                           
1[194-I.  Rent.—2[Any  person,  not  being  an  individual  or  a  Hindu  undivided  family,  who  is 
responsible for paying to a resident] any income by way of rent, shall, at the time of credit of such income 
to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or 
by any other mode, whichever is earlier, 3[deduct income-tax thereon at the rate of— 

4[(a) two per cent. for the use of any machinery or plant or equipment; and 

(b) ten  per  cent.  for  the  use  of  any  land  or  building  (including  factory  building)  or  land 

appurtenant to a building (including factory building) or furniture or fittings:]] 

Provided that no deduction shall be made under this section where the amount of such income or, 
as  the  case  may  be,  the  aggregate  of  the  amounts  of  such  income  credited  or  paid  or  likely  to  be 
credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, 
does not exceed 5[two hundred and forty thousand rupees]: 

6[Provided  further that  an  individual  or  a  Hindu  undivided  family,  whose  total  sales,  gross 
receipts  or  turnover  from  the  business  or  profession  carried  on  by  him  exceed  the  monetary  limits 
specified  under  clause  (a)  or  clause  (b)  of section  44AB during  the  financial  year  immediately 
preceding the financial year in which such income by way of rent is credited or paid, shall be liable to 
deduct income-tax under this section:] 

7[Provided also that no deduction shall be made under this section where the income by way of 
rent is credited or paid to a business trust, being a real estate investment trust, in respect of any real 
estate asset, referred to in clause (23FCA) of section 10, owned directly by such business trust.] 

Explanation.—For the purposes of this section,— 

8[(i)  “rent” means any payment, by whatever name called, under any lease, sub-lease, tenancy or 

any other agreement or arrangement for the use of (either separately or together) any,— 

(a)  land; or 

(b)  building (including factory building); or 

(c)  land appurtenant to a building (including factory building); or 

(d)  machinery; or 

(e)  plant; or 

(f)  equipment; or 

(g)  furniture; or 

(h)  fittings, 

whether or not any or all of the above are owned by the payee;] 

(ii)  where any income is credited to any account, whether called “Suspense account” or by any 
other name, in the books of account of the person liable to pay such income, such crediting shall be 
deemed to be credit of such income to the account of the payee and the provisions of this section shall 
apply accordingly.] 

1. Ins. by Act 32 of 1994, s. 40 (w.e.f. 1-6-1994).  
2. Subs. by Act 32 of 2003, s. 77, for certain words (w.e.f. 1-6-2003). 
3. Subs. by Act 22 of 1995, s. 35, for “deduct income-tax thereon at the rate of twenty per cent.” (w.e.f. 1-7-1995). 
4. Subs. by Act 33 of 2009, s. 62, for clauses (a), (b) and (c) (w.e.f. 1-10-2009). 
5. Subs. by Act 7 of 2019, s. 10, for “one hundred eighty thousand rupees” (w.e.f. 1-4-2019). Earlier it was substituted by 

Act 14 of 2010, s. 40, for “one hundred and twenty thousand rupees” (w.e.f. 1-7-2010). 

6. Ins. by Act 20 of 2002, s. 77 (w.e.f. 1-6-2002). 
7. Ins. by Act 20 of 2015, s. 45 (w.e.f. 1-6-2015). 
8. Subs. by Act 29 of 2006, s. 15, for clause (i) (w.e.f. 13-7-2006). 

647 

                                                           
1[194-IA. Payment on transfer of certain immovable property other than agricultural land—(1) 
Any  person,  being  a  transferee,  responsible  for  paying  (other  than  the  person  referred  to  in section 
194LA) to a resident transferor any sum by way of consideration for transfer of any immovable property 
(other than agricultural land), shall, at the time of credit of such sum to the account of the transferor or at 
the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever 
is earlier, deduct an amount equal to one per cent. of such sum as income-tax thereon. 

(2) No deduction under sub-section (1) shall be made where the consideration for the transfer of an 

immovable property is less than fifty lakh rupees. 

(3) The provisions of section 203A shall not apply to a person required to deduct tax in accordance 

with the provisions of this section. 

Explanation.—For the purposes of this section,— 

(a)   “agricultural  land”  means  agricultural  land  in  India,  not  being  a  land  situate  in  any  area 

referred to in items (a) and (b) of sub-clause (iii) of clause (14) of section 2; 

(b) ”immovable property” means any land (other than agricultural land) or any building or part of 

a building.] 

2[194-IB. Payment of rent by certain individuals or Hindu undivided family.—(1) Any person, 
being  an  individual  or  a  Hindu  undivided  family  (other  than  those  referred  to  in  the  second  proviso  to 
section 194-I), responsible for paying to a resident any income by way of rent exceeding fifty thousand 
rupees for a month or part of a month during the previous year, shall deduct an amount equal to five per 
cent. of such income as income-tax thereon. 

(2)  The  income-tax  referred  to  in  sub-section  (1)  shall  be  deducted  on  such  income  at  the  time  of 
credit  of  rent,  for  the  last  month  of  the  previous  year  or  the  last  month  of  tenancy,  if  the  property  is 
vacated during the year, as the case may be, to the account of the payee or at the time of payment thereof 
in cash or by issue of a cheque or draft or by any other mode, whichever is earlier. 

(3) The provisions of section 203A shall not apply to a person required to deduct tax in accordance 

with the provisions of this section. 

(4) In a case where the tax is required to be deducted as per the provisions of section 206AA, such 
deduction shall not exceed the amount of rent payable for the last month of the previous year or the last 
month of the tenancy, as the case may be. 

Explanation.—For the purposes of this section, “rent” means any payment, by whatever name called, 
under  any  lease,  sub-lease,  tenancy  or  any  other  agreement  or  arrangement  for  the  use  of  any  land  or 
building or both.] 

3[194-IC.  Payment  under  specified  agreement.—Notwithstanding  anything  contained  in  section 
194-IA,  any  person  responsible  for  paying  to  a  resident  any  sum  by  way  of  consideration,  not  being 
consideration in kind, under the agreement referred to in sub-section (5A) of section 45, shall at the time 
of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a 
cheque  or  draft or by  any  other  mode,  whichever  is earlier, deduct  an amount equal  to ten  per  cent.  of 
such sum as income-tax thereon.] 

1. Ins. by Act 17 of 2013, s. 46 (w.e.f. 1-6-2013). 
2. Ins. by Act 7 of 2017, s. 64 (w.e.f. 1-6-2017). 
3. Ins. by s. 65, ibid. (w.e.f. 1-4-2017). 

648 

                                                           
1[194J. Fees for professional or technical services.—(1) Any person, not being an individual or a 

Hindu undivided family, who is responsible for paying to a resident any sum by way of— 

(a) fees for professional services, or 

(b) fees for technical services, 2[or] 

3[(ba)  any  remuneration  or  fees  or  commission  by  whatever  name  called,  other  than  those  on 

which tax is deductible under section 192, to a director of a company, or] 

2[(c) royalty, or 

(d) any sum referred to in clause (va) of section 28,] 

shall, at the time of credit of such sum to the account of the payee or at the time of payment thereof in 
cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal 
to 4[ten per cent.] of such sum as income-tax on income comprised therein: 

Provided that no deduction shall be made under this section— 

(A) from any sums as aforesaid credited or paid before the 1st day of July, 1995; or 

(B) where the amount of such sum or, as the case may be, the aggregate of the amounts of such 
sums credited or paid or likely to be credited or paid during the financial year by the aforesaid person 
to the account of, or to, the payee, does not exceed— 

 (i)  5[thirty thousand rupees], in the case of fees for professional services referred to in clause 

(a), or 

(ii)   5[thirty thousand rupees], in the case of fees for technical services referred to in6[clause 

(b), or] 

2[(iii) 5[thirty thousand rupees], in the case of royalty referred to in clause (c), or 

(iv) 5[thirty thousand rupees], in the case of sum referred to in clause (d):] 

7[Provided  further that  an  individual  or  a  Hindu  undivided  family,  whose  total  sales,  gross 
receipts or turnover from the business or profession carried on by him exceed the monetary limits 
specified  under  clause  (a)  or  clause  (b)  of section  44AB during  the  financial  year  immediately 
preceding  the  financial  year  in  which  such  sum  by  way  of  fees  for  professional  services  or 
technical services is credited or paid, shall be liable to deduct income-tax under this section:] 

1. Ins. by Act 22 of 1995, s. 36 (w.e.f. 1-7-1995). 
2. Ins. by Act 29 of 2006, s. 16 (w.e.f. 13-7-2006). 
3. Ins. by Act 23 of 2012, s. 74 (w.e.f. 1-7-2012). 
4. Subs. by Act 22 of 2007, s. 57, for “five per cent.” (w.e.f. 1-6-2007). 
5. Subs. by Act 14 of 2010, s. 41, for “twenty thousand rupees” (w.e.f. 1-7-2010). 
6. Subs. by Act 29 of 2006, s. 16,for “clause (b):” (w.e.f. 13-7-2006). 
7. Ins. by Act 20 of 2002, s. 78 (w.e.f. 1-6-2002). 

649 

                                                           
1[Provided also that  no  individual  or  a  Hindu  undivided  family  referred  to  in  the  second 
proviso shall be liable to deduct income-tax on the sum by way of fees for professional services 
incase such sum is credited or paid exclusively for personal  purposes of such individual or any 
member of Hindu undivided family:] 

2[Provided also that the provisions of this section shall have effect, as if for the words “ten 
per cent.”, the words “two per cent.” had been substituted in the case of a payee, engaged only in 
the business of operation of call centre.] 

3* 

* 

* 

* 

* 

Explanation.—For the purposes of this section,— 

(a) “professional services” means services rendered by a person in the course of carrying on legal, 
medical,  engineering  or  architectural  profession  or  the  profession  of  accountancy  or  technical 
consultancy or interior decoration or advertising or such other profession as is notified by the Board 
for the purposes of section 44AA or of this section; 

(b) “fees for technical services” shall have the same meaning as in Explanation 2 to clause (vii) of 

sub-section (1) of section 9; 

4[(ba) “royalty” shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) 

of section 9;] 

(c)   where  any  sum  referred  to  in  sub-section  (1)  is  credited  to  any  account,  whether  called 
“suspense account” or by any other name, in the books of account of the person liable to pay such 
sum,  such  crediting  shall  be  deemed  to  be  credit  of  such  sum  to  the  account  of  the  payee  and  the 
provisions of this section shall apply accordingly. 

194K. [Income  in  respect  of  units.]—Omitted  by  the  Finance  Act,  2016  (28  of  2016),  s.  80                    

(w.e.f. 1-6-2016). 

194L.  [Payment  of  compensation  on  acquisition  of  capital  asset.]—Omitted  by  s.  80,  ibid.              

(w.e.f. 1-6-2016). 

5[194LA. Payment of compensation on acquisition of certain immovable property.—Any person 
responsible  for  paying  to  a  resident  any  sum,  being  in  the  nature  of  compensation  or  the  enhanced 
compensation or the consideration or the enhanced consideration on account of compulsory acquisition, 
under any law for the time being in force, of any immovable property (other than agricultural land), shall, 
at  the  time  of  payment  of  such  sum  in  cash  or  by  issue  of  a  cheque  or  draft  or  by  any  other  mode, 
whichever is earlier, deduct an amount equal to ten per cent of such sum as income-tax thereon: 

1. Ins. by Act 32 of 2003, s. 78 (w.e.f. 1-6-2003). 
2. Ins. by Act 7 of 2017, s. 66 (w.e.f. 1-6-2017). 
3. Subs-section (2) and (3) omitted by Act 32 of 2003, s. 78 (w.e.f. 1-6-2003). 
4. Ins. by Act 29 of 2006, s. 16 (w.e.f. 13-7-2006). 
5. Ins. by Act 23 of 2004, s. 38 (w.e.f. 1-10-2004). 

650 

 
 
 
 
 
 
 
 
                                                           
Provided that no deduction shall be made under this section where the amount of such payment or, as 
the case may be, the aggregate amount of such payments to a resident during the financial year does not 
exceed 1[two lakh and fifty thousand rupees]: 

2[Provided further that no deduction shall be made under this section where such payment is made in 
respect of any award or agreement which has been exempted from levy of income-tax under section 96 of 
the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement 
Act, 2013 (30 of 2013).] 

Explanation.—For the purposes of this section,— 

(i)  “agricultural land” means agricultural land in India including land situate in any area referred 

to in items (a) and (b) of sub-clause (iii) of clause (14) of section 2; 

(ii)  “immovable property” means any land (other than agricultural land) or any building or part 

of a building.] 

3[194LB. Income by way of interest from infrastructure debt fund.—Where any income by way 
of  interest  is  payable  to  a  non-resident,  not  being  a  company,  or  to  a  foreign  company,  by  an 
infrastructure  debt  fund  referred  to  in  clause  (47)  of section  10,  the  person  responsible  for  making  the 
payment shall, at the time of credit of such income to the account of the payee or at the time of payment 
thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-
tax thereon at the rate of five per cent.] 

4[194LBA.Certain  income  from  units  of  a  business  trust.—(1)  Where  any  distributed  income 
referred  to  in section  115UA,  being  of  the  nature  referred  to  5[in sub-clause  (a)  of  clause  (23FC)]  6[or 
clause (23FCA)] of section 10, is payable by a business trust to its unit holder being a resident, the person 
responsible for making the payment shall at the time of credit of such payment to the account of the payee 
or  at  the  time  of  payment  thereof  in  cash  or  by  the  issue  of  a  cheque  or  draft  or  by  any  other  mode, 
whichever is earlier, deduct income-tax thereon at the rate of ten per cent. 

(2)  Where  any  distributed  income  referred  to  in section  115UA,  being  of  the  nature  referred  to  
5[in sub-clause (a) of clause (23FC)] of section 10, is payable by a business trust to its unit holder,7[being 
a  non-resident  (not  being  a  company)]  or  a  foreign  company,  the  person  responsible  for  making  the 
payment shall at the time of credit of such payment to the account of the payee or at the time of payment 
thereof  in cash  or  by  the issue  of  a  cheque  or  draft or  by  any  other  mode,  whichever  is  earlier,  deduct 
income-tax thereon at the rate of five per cent.] 

6[(3)  Where  anydistributed  income  referred  to  in section  115UA,  being  of  the  nature  referred  to  in 
clause (23FCA) of section 10, is payable by a business trust to its unit holder, being a non-resident (not 
being a company), or a foreign company, the person responsible for making the payment shall at the time 
of credit of such payment to the account of the payee or at the time of payment thereof in cash or by the 
issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the 
rates in force.] 

1. Subs. by Act 28 of 2016, s. 81, for “two hundred thousand rupees” (w.e.f. 1-6-2016). 
2. Ins. by Act 7 of 2017, s. 67 (w.e.f. 1-4-2017). 
3. Ins. by Act 8 of 2011, s. 28 (w.e.f. 1-6-2011). 
4. Ins. by Act 25 of 2014, s. 58 (w.e.f. 1-10-2014). 
5. Subs. by Act 28 of 2016, s. 82, for “in clause (23FC)” (w.e.f. 1-6-2016). 
6. Ins. by Act 20 of 2015, s. 46 (w.e.f. 1-6-2015). 
7. Subs. by s. 46, ibid., for “being a non-resident, not being a company” (w.e.f. 1-6-2015). 

651 

                                                           
1[194LBB.  Income  in  respect  of  units  of  investment  fund.—Where  any  income,  other  than  that 
proportion of income which is of the same nature as income referred to in clause (23FBB) of section 10, 
is  payable  to  a  unit  holder  in  respect  of  units  of  an  investment  fund  specified  in  clause  (a)  of 
the Explanation 1 to section 115UB, the person responsible for making the payment shall, at the time of 
credit of such income to the account of payee or at the time of payment thereof in cash or by issue of a 
cheque or draft or by any other mode, whichever is earlier,2[deduct income-tax thereon,— 

(i)  at the rate of ten per cent, where the payee is a resident; 

(ii)  at the rates in force, where the payee is a non-resident (not being a company) or a foreign 

company: 

Provided that  where  the  payee  is  a  non-resident  (not  being  a  company)  or  a  foreign  company,  no 
deduction shall be made in respect of any income that is not chargeable to tax under the provisions of the 
Act.] 

Explanation.—For the purposes of this section,— 

(a)   “unit”  shall  have  the  meaning  assigned  to  it  in  clause  (c)  of  the Explanation  1 to  

section 115UB; 

(b)  where any income as aforesaid is credited to any account, whether called “suspense account” 
or by any other name, in the books of account of the person liable to pay such income, such crediting 
shall be deemed to be the credit of such income to the account of the payee, and the provisions of this 
section shall apply accordingly.] 

3[194LBC.Income  in  respect  of  investment  in  securitization  trust.—(1)  Where  any  income  is 
payable to an investor, being a resident, in respect of an investment in a securitisation trust specified in 
clause  (d)  of  the Explanation occurring  after section  115TCA,  the  person  responsible  for  making  the 
payment shall, at the time of credit of such income to the account of the payee or at the time of payment 
thereof  in  cash  or  by  issue  of  a  cheque  or  draft  or  by  any  other  mode,  whichever  is  earlier,  deduct  
income-tax thereon, at the rate of— 

(i)  twenty-five per cent., if the payee is an individual or a Hindu undivided family; 

(ii)  thirty per cent., if the payee is any other person. 

(2)  Where  any  income  is  payable  to  an  investor,  being  a  non-resident  (not  being  a  company)  or  a 
foreign  company,  in  respect  of  an  investment  in  a  securitisation  trust  specified  in  clause  (d)  of 
the Explanation occurring after section 115TCA, the person responsible for making the payment shall, at 
the time of credit of such income to the account of the payee or at the time of payment thereof in cash or 
by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon, at the 
rates in force. 

Explanation.—For the purposes of this section,— 

(a)   “investor”  shall  have  the  meaning  assigned  to  it  in  clause  (a)  of  the Explanation occurring 

after section 115TCA; 

1. Ins. by Act 20 of 2015, s. 47 (w.e.f. 1-6-2015). 
2. Subs. by Act 28 of 2016, s. 83, for “deduct income-tax thereon at the rate of ten per cent.” (w.e.f. 1-6-2016). 
3. Ins. by s. 84, ibid (w.e.f. 1-6-2016). 

652 

                                                           
(b)  where any income as aforesaid is credited to any account, whether called “suspense account” 
or by any other name, in the books of account of the person liable to pay such income, such crediting 
shall be deemed to be the credit of such income to the account of the payee, and the provisions of this 
section shall apply accordingly.] 

1[194LC. Income  by  way  of  interest  from  Indian  company.—(1)  Where  any  income  by  way  of 
interest referred to in sub-section (2) is payable to a non-resident, not being a company or to a foreign 
company by a specified company  2[or a business trust], the person responsible for making the payment, 
shall at the time of credit of such income to the account of the payee or at the time of payment thereof in 
cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct the income-tax 
thereon at the rate of five per cent. 

(2) The interest referred to in sub-section (1) shall be the income by way of interest payable by the 

specified company 2[or the business trust],— 

3[(i)  in respect of monies borrowed by it in foreign currency from a source outside India,— 

(a)  under a loan agreement at any time on or after the 1st day of July, 2012 but before the 

4[1st day of July,2020]; or 

(b)  by way of issue of long-term infrastructure bonds at any time on or after the 1st day of 

July, 2012 but before the 1st day of October, 2014; or 

(c)   by  way  of  issue  of  any  long-term  bond  including  long-term  infrastructure  bond  at  any 

time on or after the 1st day of October, 2014 but before the 4[1st day of July, 2020], 

as approved by the Central Government in this behalf;5[or] 

6[(ia) in respect of monies borrowed by it from a source outside India by way of issue of rupee 

denominated bond before the 1st day of July, 2020, and] 

(ii)  to the extent to which such interest does not exceed the amount of interest calculated at the 
rate approved by the Central Government in this behalf, having regard to the terms of the loan or the 
bond and its repayment. 

Explanation.—For the purpose of this section— 

(a)   “foreign  currency”  shall  have  the  meaning  assigned  to  it  in  clause  (m)  of  section  2  of  the 

Foreign Exchange Management Act, 1999 (42 of 1999); 

(b) ”specified company” means an Indian company.] 

1. Ins. by Act 23 of 2012, s. 76 (w.e.f. 1-7-2012). 
2. Ins. by Act 25 of 2014, s. 59 (w.e.f. 1-10-2014). 
3. Subs. by s. 59, ibid., for clause (i) (w.e.f. 1-10-2014). 
4. Subs. by Act 7 of 2017, s. 68, for “1st day of July, 2017” (w.e.f. 1-4-2018). 
5. Subs. by s. 68, ibid., for “and” (w.e.f. 1-4-2018). 
6. Ins. by s. 68, ibid (w.e.f. 1-4-2016). 

653 

                                                           
1[194LD.  Income  by  way  of  interest  on  certain  bonds  and  Government  securities.—(1)  Any 
person  who  is  responsible  for  paying  to  a  person  being  a  Foreign  Institutional  Investor  or  a  Qualified 
Foreign Investor, any income by way of interest referred to in sub-section (2), shall, at the time of credit 
of such income to the account of the payee or at the time of payment of such income in cash or by the 
issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the 
rate of five per cent. 

(2) The income  by  way  of  interest  referred to in sub-section (1)  shall  be  the  interest  payable  on  or 
after the 1st day of June, 2013 but before the 2[1st day of July, 2020] in respect of investment made by the 
payee in— 

(i)  a rupee denominated bond of an Indian company ; or 

(ii)  a Government security: 

Provided that the rate of interest in respect of bond referred to in clause (i) shall not exceed the rate as 

may be notified by the Central Government in this behalf. 

Explanation.—For the purpose of this section,— 

(a)“Foreign  Institutional  Investor”  shall  have  the  meaning  assigned  to  it  in  clause  (a)  of 

the Explanation to section 115AD; 

(b)“Government security” shall have the meaning assigned to it in clause (b) of section 2 of the 

Securities Contracts (Regulation) Act, 1956 (42 of 1956); 

(c)“Qualified  Foreign  Investor”  shall  have  the  meaning  assigned  to  it  in  the  Circular  No. 
Cir/IMD/DF/14/2011,  dated  the  9th  August,  2011,  as  amended  from  time  to  time,  issued  by  the 
Securities and Exchange Board of India, under section 11 of the Securities and Exchange Board of 
India Act, 1992 (15 of 1992).] 

195. Other sums.—3[(1) Any person responsible for paying to a non-resident, not being a company, 
or  to  a  foreign  company,  4[any  interest  (not  being  interest  referred  to  in section  194LB or section 
194LC)]5[or section 194LD] 6*** or any other sum chargeable under the provisions of this Act (not being 
income  chargeable  under  the  head  “Salaries”  7***)  shall,  at  the  time  of  credit  of  such  income  to  the 
account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by 
any other mode, whichever is earlier, deduct income-tax thereon at the rates in force: 

8[Provided that in the case of interest payable by the Government or a public sector bank within the 
meaning of clause (23D) of section 10 or a public financial institution within the meaning of that clause, 
deduction of tax shall be made only at the time of payment thereof in cash or by the issue of a cheque or 
draft or by any other mode:] 

1. Ins. by Act 17 of 2013, s. 47 (w.e.f. 1-6-2013). 
2. Subs. by Act 7 of 2017, s. 69, for “1st day of July, 2017” (w.e.f. 1-4-2018). 
3. Subs. by Act 11 of 1987, s. 49, for sub-section (1) (w.e.f. 1-6-1987). 
4. Subs. by Act 23 of 2012, s. 77, for “any interest” (w.e.f. 1-4-2012). 
5. Ins. by Act 17 of 2013, s. 48 (w.e.f. 1-6-2013). 
6. The words “(not being interest on securities)” omitted by Act 32 of 2003, s. 80 (w.e.f. 1-6-2003). 
7. The words “or dividends” omitted by Act 49 of 1991, s. 56 (w.e.f. 1-10-1991). 
8. Ins. by Act 36 of 1989, s. 23 (w.e.f. 1-6-1987). 

654 

                                                           
1[Provided  further that  no  such  deduction  shall  be  made  in  respect  of  any  dividends  referred  to 

in section 115-O.] 

Explanation  2[1].—For the purposes of this section, where any interest or other sum as aforesaid is 
credited to any account, whether called “Interest payable account” or “Suspense account” or by any other 
name, in the books of account of the person liable to pay such income, such crediting shall be deemed to 
be  credit  of  such  income  to  the  account  of  the  payee  and  the  provisions  of  this  section  shall  apply 
accordingly.] 

3[Explanation 2.—For the removal of doubts, it is hereby clarified that the obligation to comply with 
sub-section (1) and to make deduction thereunder applies and shall be deemed to have always applied and 
extends and shall be deemed to have always extended to all persons, resident or non-resident, whether or 
not the non-resident person has— 

(i) a residence or place of business or business connection in India; or 

(ii) any other presence in any manner whatsoever in India.] 

(2)  Where  the  person  responsible  for  paying  any  such  sum  chargeable  under  this  Act  (4[other  than 
salary]) to a non-resident considers that the whole of such sum would not be income chargeable in the 
case of the recipient, he may make an application to the 5[Assessing Officer] to determine, 6[by general or 
special  order],  the  appropriate  proportion  of such  sum  so chargeable,  and  upon such  determination,  tax 
shall be deducted under sub-section (1) only on that proportion of the sum which is so chargeable. 

7* 

* 

* 

* 

* 

8[(3) Subject to rules made under sub-section (5), any person entitled to receive any interest or other 
sum  on  which  income-tax  has  to  be  deducted  under  sub-section  (1)  may  make  an  application  in  the 
prescribed form to the  5[Assessing Officer] for the grant of a certificate authorising  him to receive such 
interest or other sum without deduction of tax under that sub-section, and where any such certificate is 
granted,  every  person  responsible  for  paying  such  interest  or  other  sum  to  the  person  to  whom  such 
certificate is granted shall, so long as the certificate is in force, make payment of such interest or other 
sum without deducting tax thereon under sub-section (1). 

(4)  A  certificate  granted  under  sub-section  (3)  shall  remain  in  force  till  the  expiry  of  the  period 
specified therein or, if it is cancelled by the 5[Assessing Officer] before the expiry of such period, till such 
cancellation. 

1. Ins. by Act 32 of 2003, s. 80 (w.e.f. 1-4-2003).  Earlier the proviso was omitted by Act 20 of 2002, s. 80 (w.e.f. 1-6-2002) 

which was inserted by Act 26 of 1997, s. 49 (w.e.f. 1-6-1997). 

2. The Explanation renumbered as Explanation 1 thereof by Act 23 of 2012, s. 77 (w.r.e.f. 1-4-1962). 
3. Ins. by s. 77, ibid. (w.r.e.f. 1-4-1962). 
4.  Subs.  by  Act  32  of  2003,  s.  80,  for  “other  than  interest  on  securities  and  salary”  (w.e.f.  1-6-2003).  Earlier  the  words                 

“other  than  interest  including  interest  on  securities”  substituted  by  Act  66  of  1976,  s.  22,  for  “other  than  interest  on 
securities” (w.e.f. 1-6-1976) and the word “dividend” was omitted by Act 49 of 1991, s. 56 (w.e.f. 1-10-1991). 

5. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
6.  Subs.  by  Act  26  of  1988,  s.  39,  for  “in  the  prescribed  manner  (w.r.e.f.  1-3-1988).  Earlier  the  quoted  words  were 

substituted by Act 11 of 1987, s. 49 for “by general or special order” (w.e.f. 1-6-1987). 

7. The proviso omitted by Act 49 of 1991, s. 56 (w.e.f. 1-10-1991). Earlier the proviso was inserted by Act 11 of 1987, s. 49 

(w.e.f. 1-6-1987). 

8. Ins. by Act 19 of 1970, s. 24 (w.e.f. 1-4-1970). 

655 

 
 
 
 
 
 
 
 
                                                           
(5) The  Board  may,  having  regard  to  the convenience  of  assessees  and the interests of revenue,  by 
notification in the Official Gazette, make rules specifying the cases in which, and the circumstances under 
which, an application may be made for the grant of a certificate under sub-section (3) and the conditions 
subject to which such certificate may be granted and providing for all other matters connected therewith.] 

1[(6)  The  person  responsible  for  paying  to  a  non-resident,  not  being  a  company,  or  to  a  foreign 
company,  any  sum,  whether  or  not  chargeable  under  the  provisions  of  this  Act,  shall  furnish  the 
information relating to payment of such sum, in such form and manner, as may be prescribed.] 

2[(7) Notwithstanding anything contained in sub-section (1) and sub-section (2), the Board may, by 
notification in the Official Gazette, specify a class of persons or cases, where the person responsible for 
paying  to  a  non-resident,  not  being  a  company,  or  to  a  foreign  company,  any  sum,  whether  or  not 
chargeable  under  the  provisions  of  this  Act,  shall  make  an  application  to  the  Assessing  Officer  to 
determine,  by  general  or  special  order,  the  appropriate  proportion  of  sum  chargeable,  and  upon  such 
determination,  tax  shall  be  deducted  under  sub-section  (1)  on  that  proportion  of  the  sum  which  is  so 
chargeable.] 

3[195A. Income  payable  “net  of  tax”.—4[In  a  case  other  than  that  referred  to  in  sub-section  (1A) 
of section  192,  where  under  an  agreement]  or  other  arrangement,  the  tax  chargeable  on  any  income 
referred to in the foregoing provisions of this Chapter is to be borne by the person by whom the income is 
payable, then, for the purposes of deduction of tax under those provisions such income shall be increased 
to such amount as would, after deduction of tax thereon at the rates in force for the financial year in which 
such income is payable, be equal to the net amount payable under such agreement or arrangement.] 

5[196. Interest  or  dividend  or  other  sums  payable  to  Government,  Reserve  Bank  or  certain 
corporations.—Notwithstanding  anything  contained  in  the  foregoing  provisions  of  this  Chapter,  no 
deduction of tax shall be made by any person from any sums payable to— 

(i) the Government, or 

(ii) the Reserve Bank of India, or 

(iii)  a  corporation  established  by  or  under  a  Central  Act  which  is,  under  any  law  for  the  time 

being in force, exempt from income-tax on its income, or 

(iv) a Mutual Fund specified under clause (23D) of section 10, 

where such sum is payable to it by way of interest or dividend in respect of any securities or shares owned 
by it or in which it has full beneficial interest, or any other income accruing or arising to it.] 

6[196A. Income in respect of units of non-residents.—(1) Any person responsible for paying to a 
non-resident, not being a company, or to a foreign company, any income in respect of units of a Mutual 
Fund specified under clause (23D) of section 10 or of the Unit Trust of India shall, at the time of credit of 
such income to the account of the payee or at the time of payment thereof in cash or by the issue of a 
cheque  or  draft  or  by  any  other  mode,  whichever  is  earlier,  deduct  income-tax  thereon  at  the  rate  of 
twenty per cent : 

1.  Subs.  by  Act  20  of  2015,  s.  49,  for  sub-section  (6)  (w.e.f.  1-6-2015).  Earlier  sub-section  (6)  was  inserted  by                     

Act 18 of 2008, s. 44 (w.e.f. 1-4-2008). 

2. Ins. by Act 23 of 2012, s. 77 (w.e.f. 1-7-2012). 
3. Ins. by Act 11 of 1987, s. 50 (w.e.f. 1-6-1987). 
4. Subs. by Act 20 of 2002, s. 81, for “Where, under an agreement” (w.e.f. 1-6-2002). 
5. Subs. by Act 4 of 1988, s. 75, for section 196 (w.e.f. 1-4-1988). Earlier section 196 was substituted by Act 20 of 1967, s. 

30 (w.e.f. 1-4-1967). 

6. Subs. by Act 22 of 1995, s. 37, for section 196A (w.e.f. 1-7-1995). 

656 

                                                           
1[Provided that no deduction shall be made under this section from any such income credited or paid 

on or after the 1st day of April, 2003.] 

(2)  Notwithstanding  anything  contained  in  sub-section  (1),  no  deduction of tax shall  be  made  from 
any income payable in respect of units of the Unit Trust of India to a non-resident Indian or a non-resident 
Hindu undivided family, where the units have been acquired from the Unit Trust of India out of the funds 
in  a  Non-resident  (External)  Account  maintained  with  any  bank  in  India  or  by  remittance  of  funds  in 
foreign  currency,  in  accordance,  in  either  case,  with  the  provisions  of  2[the  Foreign  Exchange 
Management Act, 1999 (42 of 1999)], and the rules made thereunder. 

Explanation.—For the purposes of this section— 

(a)  “foreign  currency”  shall  have  the  meaning  assigned  to  it  in  2[the  Foreign  Exchange 

Management Act, 1999 (42 of 1999)]; 

(b) “non-resident Indian” shall have the meaning assigned to it in clause (e) of section 115C; 

(c) “Unit Trust of India” means the Unit Trust of India established under the Unit Trust of India 

Act, 1963 (52 of 1963); 

(d) where any income as aforesaid is credited to any account, whether called “Suspense account” 
or by any other name, in the books of account of the person liable to pay such income, such crediting 
shall  be  deemed  to  be  credit  of  such income  to  the account  of the  payee and the  provisions  of this 
section shall apply accordingly.] 

3[196B. Income from units.—4[Where any income in respect of units referred to in section 115AB or 
by way of long-term capital gains arising from the transfer of such units is payable to an Offshore Fund], 
the person responsible for making the payment shall, at the time of credit of such income to the account 
of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other 
mode, whichever is earlier, deduct income-tax thereon at the rate of ten per cent.] 

5[196C. Income  from  foreign  currency  bonds  or  shares of  Indian  company.—6[Where  any 
income by way of interest or dividends in respect of  7[bonds or Global Depository Receipts] referred to 
in section 115AC or by way of long-term capital gains arising from the transfer of such 7[bonds or Global 
Depository Receipts] is payable to a non-resident], the person responsible for making the payment shall, 
at the time of credit of such income to the account of the payee or at the time of payment thereof in cash 
or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon 
at the rate of ten per cent.]: 

8[Provided that  no  such  deduction  shall  be  made  in  respect  of  any  dividends  referred  to  in                   

section 115-O.] 

1.  Ins.  by  Act  32  of  2003,  s.  81  (w.e.f.  1-4-2003).  Earlier  the  proviso  omitted  by  Act  20  of  2002,  s.  82  (w.e.f.1-6-2002) 

which was inserted by Act 27 of 1999, s. 75 (w.e.f.1-6-1999).  

2. Subs. by Act 17 of 2013, s. 4, for “the Foreign Exchange Regulation Act, 1973 (46 of 1973)” (w.e.f. 1-4-2013). 
3. Ins. by Act 49 of 1991, s. 58 (w.e.f. 1-10-1991). 
4. Subs. by Act 38 of 1993, s. 26, for “Where any income is payable in respect of units referred to in section 115AB to an 

Offshore Fund” (w.e.f. 1-6-1993). 

5. Ins. by Act 18 of 1992, s. 75 (w.e.f. 1-6-1992). 
6. Subs. by Act 38 of 1993, s. 27, for “Where any income by way of interest or dividends is payable in respect of bonds or 

shares referred to in section 115AC to a non-resident” (w.e.f. 1-6-1993). 
7. Subs. by Act 14 of 2001, s. 72, for “bonds or shares” (w.e.f. 1-4-2002). 
8. Ins. by Act 32 of 2003, s. 82 (w.e.f. 1-4-2003). Earlier the proviso was omitted by Act 20 of 2002, s. 83 (w.e.f. 1-6-2002) 

which was inserted by Act 26 of 1997, s. 50 (w.e.f. 1-6-1997). 

657 

                                                           
1[196D. Income  of  Foreign  Institutional  Investors  from  securities.—(1)  Where  2[any  income  in 
respect of securities referred to in clause (a) of sub-section (1) of section 115AD, not being income by 
way  of  interest  referred  to  in section  194LD,  is  payable]  to  a  Foreign  Institutional  Investor,  the  person 
responsible for making the payment shall, at the time of credit of such income to the account of the payee 
or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever 
is earlier, deduct income-tax thereon at the rate of twenty per cent.: 

3[Provided that  no  such  deduction  shall  be  made  in  respect  of  any  dividends  referred  to  in section 

115-O.] 

(2)  No  deduction  of  tax  shall  be  made  from  any  income,  by  way  of  capital  gains  arising  from  the 

transfer of securities referred to in section 115AD, payable to a Foreign Institutional Investor.] 

197. Certificate for deduction at lower rate.—(1)  4[Subject to rules made under sub-section (2A), 
5[where, in the case of  6[any income of any person or sum payable to any person], income-tax is required 
to be deducted at the time of credit or, as the case may be, at the time of payment at the rates in force 
under the provisions of sections 192, 193, 7[194,] 8[194A, 9[194C, 194D ,194G ,194H ,194-I, 194J , 194K 
, 194LA 10[, 194LBB, 194LBC]]] and 195, the Assessing Officer is satisfied]] that the total income 11*** 
of the recipient justifies the deduction of income-tax 12*** at any lower rates or no deduction of income-
tax  12***, as the case may be, the  13[Assessing Officer] shall, on an application made by the assessee in 
this behalf, give to him such certificate as may be appropriate. 

(2) Where any such certificate is given, the person responsible for paying the income shall, until such 
certificate is cancelled by the 13[Assessing Officer], deduct income-tax14*** at the rates specified in such 
certificate or deduct no tax, as the case may be. 

15[(2A) The Board may, having regard to the convenience of assessees and the interests of revenue, by 
notification in the Official Gazette, make rules specifying the cases in which, and the circumstances under 
which, an application may be made for the grant of a certificate under sub-section (1) and the conditions 
subject to which such certificate may be granted and providing for all other matters connected therewith.] 

16*   

* 

* 

* 

* 

1. Ins. by Act 38 of 1993, s. 28 (w.e.f. 1-6-1993). 
2.  Subs.  by  Act  17  of  2013,  s. 49,  for  “any  income  in  respect  of  securities  referred  to  in  clause  (a)  of  sub-section  (1)  of                

section 115AD is payable” (w.e.f. 1-6-2013). 

3. Ins. by Act 32 of 2003, s. 83 (w.e.f. 1-4-2003). Earlier the proviso was omitted by Act 20 of 2002, s. 84 (w.e.f. 1-6-2002) 

which was inserted by Act 26 of 1997, s. 50 (w.e.f. 1-6-1997). 

4. Subs. by Act 11 of 1987, s. 51, for “Where in the case of any income of any person other than a company” (w.e.f. 1-6-

1987). 

5. Subs. by Act 18 of 1992, s. 76, for certain words (w.e.f. 1-6-1992). 
6. Subs. by Act 32 of 2003, s. 84, for “any income of any person” (w.e.f. 1-6-2003). 
7. Ins. by Act 38 of 1993, s. 29 (w.e.f. 1-6-1993). 
8. Subs. by Act 32 of 2003, s. 84, for “194A, 194D, 194H, 194-I, 194K, 194L” (w.e.f. 1-6-2003). 
9. Subs. by Act 23 of 2004, s. 39, for “194C, 194D, 194G, 194H, 194-I, 194J, 194K” (w.e.f. 1-10-2004). 
10. Ins. by Act 28 of 2016, s. 85 (w.e.f. 1-6-2016). 
11. The words “or the total world income” omitted by Act 10 of 1965, s. 48 (w.e.f. 1-4-1965). 
12. The words “or super-tax” omitted by s. 48, ibid. (w.e.f. 1-4-1965). 
13. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
14. The words “and super-tax” omitted by Act 10 of 1965, s. 48 (w.e.f. 1-4-1965). 
15. Ins. by Act 11 of 1987, s. 51 (w.e.f. 1-6-1987). 
16. Sub-section (3) omitted by Act 23 of 1986, s. 39 (w.e.f. 1-4-1987). 

658 

 
 
 
 
 
 
 
                                                           
1[197A. No  deduction  to  be  made  in  certain  cases.—(1)  Notwithstanding  anything  contained  in 
2*** section  194  3*** 4[or section  194EE],  no  deduction  of  tax  shall  be  made  under  any  of  the  said 
sections in the case of an individual, who is resident in India, if such individual furnishes to the person 
responsible for paying any income of the nature referred to in 2*** section 194 5[ 3*** or, as the case may 
be, section  194EE],  a  declaration  in  writing  in  duplicate  in  the  prescribed  form  and  verified  in  the 
prescribed manner to the effect that 6[the tax on his estimated total income of the previous year in which 
such income is to be included in computing his total income will be nil.] 

anything 

in 8[section 

7[(1A)Notwithstanding 

contained 

193 or section 
194A 9[or section 194D] or section 194DA] 10[or section 194-I] or section 194K, no deduction of tax shall 
be made under 11[any of] the said sections in the case of a person (not being a company or a firm), if such 
person  furnishes  to  the  person  responsible  for  paying  any  income  of  the  nature  referred  to  in 8[section 
192A or section 193 or section 194A 9[or section 194D] or section 194DA] 10[or section 194-I] or section 
194K, as the case may be, a declaration in writing in duplicate in the prescribed form and verified in the 
prescribed manner to the effect that the tax on his estimated total income of the previous year in which 
such income is to be included in computing his total income will be nil.] 

192A or 

section 

12[(1B) The provisions of this section shall not apply where the amount of any income of the nature 
referred to in sub-section (1) or sub-section (1A), as the case may be, or the aggregate of the amounts of 
such  incomes  credited  or  paid  or  likely  to  be  credited  or  paid  during  the  previous  year  in  which  such 
income is to be included exceeds the maximum amount which is not chargeable to income-tax.] 

in 14[section  192A or 

13[(1C)  Notwithstanding  anything  contained 

section  193 or section 
194 or section  194A 9[or section  194D] or section  194DA]  or section  194EE 10[or section  194-I]  or 
section  194K or  sub-section  (1B)  of  this  section,  no  deduction  of  tax  shall  be  made  in  the  case  of  an 
individual resident in India, who is of the age of  15[sixty years] or more at any time during the previous 
year16***,  if  such  individual  furnishes  to  the  person  responsible  for  paying  any  income  of  the  nature 
referred to in 14[section 192A or section 193 or section 194 or section 194A 9[or section 194D]or section 
194DA] or section 194EE 10[or section194-I] or section 194K, as the case may be, a declaration in writing 
in duplicate in the prescribed formand verified in the prescribed manner to the effect that the tax on his 
estimated total income of the previous year in which such income is to be included in computing his total 
income will be nil.] 

1. Ins. by Act 14 of 1982, s. 26 (w.e.f. 1-6-1982). 
2. The words and figures “section 193 or” omitted by Act 27 of 1999, s. 77 (w.e.f. 1-6-1999). 
3. The words and figures “or section 194A” omitted by Act 18 of 1992, s. 77 (w.e.f. 1-6-1992). 
4. Ins. by Act 49 of 1991, s. 59 (w.e.f. 1-10-1991). 
5. Subs. by s. 59, ibid., for “or, as the case may be, section 194A” (w.e.f. 1-10-1991). 
6.  Subs.  by  Act  12  of  1990,  s.  50,  for  “his  estimated  total  income  of  the  previous  year  in  which  such  income  is  to  be 

included in computing his total income will be less than the minimum liable to income-tax” (w.e.f. 1-4-1990). 

7. Subs. by Act 22 of 1995, s. 39, for sub-section (1A) (w.e.f. 1-7-1995). 
8. Subs. by Act 20 of 2015, s. 50, for “section 193 or section 194A” (w.e.f. 1-6-2015). 
9. Ins. by Act 7 of 2017, s. 70 (w.e.f. 1-6-2017). 
10. Ins. by Act 28 of 2016, s. 86 (w.e.f. 1-6-2016). 
11. Subs. by Act 27 of 1999, s. 77, for “either of” (w.e.f. 1-6-1999). 
12. Ins. by Act 20 of 2002, s. 85 (w.e.f. 1-6-2002). 
13. Ins. by Act 32 of 2003, s. 85 (w.e.f. 1-6-2003). 
14. Subs. by Act 20 of 2015, s. 50, for “section 193 or section 194 or section 194A” (w.e.f. 1-6-2015). 
15. Subs. by Act 23 of 2012, s. 78, for “sixty-five years” (w.e.f. 1-7-2012). 
16. The words, figures and letter “and is entitled to a deduction from the amount of income-tax on his total income referred 

to in section 88B” omitted by Act 22 of 2007, s. 58 (w.e.f. 1-4-2006). 

659 

                                                           
1[(1D) Notwithstanding anything contained in this section, no deduction of tax shall be made by the 

Offshore Banking Unit from the interest paid— 

(a)   on  deposit  made  on  or  after  the  1st  day  of  April,  2005,  by  a  non-resident  or  a  person  not 

ordinarily resident in India; or 

(b)   on  borrowing,  on  or  after  the  1st  day  of  April,  2005,  from  a  non-resident  or  a  person  not 

ordinarily resident in India. 

Explanation.—For the purposes of this sub-section “Offshore Banking Unit” shall have the same 

meaning as assigned to it in clause (u) of section 2 of the Special Economic Zones Act, 2005.] 

2[(1E) Notwithstanding anything contained in this Chapter, no deduction of tax shall be made from 
any payment to any person for, or on behalf of, the New Pension System Trust referred to in clause (44) 
of section 10.] 

3[(1F) Notwithstanding anything contained in this Chapter, no deduction of tax shall be made from 
such  specified  payment  to  such  institution,  association  or  body  or  class  of  institutions,  associations  or 
bodies as may be notified by the Central Government in the Official Gazette, in this behalf.] 

(2)  The  person  responsible  for  paying  any  income  of  the  nature  referred  to  in  sub-section  (1)  4[or  
sub-section (1A)]  5[or sub-section (1C)] shall deliver or cause to be delivered to the  6[  7[Principal Chief 
Commissioner or Chief Commissioner] or  8[Principal Commissioner or Commissioner]] one copy of the 
declaration  referred  to  in  sub-section  (1)  4[or  sub-section  (1A)]  5[or  sub-section  (1C)]  on  or  before  the 
seventh day of the month next following the month in which the declaration is furnished to him.] 

198.  Tax  deductedis  income  received.—All  sums  deducted  in  accordance  with  9[the  foregoing 
provisions of this Chapter] shall, for the purpose of computing the income of an assessee, be deemed to 
be income received: 

10[Provided that the sum being the tax paid, under sub-section (1A) of section 192 for the purpose of 

computing the income of an assessee, shall not be deemed to be income received.] 

11[199. Credit  for  tax  deducted.—(1)  Any  deduction  made  in  accordance  with  the  foregoing 
provisions  of  this  Chapter and  paid  to the  Central  Government  shall  be  treated as  a  payment  of  tax  on 
behalf of the person from whose income the deduction was made, or of the owner of the security, or of 
the depositor or of the owner of property or of the unit-holder, or of the shareholder, as the case may be. 

(2) Any sum referred to in sub-section (1A) of section 192 and paid to the Central Government shall 
be treated as the tax paid on behalf of the person in respect of whose income such payment of tax has 
been made. 

1. Ins. by Act 28 of 2005, s. 27 and the Second Schedule (w.e.f. 10-2-2006). 
2. Ins. by Act 33 of 2009, s. 63 (w.e.f. 1-4-2009). 
3. Ins. by Act 23 of 2012, s. 78 (w.e.f. 1-7-2012). 
4. Ins. by Act 18 of 1992, s. 77 (w.e.f. 1-6-1992). 
5. Ins. by Act 32 of 2003, s. 85 (w.e.f. 1-6-2003). 
6. Subs. by Act 4 of 1988, s. 2, for “Commissioner” (w.e.f. 1-4-1988). 
7. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). 
8. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 
9. Subs. by Act 23 of 2004, s. 40, for certain words (w.e.f.  1-10-2004). 
10. Ins. by Act 20 of 2002, s. 86 (w.e.f. 1-6-2002). 
11. Subs. by Act 18 of 2008, s. 45, for section 199 (w.e.f. 1-4-2008). 

660 

                                                           
(3) The Board may, for the purposes of giving credit in respect of tax deducted or tax paid in terms of 
the provisions of this Chapter, make such rules as may be necessary, including the rules for the purposes 
of giving credit to a person other than those referred to in sub-section (1) and sub-section (2) and also the 
assessment year for which such credit may be given.] 

200. Duty of person deducting tax.—1[(1)] Any person deducting any sum in accordance with 2[the 
foregoing  provisions  of  this  Chapter]  shall  pay  within  the  prescribed  time,  the  sum  so  deducted  to  the 
credit of the Central Government or as the Board directs. 

3[(2) Any person being an employer, referred to in sub-section (1A) of section 192 shall pay, within 

the prescribed time, the tax to the credit of the Central Government or as the Board directs.] 

4[(2A)  In  case  of  an  office  of  the  Government,  where  the  sum  deducted  in  accordance  with  the 
foregoing provisions of this Chapter or tax referred to in sub-section (1A) of section 192 has been paid to 
the credit of the Central Government without the production of a challan, the Pay and Accounts Officer or 
the  Treasury  Officer  or  the  Cheque  Drawing  and  Disbursing  Officer  or  any  other  person,  by  whatever 
name called, who is responsible for crediting such sum or tax to the credit of the Central Government, 
shall deliver or cause to be delivered to the prescribed income-tax authority, or to the person authorised 
by  such  authority,  a statement  in such  form,  verified  in  such  manner,  setting  forth  such  particulars  and 
within such time as may be prescribed.] 

5[(3)  Any  person  deducting  any  sum  on  or  after  the  1st  day  of  April,  2005  in  accordance  with  the 
foregoing provisions of this Chapter or, as the case may be, any person being an employer referred to in 
sub-section  (1A)  of section  192 shall,  after  paying  the  tax  deducted  to  the  credit  of  the  Central 
Government within the prescribed time, prepare such statements for such period as may be prescribed and 
deliver or cause to be delivered to the prescribed income-tax authority or the person authorised by such 
authority such statement in such form and verified in such manner and setting forth such particulars and 
within such time as may be prescribed:] 

6[Provided that  the  person  may  also  deliver  to  the  prescribed  authority  a  correction  statement  for 
rectification  of  any  mistake  or  to  add,  delete  or  update  the  information  furnished  in  the  statement 
delivered  under  this  sub-section  in  such  form  and  verified  in  such  manner  as  may  be  specified  by  the 
authority.] 

7[200A. Processing  of  statements  of  tax  deducted  at  source.—(1)  Where  a  statement  of  tax 
deduction at source 8[or a correction statement] has been made by a person deducting any sum (hereafter 
referred  to  in  this  section  as  deductor)  under section  200,  such  statement  shall  be  processed  in  the 
following manner, namely:— 

(a)  the  sums  deductible  under  this  Chapter  shall  be  computed  after  making  the  following 

adjustments, namely:— 

(i) any arithmetical error in the statement; or 

1. Section 200 re-numbered as sub-section (1) thereof by Act 20 of 2002, s. 88 (w.e.f. 1-6-2002). 
2. Subs. by Act 23 of 2004, s. 42, for certain words (w.e.f. 1-10-2004). 
3. Ins. by Act 20 of 2002, s. 88 (w.e.f. 1-6-2002). 
4. Ins. by Act 20 of 2015, s. 51 (w.e.f. 1-6-2015). 
5. Ins. by Act 23 of 2004, s. 42 (w.e.f. 1-4-2005). 
6. Ins. by Act 25 of 2014, s. 60 (w.e.f. 1-10-2014). 
7. Ins. by Act 33 of 2009, s. 65 (w.e.f. 1-4-2010). 
8. Ins. by Act 25 of 2014, s. 61 (w.e.f. 1-10-2014). 

661 

                                                           
(ii) an incorrect claim, apparent from any information in the statement; 

(b) the interest, if any, shall be computed on the basis of the sums deductible as computed in the 

statement; 

1[(c) the fee, if any, shall be computed in accordance with the provisions of section 234E; 

(d) the sum payable by, or the amount of refund due to, the deductor shall be determined after 
adjustment  of  the  amount  computed  under  clause  (b)  and  clause  (c)  against  any  amount  paid 
under section  200 or section  201 orsection  234E and  any  amount  paid  otherwise  by  way  of  tax  or 
interest or fee; 

(e)  an  intimation  shall  be  prepared  or  generated  and  sent  to  the  deductor  specifying  the  sum 

determined to be payable by, or the amount of refund due to, him under clause (d); and 

(f) the amount of refund due to the deductor in pursuance of the determination under clause (d) 

shall be granted to the deductor:] 

Provided that no intimation under this sub-section shall be sent after the expiry of one year from 

the end of the financial year in which the statement is filed. 

Explanation.—For  the  purposes  of  this  sub-section,  “an  incorrect  claim  apparent  from  any 

information in the statement” shall mean a claim, on the basis of an entry, in the statement— 

(i) of an item, which is inconsistent with another entry of the same or some other item in such 

statement; 

(ii) in respect of rate of deduction of tax at source, where such rate is not in accordance with the 

provisions of this Act. 

(2) For the purposes of processing of statements under sub-section (1), the Board may make a scheme 
for  centralised  processing  of  statements  of  tax  deducted  at  source  to  expeditiously  determine  the  tax 
payable by, or the refund due to, the deductor as required under the said sub-section.] 

201. Consequences  of failure  to  deduct  or  pay.—2[(1)  Where  any  person,  including  the  principal 

officer of a company,— 

(a) who is required to deduct any sum in accordance with the provisions of this Act; or 

(b) referred to in sub-section (1A) of section 192, being an employer, 

does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as 
required by or under this Act, then, such person, shall, without prejudice to any other consequences which 
he may incur, be deemed to be an assessee in default in respect of such tax: 

3[Provided that  any  person,  including  the  principal  officer  of  a  company,  who  fails  to  deduct  the 
whole  or  any  part  of  the  tax  in  accordance  with  the  provisions  of  this  Chapter  on  the  sum  paid  to  a 
resident  or  on  the  sum  credited  to  the  account  of  a  resident  shall  not  be  deemed  to  be  an  assessee  in 
default in respect of such tax if such resident— 

(i) has furnished his return of income under section 139; 

1. Subs. by Act 20 of 2015, s. 52, for clauses (c) to (e) (w.e.f. 1-6-2015). 
2. Subs. by Act 18 of 2008, s. 46, for sub-section (1) (w.r.e.f. 1-6-2002). 
3. Ins. by Act 23 of 2012, s. 79 (w.e.f. 1-7-2012). 

662 

                                                           
(ii) has taken into account such sum for computing income in such return of income; and 

(iii) has paid the tax due on the income declared by him in such return of income, 

and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed:] 

1[Provided further that]  no  penalty  shall  be  charged  under section  221 from  such  person,  unless  the 
Assessing Officer is satisfied that such person, without good and sufficient reasons, has failed to deduct 
and pay such tax.] 

2[(1A) Without prejudice to the provisions of sub-section (1), if any such person, principal officer or 
company  as  is  referred  to  in  that  sub-section  does  not  deduct  the  whole  or  any  part  of  the  tax  or  after 
deducting  fails  to  pay  the  tax  as  required  by  or  under  this  Act,  he  or  it  shall  be  liable  to  pay  simple 
interest,— 

(i) at one per cent for every month or part of a month on the amount of such tax from the date on 

which such tax was deductible to the date on which such tax is deducted; and 

(ii) at one and one-half per cent for every month or part of a month on the amount of such tax 

from the date on which such tax was deducted to the date on which such tax is actually paid, 

and such interest shall be paid before furnishing the statement in accordance with the provisions of sub-
section (3) of section 200:] 

1[Provided that  in  case  any  person,  including  the  principal  officer  of  a  company  fails  to  deduct  the 
whole  or  any  part  of  the  tax  in  accordance  with  the  provisions  of  this  Chapter  on  the  sum  paid  to  a 
resident or on the sum credited to the account of a resident but is not deemed to be an assessee in default 
under the first proviso to sub-section (1), the interest under clause (i) shall be payable from the date on 
which such tax was deductible to the date of furnishing of return of income by such resident.] 

(2) Where the tax has not been paid as aforesaid after it is deducted,  3[the amount of the tax together 
with the amount of simple interest thereon referred to in sub-section (1A) shall be a charge] upon all the 
assets of the person, or the company, as the case may be, referred to in sub-section (1). 

4[5[(3) No order shall be made under sub-section (1) deeming a person to be an assessee in default for 
failure to deduct the whole or any part of the tax from a person resident in India, at any time after the 
expiry of seven years from the end of the financial year in which payment is made or credit is given.] 

(4) The provisions of sub-clause (ii) of sub-section (3) of section 153 and of Explanation 1 to section 

153 shall, so far as may, apply to the time limit prescribed in sub-section (3).] 

6[Explanation.—For the purposes of this section, the expression “accountant” shall have the meaning 

assigned to it in the Explanation to sub-section (2) of section 288.] 

202. Deduction only one mode of recovery.—The power to 7[recover tax] by deduction under 8[the 

foregoing provisions of this Chapter] shall be without prejudice to any other mode of recovery. 

1. Subs. by Act 23 of 2012, s. 79, for “Provided that” (w.e.f. 1-7-2012) 
2. Subs. by Act 14 of 2010, s. 42, for sub-section (1A) (w.e.f. 1-7-2010). 
3. Subs. by Act 13 of 1966, s. 26, for “it shall be a charge” (w.e.f. 1-4-1966). 
4. Ins. by Act 33 of 2009, s. 66 (w.e.f. 1-4-2010). 
5. Subs. by Act 25 of 2014, s. 62, for sub-section (3) (w.e.f. 1-10-2014).  Earlier sub-section (3) was amended by Act 23 of 

2012, s. 79 (w.r.e.f. 1-4-2010). 

6. Ins. by Act 23 of 2012, s. 79 (w.e.f. 1-7-2012). 
7. Subs. by Act 11 of 1987, s. 53 for “levy tax” (w.e.f. 1-6-1987). 
8. Subs by Act 23 of 2004, s. 43, for certain words, figures and letters the portion beginning with the words “the provisions 

of section 192” and ending with the words “section 196D” (w.e.f. 1-10-2004). 

663 

                                                           
1[203. Certificate  for  tax  deducted.—2[(1)] Every  person  deducting  tax  in  accordance  with  3[the 
foregoing  provisions  of  this  Chapter]4[shall,  within  such  period  as  may  be  prescribed  from  the  time  of 
credit or payment of the sum, or, as the case may be, from the time of issue of a cheque or warrant for 
payment of any dividend to a shareholder], furnish to the person to whose account such credit is given or 
to whom such payment is made or the cheque or warrant is issued, a certificate to the effect that tax has 
been deducted, and specifying the amount so deducted, the rate at which the tax has been deducted and 
such other particulars as may be prescribed.] 

5[(2)  Every  person,  being  an  employer,  referred  to  in  sub-section  (1A)  of section  192 shall,  within 
such period, as may be prescribed, furnish to the person in respect of whose income such payment of tax 
has been made, a certificate to the effect that tax has been paid to the Central Government, and specify the 
amount so paid, the rate at which the tax has been paid and such other particulars as may be prescribed.] 

6* 

* 

* 

* 

* 

7[203A. Tax  deduction  and  collection  account  number.—(1)  Every  person,  deducting  tax  or 
collecting tax in accordance with the provisions of this Chapter, who has not been allotted a tax deduction 
account number or, as the case may be, a tax collection account number, shall, within such time as may be 
prescribed,  apply  to  the  Assessing  Officer  for  the  allotment  of  a  “tax  deduction  and  collection  account 
number”. 

(2)  Where  a  “tax  deduction  account  number”  or,  as  the  case  may  be,  a  “tax  collection  account 
number” or a “tax deduction and collection account number” has been allotted to a person, such person 
shall quote such number— 

(a) in all challans for the payment of any sum in accordance with the provisions of section 200 or 

sub-section (3) of section 206C; 

(b) in all certificates furnished under section 203 or sub-section (5) of section 206C; 

8[(ba) in all the  9*** statements prepared and delivered or caused to be delivered in accordance 

with the provisions of sub-section (3) of section 200 or sub-section (3) of section 206C;] 

(c)  in  all  the  returns,  delivered  in  accordance  with  the  provisions  of section  206 or  sub-section 

(5A) or sub-section (5B) of section 206C to any income-tax authority; and 

(d) in all other documents pertaining to such transactions as may be prescribed in the interests of 

revenue.] 

10[(3) The provisions of this section shall not apply to such person, as may be notified by the Central 

Government in this behalf.] 

1. Subs. by Act 20 of 1967, s. 30, for section 203, (w.e.f. 1-4-1967). 
2. Section 203 renumbered as sub-section (1) thereof by Act 20 of 2002, s. 90 (w.e.f. 1-6-2002). 
3. Subs. by Act 23 of 2004, s. 44, for the portion beginning with the words “the provisions of section 192” and ending with 

the words “section 196D” (w.e.f. 1-10-2004). 

4. Subs. by Act 11 of 1987, s. 54, for “shall, at the time of credit of payment of the sum, or, as the case may be, at the time 

of issue of a cheque or warrant for payment of any dividend to a shareholder” (w.e.f. 1-6-1987). 

5. Ins. by Act 20 of 2002, s. 90 (w.e.f. 1-6-2002). 
6. Sub-section (3) omitted by Act 14 of 2010, s. 43 (w.e.f. 1-4-2010). 
7. Subs. by Act 23 of 2004, s. 45, for section 203A (w.e.f. 1-10-2004). 
8. Ins. by Act 21 of 2006, s. 44 (w.e.f. 1-6-2006). 
9. The word “quarterly” omitted by Act 33 of 2009, s. 67 (w.e.f. 1-10-2009). 
10. Ins. by Act 20 of 2015, s. 53 (w.e.f. 1-6-2015). 

664 

 
 
 
 
 
 
 
 
                                                           
1[203AA. Furnishing  of  statement  of  tax  deducted.—The  prescribed  income-tax  authority  or  the 
person  authorised  by  such  authority  referred  to  in  sub-section  (3)  of section  200,  shall,  within  the 
prescribed  time  after  the  end  of  each financial  year beginning  on  or  after the  2[1st  day  of  April,  2008] 
prepare and deliver to every person from whose income the tax has been deducted or in respect of whose 
income the tax has been paid a statement in the prescribed form specifying the amount of tax deducted or 
paid and such other particulars as may be prescribed.] 

204. Meaning of“person responsible for paying”.—For the purposes of  3[the foregoing provisions 

of this Chapter] and section 285, the expression “person responsible for paying” means— 

(i)  in the case of payments of income chargeable under the head “Salaries”, other than payments 
by the Central Government or the Government of a State, the employer himself or, if the employer is 
a company, the company itself, including the principal officer thereof; 

(ii)  in the case of payments of income chargeable under the head “Interest on securities”, other 
than  payments  made  by  or  on  behalf of the  Central Government  or the  Government  of  a  State,  the 
local authority, corporation or company, including the principal officer thereof; 

4[(iia)  in  the  case  of  any  sum  payable  to  a  non-resident  Indian,  being  any  sum  representing 
consideration for the transfer by him of any foreign exchange asset, which is not a short-term capital 
asset,  the  5[authorised  person]  responsible  for  remitting  such  sum  to  the  non-resident  Indian  or  for 
crediting  such  sum  to  his  Non-resident  (External)  Account  maintained  in  accordance  with  6[the 
Foreign Exchange Management Act, 1999 (42 of 1999)], and any rules made thereunder;] 

7[(iib) in the case of furnishing of information relating to payment to a non-resident, not being a 
company, or to a foreign company, of any sum, whether or not chargeable under the provisions of this 
Act,  the  payer  himself,  or,  if  the  payer  is  a  company,  the  company  itself  including  the  principal 
officer thereof;] 

(iii)  8[in the case of credit, or, as the case may be, payment] of any other sum chargeable under 
the  provisions  of  this  Act,  the  payer  himself,  or,  if  the  payer  is  a  company,  the  company  itself 
including the principal officer thereof; 

9[(iv)  in  the  case  of  credit,  or  as  the  case  may  be,  payment  of  any  sum  chargeable  under  the 
provisions of this Act made by or on behalf of the Central Government or the Government of a State, 
the  drawing  and  disbursing  officer  or  any  other  person,  by  whatever  name  called,  responsible  for 
crediting, or as the case may be, paying such sum.] 

10[Explanation.—For the purposes of this section,— 

(a) “non-resident Indian” and “foreign exchange asset” shall have the meanings assigned to them 

in Chapter XII-A; 

11[(b) “authorised person” shall have the meaning assigned to it in clause (c) of section 2 of the 

Foreign Exchange Management Act, 1999 (42 of 1999).]] 

1. Ins. by Act 23 of 2004, s. 46 (w.e.f. 1-4-2005). 
2. Subs. by Act 21 of 2006, s. 45, for “1st day of April, 2005” (w.e.f. 1-4-2006). 
3. Subs. by Act 23 of 2004, s. 47, for certain words, figures and letter (w.e.f. 1-10-2004). Earlier to amended by Act 20 of 

1967, s. 30 (w.e.f. 1-4-1967). 

4. Ins. by Act 23 of 1986, s. 32 (w.e.f. 1-6-1986). 
5. Subs. by Act 17 of 2013, s. 50, for “authorized dealer” (w.e.f. 1-4-2013). 
6. Subs. by s. 4, ibid., for “the Foreign Exchange Regulation Act, 1973 (46 of 1973)” (w.e.f. 1-4-2013). 
7. Ins. by Act 7 of 2017, s. 71 (w.e.f. 1-4-2017). 
8. Subs. by Act 20 of 1967, s. 30, for “in the case of payment” (w.e.f. 1-4-1967). 
9. Ins. by Act 23 of 2012, s. 80 (w.e.f. 1-7-2012). 
10. Added by Act 23 of 1986, s. 32 (w.e.f. 1-6-1986). 
11. Subs. by Act 17 of 2013, s. 50, for clause (b) (w.e.f. 1-4-2013). 

665 

                                                           
205. Bar  against  direct  demand  on  assessee.—Where  tax  is  deductible  at  the  source  under  1[the 
foregoing provisions of this Chapter], the assessee shall not be called upon to pay the tax himself to the 
extent to which tax has been deducted from that income. 

2[206.  Persons  deducting  tax  to  furnish  prescribed  returns.—3[(1)]  The  prescribed  personin  the 
case  of  every  office  of  Government,  the  principal  officer  in  the  case  of  every  company,  the  prescribed 
personin the case of every local authority or other public body or association, every private employer and 
every other person 4[responsible for deducting tax before the 1st day of April, 2005] under the foregoing 
provisions of this Chapter 5[shall, within the prescribed time after the end of each financial year, prepare 
and  deliver  or  cause to  be delivered] to the  6[prescribed  income-tax  authorityor  such  other authority  or 
agency  as  may  be  prescribed], such returns in  such form  and  verified  in  such manner  and setting  forth 
such particulars as may be prescribed:] 

7[Provided that the Board may, if it considers necessary or expedient so to do, frame a scheme for the 

purposes of filing such returns with such other authority or agency referred to in this sub-section.] 

8[(2) Without prejudice to the provisions of sub-section (1), the person responsible for deducting tax 
under  the  foregoing  provisions  of  this  Chapter  9[other  than  the  prescribed  person  in  the  case  of  every 
office  of  the  Government  andthe  principal  officer  in  the  case  of  every  company]  may,  at  his  option, 
deliver  or  cause  to  be  delivered  such  return  to  the  prescribed  income-tax  authority  in  accordance  with 
such scheme as may be specified by the Board in this behalf, by notification in the Official Gazette, and 
subject to such conditions as may be specified therein, on or before the prescribed time after the end of 
each  financial  year,  on  a  floppy,  diskette,  magnetic  cartridge  tape,  CD-ROM  or  any  other  computer 
readable media (hereinafter referred to as the computer media) and in the manner as may be specified in 
that scheme: 

10[Provided that  the  prescribed  person  in  the  case  of  every  office  of  Government  and  the  principal 
officer in the case of every company responsible for deducting tax under the foregoing provisions of this 
Chapter shall, deliver or cause to be delivered, within the prescribed time after the end of each financial 
year, such returns on computer media under the said scheme.] 

(3) Notwithstanding anything contained in any other law for the time being in force, a return filed on 
computer  media  shall  be  deemed  to  be  a  return  for  the  purposes  of  this  section  and  the  rules  made 
thereunder and shall be admissible in any proceedings thereunder, without further proof of production of 
the original, as evidence of any contents of the original or of any fact stated therein. 

(4) Where the Assessing Officer considers that the return delivered or caused to be delivered under 
sub-section (2) is defective, he may intimate the defect to the person responsible for deducting tax or the 
principal officer in the case of a company, as the case may be, and give him an opportunity of rectifying 
the defect within a period of fifteen days from the date of such intimation or within such further period 
which, on an application made in this behalf, the Assessing Officer may, in his discretion, allow; and if 
the defect is not rectified within the said period of fifteen days or, as the case may be, the further period 
so allowed, then, notwithstanding anything contained in any other provision of this Act, such return shall 
be treated as an invalid return and the provisions of this Act shall apply as if such person had failed to 
deliver the return.] 

1. Subs. by Act 23 of 2004, s. 48, for certain words, figures and letter (w.e.f. 1-10-2004). 
2. Subs. by Act 11 of 1987, s. 56, for section 206 (w.e.f. 1-6-1987). 
3. Section 206 renumbered as sub-section (1) by Act 26 of 1997, s. 52 (w.e.f. 1-4-1997). 
4. Subs. by Act 21 of 2006, s. 46, for “responsible for deducting tax” (w.e.f. 1-4-2006). 
5. Subs. by  Act 49 of 1991, s. 62, for “shall prepare,  within the prescribed time  after the end of  each  financial  year, and 

deliver or cause to be delivered” (w.e.f. 27-9-1991). 

6. Subs. by Act 23 of 2004, s. 49, for “prescribed income-tax authority” (w.e.f. 1-10-2004). 
7. Ins. by s. 49, ibid. (w.e.f. 1-10-2004). 
8. Subs. by Act 32 of 2003, s. 86, for sub-sections (2) and (3) (w.e.f. 1-6-2003). 
9. Subs. by Act 23 of 2004, s. 49, for “other than the principal officer in the case of every company” (w.e.f. 1-4-2005). 
10. Subs. by s. 49, ibid., for the proviso (w.e.f. 1-4-2005). 

666 

                                                           
1[206A.  Furnishing  of  quarterlyreturn  in  respect  of  payment  of  interest  to  residents  without 
deduction of tax.—(1) Any banking company or co-operative society or public company referred to in 
the  proviso  to  clause  (i)  of  sub-section  (3)  of section  194A responsible  for  paying  to  a  resident  any 
income  2[not  exceeding  ten  thousand  rupees,  where  the  payer  is  a  banking  company  or  a  co-operative 
society, and five thousand rupees in any other case] by way of interest (other than interest on securities), 
shall prepare 3[such statements for such period as may be prescribed] and deliver or cause to be delivered 
to the prescribed income-tax authorityor the person authorised by such authority the quarterly returns as 
aforesaid, in the prescribed form, verified in such manner and within such time as may be prescribed, on a 
floppy, diskette, magnetic cartridge tape, CD-ROM or any other computer readable media. 

(2)  The  Central  Government  may,  by  notification  in  the  Official  Gazette,  require  any  person  other 
than  a  person  mentioned  in  sub-section  (1)  responsible  for  paying  to  a  resident  any  income  liable  for 
deduction  of  tax  at  source  under  Chapter  XVII,  to  prepare  and  deliver  or  cause  to  be  delivered  4[such 
statements]  in  the  prescribed  form  and  verified  in  such  manner  and  within  such  time  as  may  be 
prescribed, to the prescribed income-tax authority or the person authorised by such authority on a floppy, 
diskette, magnetic cartridge tape, CD-ROM or any other computer readable media.] 

5[206AA.  Requirement  to  furnish  Permanent  Account  Number.—(1)  Notwithstanding  anything 
contained  in  any  other  provisions  of  this  Act,  any  person  entitled  to  receive  any  sum  or  income  or 
amount, on which tax is deductible under Chapter XVIIB (hereafter referred to as deductee) shall furnish 
his Permanent Account Number to the person responsible for deducting such tax (hereafter referred to as 
deductor), failing which tax shall be deducted at the higher of the following rates, namely:— 

(i)  at the rate specified in the relevant provision of this Act; or 

(ii)  at the rate or rates in force; or 

(iii) at the rate of twenty per cent. 

(2) No declaration under sub-section (1) or sub-section (1A) or sub-section (1C) of section 197A shall 

be valid unless the person furnishes his Permanent Account Number in such declaration. 

(3) In case any declaration becomes invalid under sub-section (2), the deductor shall deduct the tax at 

source in accordance with the provisions of sub-section (1). 

(4)  No  certificate  under section  197 shall  be  granted unless the application  made  under that  section 

contains the Permanent Account Number of the applicant. 

(5) The deductee shall furnish his Permanent Account Number to the deductor and both shall indicate 

the same in all the correspondence, bills, vouchers and other documents which are sent to each other. 

(6) Where the Permanent Account Number provided to the deductor is invalid or does not belong to 
the deductee, it shall be deemed that the deductee has not furnished his Permanent Account Number to 
the deductor and the provisions of sub-section (1) shall apply accordingly.] 

6[(7) The  provisions  of  this  section shall  not  apply  to a  non-resident,  not  being  a  company,  or  to  a 

foreign company, in respect of— 

(i)  payment of interest on long-term bonds as referred to in section 194LC; and 

(ii)  any other payment subject to such conditions as may be prescribed.] 

206B.  [Person  paying  dividend  to  certain  residents  without  deduction  of  tax  to  furnish 

prescribed return].—Omitted by the Finance (No. 2) Act, 1996(33 of 1996), s. 51(w.e.f. 1-10-1996). 

1. Ins. by Act 18 of 2005, s. 52 (w.e.f. 1-6-2005). 
2. Subs. by Act 22 of 2007, s. 60, for “not exceeding five thousand rupees” (w.e.f. 1-6-2007). 
3. Subs. by Act 33 of 2009, s. 68, for “quarterly returns for the period ending on the 30th June, the 30th September, the 31st 

December and the 31st March in each financial year” (w.e.f. 1-10-2009). 

4. Subs. by s. 68, ibid., for “quarterly returns” (w.e.f. 1-10-2009). 
5. Ins. by s. 69, ibid. (w.e.f. 1-4-2010). 
6. Subs. by Act 28 of 2016, s. 87, for sub-section (7) (w.e.f. 1-6-2016). 

667 

                                                           
1[BB.—Collection at source 

206C. Profits and gains from the business of trading in alcoholic liquor, forest produce, scrap, 
etc.—2[(1) Every person, being a seller shall, at the time of debiting of the amount payable by the buyer 
to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the 
issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of any goods 
of the nature specified in column (2) of the Table below, a sum equal to the percentage, specified in the 
corresponding entry in column (3) of the said Table, of such amount as income-tax: 

Sl. No. 

Nature of goods 

3[TABLE 

(2) 

Alcoholic Liquor for human consumption 

Tendu leaves 

Percentage 

(3) 

One per cent 

Five per cent 

Timber obtained under a forest lease 

Two and one-half per cent 

Timber  obtained  by  any  mode  other  than  under  a  forest 

Two and one-half per cent 

lease 

Any other forest produce not being timber or tendu leaves 

Two and one-half per cent 

Scrap 

4[(vii)  Minerals, being coal or lignite or iron ore 

One per cent] 

One per cent:] 

(1) 

(i) 

(ii) 

(iii) 

(iv) 

(v) 

(vi) 

5[Provided that every person, being a seller shall at the time, during the period beginning on the 1st 
day  of  June,  2003  and ending  on  the  day  immediately  preceding  the  date  on  which the Taxation  Laws 
(Amendment) Act, 2003 comes into force, of debiting of the amount payable by the buyer to the account 
of the buyer or of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft 
or by any other mode, whichever is earlier, collect from the buyer of any goods of the nature specified in 
column  (2)  of  the  Table  as  it  stood  immediately  before  the  1st  day  of  June,  2003,  a  sum  equal  to  the 
percentage,  specified  in  the  corresponding  entry  in  column  (3)  of  the  said  Table,  of  such  amount  as 
income-tax in accordance with the provisions of this section as they stood immediately before the 1st day 
of June, 2003.]] 

6[(1A) Notwithstanding anything contained in sub-section (1), no collection of tax shall be made in 
the  case  of  a  buyer,  who  is  resident  in  India,  if  such  buyer  furnishes  to  the  person  responsible  for 
collecting tax, a declaration in writing in duplicate in the prescribed form and verified in the prescribed 
manner to the effect that the goods referred to in column (2) of the aforesaid Table are to be utilised for 
the  purposes  of  manufacturing,  processing  or  producing  articles  or  things  4[or  for  the  purposes  of 
generation of power] and not for trading purposes. 

1. Ins. by 26 of 1988, s. 40 (w.e.f. 1-6-1988). 
2. Subs. by Act 18 of 1992, s. 79, for sub-section (1) (w.e.f. 1-4-1992). Earlier sub-section (1) amended by Act 3 of 1989, s. 

34 (w.r.e.f. 1-6-1988).   

3. Subs. by Act 54 of 2003, s. 9, for the Table (w.e.f. 8-9-2003). Earlier substitution by 18 of 1992, s. 75 (w.e.f. 1-4-1992), 

as so amended by Act 32 of 2003, s. 86 (w.e.f. 1-6-2003).   

4. Ins. by Act 23 of 2012, s. 81 (w.e.f. 1-7-2012). 
5. Subs. by Act 54 of 2003, s. 9, for the proviso (w.e.f. 8-9-2003). 
6. Ins. by s. 9, ibid. (w.e.f. 8-9-2003). 

668 

                                                           
 
(1B) The person responsible for collecting tax under this section shall deliver or cause to be delivered 
to  the 1[Principal  Chief  Commissioner  or  Chief  Commissioner]  or 2[Principal  Commissioner  or 
Commissioner] one copy of the declaration referred to in sub-section (1A) on or before the seventh day of 
the month next following the month in which the declaration is furnished to him.] 

3[(1C) Every person, who grants a lease or a licence or enters into a contract or otherwise transfers 
any right or interest either in whole or in part in any parking lot or toll plaza or mine or quarry, to another 
person, other than a public sector company (hereafter in this section referred to as “licensee or lessee”) for 
the use of such parking lot or toll plaza or mine or quarry for the purpose of business shall, at the time of 
debiting of the amount payable by the licensee or lessee to the account of thelicensee or lessee or at the 
time of receipt of such amount from the licensee or lessee in cash or by the issue of a cheque or draft or 
by any other mode, whichever is earlier, collect from the licensee or lessee of any such licence, contract 
or lease of the nature specified in column (2) of the Table below, a sum equal to the percentage, specified 
in the corresponding entry in column (3) of the said Table, of such amount as income-tax: 

TABLE 

Sl. No. 

Nature of contract or licence or lease, etc. 

Percentage 

(1) 

(i) 

(ii) 

Parking lot 

Toll plaza 

(2) 

(3) 

Two per cent. 

Two per cent. 

(iii) 
4[Explanation  1.—For  the  purposes  of  this  sub-section,  “mining  and  quarrying”  shall  not  include 

Mining and quarrying 

Two per cent.] 

mining and quarrying of mineral oil. 

Explanation  2.—For  the  purposes  of Explanation  1,  “mineral  oil”  includes  petroleum  and  natural 

gas.] 
5* 
(1F)Every  person,  being  a  seller,  who  receives  any  amount  as  consideration  for  sale  of  a  motor 
vehicle of the value exceeding ten lakh rupees, shall, at the time of receipt of such amount, collect from 
the buyer, a sum equal to one per cent of the sale consideration as income-tax.] 

* 

* 

* 

* 

(2) The power to recover tax by collection under sub-section (1)  3[or sub-section (1C)]  6***shall be 

without prejudice to any other mode of recovery. 

(3)  Any  person  collecting  any  amount  under  sub-section  (1)  3[or  sub-section  (1C)  6***shall  pay 
within 7[the  prescribed time]  the  amount so collected  to  the  credit of the  Central Government  or  as the 
Board directs: 

8[Provided that the person collecting tax on or after the 1st day of April, 2005 in accordance with the 
foregoing  provisions  of  this  section  shall,  after  paying  the  tax  collected  to  the  credit  of  the  Central 
Government within the prescribed time,  9[prepare such statements for such period as may be prescribed] 
and deliver or cause to be delivered to the prescribed income-tax authority, or the person authorised by 
such authority, such statement in such form and verified in such manner and setting forth such particulars 
and within such time as may be prescribed.] 

1. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). 
2. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 
3. Ins. by Act 23 of 2004, s. 50 (w.e.f. 1-10-2004). 
4. The Explanations ins. by Act 22 of 2007, s. 61 (w.e.f. 1-6-2007). 
5. Sub-sections (1D) and (1E) omitted by Act 7 of 2017, s. 72 (w.e.f. 1-4-2017). 
6. The words “or sub-section (1D)” omitted by s. 72, ibid. (w.e.f. 1-4-2017). 
7. Subs. by Act 54 of 2003, s. 9, for “seven days” (w.e.f. 8-9-2003).  
8. Ins. by Act 23 of 2003, s. 50 (w.e.f. 1-4-2005). 
9.  Subs.  by  Act  33  of  2009,  s.  70,  for  “prepare  quarterly  statements  for  the  period  ending  on  the  30th  June,  the                    

30th September, the 31st December and the 31st March in each financial year”  (w.e.f. 1-10-2009). 

669 

 
 
 
 
 
 
 
 
                                                           
1[(3A) In case of an office of the Government, where the amount collected under sub-section (1) 2[or 
sub-section (1C)] 3*** has been paid to the credit of the Central Government without the production of a 
challan,  the  Pay  and  Accounts  Officer  or  the  Treasury  Officer  or  the  Cheque  Drawing  and  Disbursing 
Officer  or  any  other  person,  by  whatever  name  called,  who  is  responsible  for  crediting  such  tax  to  the 
credit  of  the  Central  Government,  shall  deliver  or  cause  to  be  delivered  to  the  prescribed  income-tax 
authority, or to the person authorised by such authority, a statement in such form, verified in such manner, 
setting forth such particulars and within such time as may be prescribed. 

(3B)  The  person  referred  to  in  the  proviso  to  sub-section  (3)  may  also  deliver  to  the  prescribed 
authority under the said proviso, a correction statement for rectification of any mistake or to add, delete or 
update  the  information  furnished  in  the  statement  delivered  under  the  said  proviso  in  such  form  and 
verified in such manner, as may be specified by the authority.] 

4[(4) Any amount collected in accordance with the provisions of this section and paid to the credit of 
the Central Government shall be deemed to be a payment of tax on behalf of the person from whom the 
amount  has  been  collected  and  credit  shall  be  given  to  such  person  for  the  amount  so  collected  in  a 
particular assessment year in accordance with the rules as may be prescribed by the Board from time to 
time.] 

(5) Every person collecting tax in accordance with the provisions of this section shall within  5[such 
period  as  may  be  prescribed from  the  time  of  debit]  or  receipt  of  the  amount  furnish  to  the  6[buyer  or 
licensee or lessee] to whose account such amount is debited or from whom such payment is received, a 
certificate to the effect that tax has been collected, and specifying the sum so collected, the rate at which 
the tax has been collected and such other particulars as may be prescribed: 

7[*   

* 

* 

* 

* 

Provided  8*** that  the  prescribed  income-tax  authority  or  the  person  authorised  by  such  authority 
referred  to  in  sub-section  (3)  shall,  within  the  prescribed  time  9[after  the  end  of  each  financial  year 
beginning  on  or  after  the  1st  day  of  April,  2008],  prepare  and  deliver  to  the  buyer  referred  to  in  sub-
section (1) or, as the case may be, to the licensee or lessee referred to in sub-section (1C), a statement in 
the  prescribed  form specifying  the  amount  of  tax  collected  and  such  other  particulars  as  may  be 
prescribed.] 

10[(5A)  Every  person  11[collecting  tax  before  the  1st  day  of  April,  2005]  in  accordance  with  the 
provisions of this section shall 12[prepare within the prescribed time after the end of each financial year], 
and deliver or cause to be delivered to the  13[prescribed income-tax authority or such other authority or 
agency  as  may  be  prescribed]  such  returns  in  such  form  and  verified  in  such  manner  and  setting  forth 
such particulars and within such time as may be prescribed:] 

1. Ins. by Act 20 of 2015, s. 54 (w.e.f. 1-6-2015). 
2. Ins. by Act 23 of 2004, s. 50 (w.e.f. 1-10-2004). 
3. The words “or sub-section (1D)” omitted by Act 7 of 2017, s. 72 (w.e.f. 1-4-2017). 
4.  Subs.  by  Act  18  of  2008,  s.  48,  for  sub-section  (4)  (w.e.f.  1-4-2008).  Earlier  inserted  by  Act  23  of  2004,                                 

s. 50 (w.e.f. 1-4-2005). 

5. Subs. by Act 54 of 2003, s. 9, for “ten days from the date of debit” (w.e.f. 8-9-2003). 
6. Subs. by Act 23 of 2004, s. 50, for “buyer” (w.e.f. 1-10-2004). 
7.  The  Proviso  omitted  by  14  of  2010,  s.  44  (w.e.f.  1-4-2010).  Earlier  provisos  inserted  by  Act  23  of  2004,  s.  50             

(w.e.f. 1-4-2005). 

8. The words “Provided further” omitted by s.  44, ibid. (w.e.f. 1-4-2010). 
9. Subs. by Act 21 of 2006, s. 47, for “1st day of April, 2006” (w.e.f. 1-4-2005). 
10. Ins. by Act 3 of 1989, s. 34 (w.e.f. 1-4-1989). 
11. Subs. by Act 21 of 2006, s. 47, for “after the end of each financial year” (w.e.f. 1-4-2006). 
12. Subs. by Act 23 of 2004, s. 50, for “prepare half-yearly returns of the period ending on the 30thSeptmebt and 31st March 

in each financial year” (w.e.f. 1-10-2004). 

13. Subs. by s. 50,ibid., for “prescribed income-tax authority” (w.e.f. 1-10-2004). 

670 

 
 
 
 
 
 
 
                                                           
1[Provided that the Board may, if it considers necessary or expedient so to do, frame a scheme for the 

purposes of filing such returns with such other authority or agency referred to in this sub-section.] 

2[(5B) Without prejudice to the provisions of sub-section (5A), any person collecting tax, other than in 
a case where the seller is a company, the Central Government or a State Government, may at his option, 
deliver  or  cause  to  be  delivered  such  return  to  the  prescribed  income-tax  authority in  accordance  with 
such scheme as may be specified by the Board in this behalf, by notification in the Official Gazette, and 
subject to such conditions as may be specified therein, on or before the prescribed time after the end of 
each  financial  year,  on  a  floppy,  diskette,  magnetic  cartridge  tape,  CD-ROM  or  any  other  computer 
readable media (hereinafter referred to as the computer media) and in the manner as may be specified in 
that scheme: 

Provided that  where  the  person  collecting  tax  is  a  company  or  the  Central  Government  or  a  State 
Government, such person shall, in accordance with the provisions of this section, deliver or cause to be 
delivered, within the prescribed time after the end of each financial year, such returns on computer media 
under the said scheme. 

(5C) Notwithstanding anything contained in any other law for the time being in force, a return filed 
on computer media shall be deemed to be a return for the purposes of sub-section (5A) and the rules made 
thereunder  and  shall  be  admissible  in  any  proceedings  made  thereunder,  without  further  proof  of 
production of the original, as evidence of any contents of the original or of any facts stated therein. 

(5D)Where the Assessing Officer considers that the return delivered or caused to be delivered under 
sub-section  (5B)  is  defective,  he  may  intimate  the  defect  to  the  person  collecting  tax  and  give  him  an 
opportunity  of  rectifying  the  defect  within  a  period  of  fifteen  days  from  the  date  of  such  intimation  or 
within such further period which, on an application made in this behalf, the Assessing Officer may, in his 
discretion, allow; and if the defect is not rectified within the said period of fifteen days or, as the case may 
be, the further period so allowed, then, notwithstanding anything contained in any other provision of this 
Act, such return shall be treated as an invalid return and the provisions of this Act shall apply as if such 
person had failed to deliver the return.] 

(6) Any person responsible for collecting the tax who fails to collect the tax in accordance with the 
provisions of this section, shall, notwithstanding such failure, be liable to pay the tax to the credit of the 
Central Government in accordance with the provisions of sub-section (3). 

3[(6A) If any person responsible for collecting tax in accordance with the provisions of this section 
does not collect the whole or any part of the tax or after collecting, fails to pay the tax as required by or 
under this Act, he shall, without prejudice to any other consequences which he may incur, be deemed to 
be an assessee in default in respect of the tax: 

4[Provided that any person5***responsible for collecting tax in accordance with the provisions of this 
section,  who  fails  to  collect  the  whole  or  any  part  of  the  tax  on  the  amount  received  from  a  buyer  or 
licensee or lessee or on the amount debited to the account of the buyer or licensee or lessee shall not be 
deemed to be an assessee in default in respect of such tax if such buyer or licensee or lessee— 

  (i) has furnished his return of income under section 139; 

1. Ins. by Act 23 of 2004, s. 50 (w.e.f. 1-10-2004). 
2. Subs. by s. 50, ibid., for sub-sections (5B) and (5C) (w.e.f. . 1-4-2005). 
3. Ins. by Act 21 of 2006, s. 47 (w.e.f. 1-4-2007). 
4. Ins. by Act 23 of 2012, s. 81 (w.e.f. 1-7-2012). 
5. The words “, other than a person referred to in sub-section (1D),” omitted by Act 7 of 2017, s. 72 (w.e.f. 1-4-2017). 

671 

                                                           
 (ii) has taken into account such amount for computing income in such return of income; and 

(iii) has paid the tax due on the income declared by him in such return of income, 

and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed:] 

1[Provided  further that]  no  penalty  shall  be  charged  under section  221 from  such  person  unless  the 
Assessing Officer is satisfied that the person has without good and sufficient reasons failed to collect and 
pay the tax.] 

(7) Without prejudice to the provisions of  sub-section (6), if the  2[person responsible for collecting 
tax] does not collect the tax or after collecting the tax fails to pay it as required under this section, he shall 
be liable to pay simple interest at the rate of  3[one per cent.] per month or part thereof on the amount of 
such tax from the date on which such tax was collectible to the date on which the tax was actually paid 
4[and such interest shall be paid before furnishing the quarterly statement for each quarter in accordance 
with the provisions of sub-section (3)]: 

5[Provided that in case any person6***responsible for collecting tax in accordance with the provisions 
of this section, fails to collect the whole or any part of the tax on the amount received from a buyer or 
licensee  or  lessee  or  on the  amount  debited to  the  account  of the buyer  or  licensee  or  lessee  but is  not 
deemed  to  be  an  assessee  in  default  under  the  first  proviso  of  sub-section  (6A),  the  interest  shall  be 
payable from the date on which such tax was collectible to the date of furnishing of return of income by 
such buyer or licensee or lessee.] 

(8) Where the tax has not been paid as aforesaid, after it is collected, the amount of the tax together 
with  the  amount  of simple  interest thereon referred to  in  sub-section (7)  shall be  a  charge  upon  all the 
assets of the 2[person responsible for collecting tax].] 

7[(9) Where the Assessing Officer is satisfied that the total income of the 8[buyer or licensee or lessee] 
justifies the collection of the tax at any lower rate than the relevant rate specified in sub-section (1) 9[or 
sub-section (1C)]  10***, the Assessing Officer shall, on an application made by the buyer or licensee or 
lessee in this behalf, give to him a certificate for collection of tax at such lower rate than the relevant rate 
specified in sub-section (1) 9[or sub-section (1C)] 10***. 

(10) Where a certificate under sub-section (9) is given, the person responsible for collecting the tax 
shall, until such certificate is cancelled by the Assessing Officer, collect the tax at the  rates specified in 
such certificate. 

1. Subs. by Act 23 of 2012, s. 81, for “Provided that” (w.e.f. 1-7-2012). 
2. Subs. by Act 21 of 2006, s. 47, for “seller” (w.e..f 1-4-2007). 
3. Subs. by Act 54 of 2003, s. 9, for “one and one-fourth per cent." (w.e.f. 8-9-2003). 
4. Ins. by Act 21 of 2006, s. 47 (w.e.f. 1-6-2006). 
5. Ins. by Act 23 of 2012, s. 81 (w.e.f. 1-7-2012). 
6. The words “, other than a person referred to in sub-section (1D),” omitted by Act 7 of 2017, s. 72 (w.e.f. 1-4-2017). 
7. Ins. by Act 27 of 1999, s. 80 (w.e.f. 1-6-1999). 
8. Subs. by Act 23 of 2004, s. 50, for “buyer” (w.e.f. 1-10-2004). 
9. Ins. by s. 50, ibid. (w.e.f. 1-10-2004). 
10. The words “or sub-section (1D)” omitted by Act 7 of 2017, s. 72 (w.e.f. 1-4-2017). 

672 

                                                           
(11) The Board may, having regard to the convenience of assessees and the interests of revenue, by 
notification in the Official Gazette, make rules specifying the cases in which, and the circumstances under 
which, an application may be made for the grant of a certificate under sub-section (9) and the conditions 
subject to which such certificate may be granted and providing for all other matters connected therewith.] 

1[Explanation.—For the purposes of this section,— 

2[(a)  “accountant”  shall  have  the  meaning  assigned  to  it  in  the Explanation to  sub-section  (2) 

of section 288; 

(aa) “buyer” with respect to— 

(i) sub-section (1) means a person who obtains in any sale, by way of auction, tender or any 
other mode, goods of the nature specified in the Table in sub-section (1) or the right to receive 
any such goods but does not include,— 

(A)  a  public  sector  company,  the  Central  Government,  a  State  Government,  and  an 
embassy, a High Commission, legation, commission, consulate and the trade representation, 
of a foreign State and a club; or 

(B) a buyer in the retail sale of such goods purchased by him for personal consumption; 

3* 

* 

* 

* 

* 

4[(iii) sub-section (1F) means a person who obtains in any sale, goods of the nature specified 

in the said sub-section, but does not include,— 

(A) the Central Government, a State Government and an embassy, a High Commission, 

legation, commission, consulate and the trade representation of a foreign State; or 

(B) a local authority as defined in Explanation to clause (20) of section 10; or 

(C) a public sector company which is engaged in the business of carrying passengers.] 

5* 

* 

* 

* 

*] 

6[(b)  “scrap”  means  waste and  scrap from  the  manufacture  or  mechanical  working  of  materials 

which is definitely not usable as such because of breakage, cutting up, wear and other reasons;] 

(c)  “seller”  means  the  Central  Government,  a  State  Government  or  any  local  authority  or 
corporation or authority established by or under a Central, State or Provincial Act, or any company or 
firm or co-operative society and also includes an individual or a Hindu undivided family whose total 
sales,  gross  receipts  or  turnover  from  the  business  or  profession  carried  on  by  him  exceed  the 
monetary  limits  specified  under  clause  (a)  or  clause  (b)  of  section  44AB  during  the  financial 
yearimmediately preceding the financial year in which the goods of the nature specified in the Table 
in sub-section (1) 7[are sold]. 

1. Ins. by Act 18 of 1992, s. 79 (w.e.f. 1-4-1992). 
2. Subs. by Act 23 of 2012, s. 81, for  clause (a) (w.e.f. 1-7-2012). 
3. Sub-clause (ii) omitted by Act 7 of 2017, s. 72 (w.e.f. 1-4-2017). 
4. Ins. by s. 72, ibid. (w.e.f. 1-4-2017). 
5. Clause (ab) omitted by s. 72, ibid. (w.e.f. 1-4-2017). 
6. Subs. by Act 32 of 2003, s. 87, for clause (b) (w.e.f. 1-6-2003). 
7. Subs. by Act 7 of 2017, s. 72, for “or sub-section (1D) are sold or services referred to in sub-section (1D) are provided”              

(w.e.f. 1-4-2017). 

673 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
1[206CA. Tax collection account number.—(1) Every person collecting tax in accordance with the 
provisions of section 206C, shall, within such time as may be prescribed, apply to the Assessing Officer 
for the allotment of a tax collection account number. 

(2) Where a tax collection account number has been allotted to a person, such person shall quote such 

number— 

(a) in all challans for the payment of any sum in accordance with the provisions of sub-section (3) 

of section 206C; 

(b) in all certificates furnished under sub-section (5) of section 206C; 

(c) in  all  the  returns  delivered  in  accordance  with  the  provisions  of  sub-section  (5A)  or  sub-

section (5B) of section 206C to any income-tax authority; and 

(d) in all other documents pertaining to such transactions as may be prescribed in the interest of 

revenue:] 

2[Provided that the provisions of this section shall not apply on or after the 1st day of October, 

2004.] 

3[206CB. Processing  of  statements  of  tax  collected  at  source.—(1)  Where  a  statement  of  tax 
collection  at  source  or  a  correction  statement  has  been  made  by  a  person  collecting  any  sum  (herein 
referred to as collector) under section 206C, such statement shall be processed in the following manner, 
namely:— 

(a) the  sums  collectible  under  this  Chapter  shall  be  computed  after  making  the  following 

adjustments, namely:— 

(i) any arithmetical error in the statement; 

(ii) an incorrect claim, apparent from any information in the statement; 

(b) the interest, if any, shall be computed on the basis of the sums collectible as computed in the 

statement; 

(c) the fee, if any, shall be computed in accordance with the provisions of section 234E; 

(d) the sum payable by, or the amount of refund due to, the collector, shall be determined after 
adjustment  of  the  amount  computed  under  clause  (b)  and  clause  (c)  against  any  amount  paid 
under section 206C or section 234E and any amount paid otherwise by way of tax or interest or fee; 

(e)  an  intimation  shall  be  prepared  or  generated  and  sent  to  the  collector  specifying  the  sum 

determined to be payable by, or the amount of refund due to, him under clause (d); and 

(f) the amount of refund due to the collector in pursuance of the determination under clause (d) 

shall be granted to the collector: 

Provided that no intimation under this sub-section shall be sent after the expiry of the period of 

one year from the end of the financial year in which the statement is filed. 

Explanation.—For  the  purposes  of  this  sub-section,  “an  incorrect  claim  apparent  from  any 

information in the statement” shall mean a claim, on the basis of an entry, in the statement— 

(i) of  an  item,which  is  inconsistent  with  another  entry  of  the  same  or  some  other  item  in  such 

statement; 

1. Ins. by Act 20 of 2002, s. 91 (w.e.f. 1-6-2002). 
2. Ins. by Act 23 of 2004, s. 51 (w.e.f. 1-10-2004). 
3. Ins. by Act 20 of 2015, s. 55 (w.e.f. 1-6-2015). 

674 

                                                           
(ii) in respect of rate of collection of tax at source, where such rate is not in accordance with the 

provisions of this Act. 

(2) The Board may make a scheme for centralised processing of statements of tax collected at source 
to expeditiously determine the tax payable by, or the refund due to, the collector, as required under sub-
section (1).] 

to 

1[206CC. Requirement 

furnish  Permanent  Account  number  by 

collectee.—(1) 
Notwithstanding anything  contained in any other provisions of this Act, any person paying any sum or 
amount,  on  which  tax  is  collectible  at  source  under  Chapter  XVII-BB  (herein  referred  to  as  collectee) 
shall  furnish  his  Permanent  Account  Number  to  the  person  responsible  for  collecting  such  tax  (herein 
referred  to  as  collector),  failing  which  tax  shall  be  collected  at  the  higher  of  the  following  rates, 
namely:— 

(i) at twice the rate specified in the relevant provision of this Act; or 

(ii) at the rate of five per cent. 

(2) No declaration under sub-section (1A) of section 206C shall be valid unless the person furnishes 

his Permanent Account Number in such declaration. 

(3) In case any declaration becomes invalid under sub-section (2), the collector shall collect the tax at 

source in accordance with the provisions of sub-section (1). 

(4) No certificate under sub-section (9) of section 206C shall be granted unless the application made 

under that section contains the Permanent Account Number of the applicant. 

(5) The collectee shall furnish his Permanent Account Number to the collector and both shall indicate 

the same in all the correspondence, bills, vouchers and other documents which are sent to each other. 

(6) Where the Permanent Account Number provided to the collector is invalid or does not belong to 
the collectee, it shall be deemed that the collectee has not furnished his Permanent Account Number to 
the collector and the provisions of sub-section (1) shall apply accordingly. 

(7)  The  provisions  of  this  section  shall  not  apply  to  a  non-resident  who  does  not  have  permanent 

establishment in India. 

Explanation.—For  the  purposes  of  this  sub-section,  the  expression  “permanent  establishment” 
includes a fixed place of business through which the business of the enterprise is wholly or partly carried 
on.] 

2[207. Liability  for  payment  of  advance  tax.—3[(1)]  Tax  shall  be  payable  in  advance  during  any 
financial year, in accordance with the provisions of sections 208 to 219 (both inclusive), in respect of the 
total  income  of  the  assessee  which  would  be  chargeable  to  tax  for  the  assessment  year  immediately 
following that financial year, such income being hereafter in this Chapter referred to as “current income”. 

4[(2) The provisions of sub-section (1) shall not apply to an individual resident in India, who— 

(a)   does  nothave  any  income  chargeable  under  the  head  “Profits  and  gains  of  business  or 

profession”; and 

1. Ins. by Act 7 of 2017, s. 73 (w.e.f. 1-4-2017). 
2. Subs. by Act 4 of 1988, s. 76, for sections 207 and 208 (w.e.f. 1-4-1988). Earlier amended by Act 16 of 1972, s. 33 (w.e.f. 

1-4-1972). 

3. Section207 renumbered as sub-section (1) thereof by Act 23 of 2012, s. 82 (w.e.f. 1-4-2012). 
4. Ins. by s. 82, ibid. (w.e.f. 1-4-2012). 

675 

                                                           
(b) is of the age of sixty years or more at any time during the previous year.] 

208. Conditions of liability to pay advance tax.—Advance tax shall be payable during a financial 
year in every case where the amount of such tax payable by the assessee during that year, as computed in 
accordance with the provisions of this Chapter, is ten thousand rupees or more.] 

209.Computation of advance tax.—1[(1) The amount of advance tax payable by an assessee in the 
financial  year  shall,  subject  to  the  provisions  of  sub-sections  (2)  and  (3),  be  computed  as  follows,          
namely:— 

(a)   where  the  calculation  is  made  by  the  assessee  for  the  purposes  of  payment  of  advance  tax 
under sub-section (1) or sub-section (2) or sub-section (5) or sub-section (6) of section 210, he shall 
first estimate his current income and income-tax thereon shall be calculated at the rates in force in the 
financial year; 

(b)  where the calculation is made by the Assessing Officer for the purpose of making an order 
under sub-section (3) of section 210, the total income of the latest previous year in respect of which 
the  assessee  has  been  assessed  by  way  of  regular  assessment  or  the  total  income  returned  by  the 
assessee  in  any  return  of  income  furnished  by  him  for  any  subsequent  previous  year,  whichever  is 
higher, shall be taken and income-tax thereon shall be calculated at the rates in force in the financial 
year; 

(c)   where  the  calculation  is  made  by  the  Assessing  Officer  for  the  purpose  of  making  an 
amended order under sub-section (4) of section 210, the total income declared in the return furnished 
by the assessee for the later previous year, or, as the case may be, the total income in respect of which 
the regular assessment, referred to in that sub-section has been made, shall be taken and income-tax 
thereon shall be calculated at the rates in force in the financial year; 

(d)  the income-tax calculated under clause (a) or clause (b) or clause (c) shall, in each case, be 
reduced by the amount of income-tax which would be 2[deductible or collectible at source] during the 
said  financial  year  under any  provision  of this  Act from  any  income  (as  computed  before allowing 
any  deductions  admissible  under  this  Act)  which  has  been  taken  into  account  in  computing  the 
current income or, as the case may be, the total income aforesaid; and the amount of income-tax as so 
reduced shall be the advance tax payable:] 

3[Provided that for computing liability for advance tax, income-tax calculated under clause (a) or 
clause  (b)  or  clause  (c)  shall  not,  in  each  case,  be  reduced  by  the  aforesaid  amount  of  income-tax 
which would be deductible or collectible at source during the said financial year under any provision 
of  this  Act  from  any  income,  if  the  person  responsible  for  deducting  tax  has  paid  or  credited  such 
income  without  deduction  of  tax  or  it  has  been  received  or  debited  by  the  person  responsible  for 
collecting tax without collection of such tax.] 

1. Subs. by Act 4 of 1988, s. 77, for sub-section (1) (w.e.f. 1-4-1988). 

2. Subs. by Act 3 of 1989, s. 35, for “deductible at source” (w.r.e.f. 1-6-1988). 

3. Ins. by Act 23 of 2012, s. 83 (w.e.f. 1-4-2012). 

676 

                                                           
1[(2) Where the Finance Act of the relevant year provides that, in the case of any class of assessees, 
net agricultural income (as defined in that Act) shall be taken into account for the purposes of computing 
advance tax, then, the net agricultural income to be taken into account in the case of any assessee falling 
in that class, shall be— 

(a)  in cases  2[where the Assessing Officer makes an order under sub-section (3) or sub-section 

(4) of section 210],— 

(i)   if  the  total  income  of  the  latest  previous  year  in  respect  of  which  the  assessee  has  been 
assessed by way of regular assessment forms the basis of computation of advance tax payable by him, 
the net agricultural income which has been taken into account for the purposes of charging income-
tax for the assessment year relevant to that previous year; or 

3[(ii)  if the total income declared by the assessee for the later previous year referred to in sub-
section (4) of section 210 forms the basis of computation of advance tax, the net agricultural income 
as  returned  by  the  assessee  in  the  return  of  income  for  the  assessment  year  relevant  to  such  later 
previous year;] 

4[(b)  in cases where the advance tax is paid by the assessee on the basis of his estimate of his current 
income under sub-section (1) or sub-section (2) or sub-section (5) or sub-section (6) of section 210, the 
net  agricultural  income,  as  estimated  by  him,  of  the  period  which  would  be  the  previous  year  for  the 
immediately following assessment year.] 

(3) Where the Finance Act of the relevant year specifies any separate rate or rates for the purposes of 
computing advance tax in the case of every Hindu undivided family which has at least one member whose 
total income of the previous year exceeds the maximum amount not chargeable to income-tax in his case, 
then,  the  5[Assessing  Officer]  shall,  for  making  an  order  under  6[sub-section  (3)  or  sub-section  (4) 
of section  210] in  the  case  of  any  such  Hindu  undivided  family,  compute  (subject  to  the  provisions 
of section 164) the advance tax at such rate or rates— 

(a)   in  a  case  where  the  total  income  of  the  latest  previous  year  in  respect  of  which  the  Hindu 
undivided  family  has  been  assessed  by  way  of  regular  assessment  forms  the  basis  of  computation  of 
advance  tax,  if  the  total  income  of  any  member  of  the  family  for  the  assessment  year  relevant  to  such 
latest previous year exceeds the maximum amount not chargeable to income-tax in his case; 

(b) in a case where the total income of the previous year  7[in respect of which a return of income is 
furnished by the Hindu undivided family under section 139 or in response to a notice under sub-section 
(1) of section 142] forms the basis of computation of advance tax, if the total income of any member of 
the  family  for  the  assessment  year  relevant  to  such  previous  year  exceeds  the  maximum  amount  not 
chargeable to income-tax in his case.] 

1. Ins. by Act 20 of 1974, s. 11 (w.e.f. 1-4-1974). 
2. Subs. by Act 4 of 1988, s. 77, for “where the assessee sends a statement under sub-section (1) of section 209A or where 

the Income-tax Officer makes an order under sub-section (1) or sub-section (3)  of section 210” (w.e.f. 1-4-1988). 

3. Subs. by s. 77, ibid., for sub-clause (ii) (w.e.f. 1-4-1988). 
4. Subs. by s. 77, ibid.,for clause (b) (w.e.f. 1-4-1988).  
5. Subs. by s. 2, ibid., for “Income-tax Officer” (w.e.f. 1-4-1988). 
6. Subs. by s. 77, ibid., for “under section 210” (w.e.f. 1-4-1988). 
7. Subs. by s. 77, ibid., for “on the basis of which tax has been paid by the Hindu undivided family under section 140A” 

(w.e.f. 1-4-1988). 

677 

                                                           
209A. [Computation and payment of advance tax by assessee.] Omitted by the Direct Tax Laws 
(Amendment) Act, 1987 (4 of 1988), s. 78 (w.e.f. 1-4-1988). Original section was inserted by the Finance 
Act, 1978 (19 of 1978), s. 24 (w.e.f. 1-6-1978). 

1[210.  Payment  of  advance  tax  by  the  assessee  of  his  own  accord  or  in  pursuance  of  order  of 
Assessing Officer.—(1) Every person who is liable to pay advance tax under section 208 (whether or not 
he has been previously assessed by way of regular assessment) shall, of his own accord, pay, on or before 
each of the due dates specified in section 211, the appropriate percentage, specified in that section, of the 
advance tax on his current income, calculated in the manner laid down in section 209. 

(2)  A  person  who  pays  any  instalment  or  instalments  of  advance  tax  under  sub-section  (1),  may 
increase or reduce the amount of advance tax payable in the remaining instalment or instalments to accord 
with his estimate of his current income and the advance tax payable thereon, and make payment of the 
said amount in the remaining instalment or instalments accordingly. 

(3) In the case of a person who has been already assessed by way of regular assessment in respect of 
the total income of any previous year,  2*** the Assessing Officer, if he is of opinion that such person is 
liable  to  pay  advance  tax,  may,  at  any  time  during  the  financial  year  but  not  later  than  the  last  day  of 
February, by order in writing, require such person to pay advance tax calculated in the manner laid down 
in section 209, and issue to such person a notice of demand under section 156 specifying the instalment or 
instalments in which such tax is to be paid. 

(4)  If,  after  the  making  of an  order  by  the  Assessing Officer  under  sub-section  (3)  and at  any  time 
before  the  1st  day  of  March,  a  return  of  income  is  furnished  by  the  assessee  under section  139 or  in 
response to a notice under sub-section (1) of section 142, or a regular assessment of the assessee is made 
in respect of a previous year later than that referred to in sub-section (3), the Assessing Officer may make 
an amended order and issue to such assessee a notice of demand under section 156 requiring the assessee 
to pay, on or before the due date or each of the due dates specified in section 211falling after the date of 
the amended order, the appropriate percentage, specified in section 211, of the advance tax computed on 
the  basis  of  the  total  income  declared  in  such  return  or  in  respect  of  which  the  regular  assessment 
aforesaid has been made. 

(5)  A  person  who  is  served  with  an  order  of  the  Assessing  Officer  under  sub-section  (3)  or  an 
amended  order  under  sub-section  (4)  may,  if  in  his  estimation  the  advance  tax  payable  on  his  current 
income would be less than the amount of the advance tax specified in such order or amended order, send 
an intimation in the prescribed form to the Assessing Officer to that effect and pay such advance tax as 
accords  with  his  estimate,  calculated  in  the  manner  laid  down  in section  209,  at  the  appropriate 
percentage thereof specified in section 211, on or before the due date or each of the due dates specified 
in section 211 falling after the date of such intimation. 

(6) A person who is served with an order of the Assessing Officer under sub-section (3) or amended 
order under sub-section (4) shall, if in his estimation the advance tax payable on his current income would 
exceed the amount of advance tax specified in such order or amended order or intimated by him under 
sub-section  (5),  pay  on  or  before  the  due  date  of  the  last  instalment  specified  in section  211,  the 
appropriate part or, as the case may be, the whole of such higher amount of advance tax as accords with 
his estimate, calculated in the manner laid down in section 209.] 

1. Subs. by Act 4 of 1988, s. 79, for section 210 (w.e.f. 1-4-1988). 

2. The words “and who has not paid any advance tax under sub-section (1)” omitted by Act 20 of 2002, s. 92 (w.e.f. 1-6-

2002). 

678 

                                                           
1[211.  Instalments  of  advance  tax  and  due  dates.—2[(1)  Advance  tax  on  the  current  income 

calculated in the manner laid down in section 209 shall be payable by— 

(a)  all the assessees, other than the assessee  referred to in clause (b), who are liable to pay the 
same,  in  four  instalments  during  each  financial  year  and  the  due  date  of  each  instalment  and 
theamount of such instalment shall be as specified in the Table below: 

TABLE 

Due date of 

instalment 

Amount payable 

On  or  before  the  15th 

June 

Not less than fifteen per cent. of such advance 
tax. 

On  or  before  the  15th 

September 

Not  less  than  forty-five  per  cent.  of  such 
advance tax, as reduced by the amount, if any, 
paid in the earlier instalment. 

On  or  before  the  15th 

December 

Not  less  than  seventy-five  per  cent.  of  such 
advance  tax,  as  reduced  by  the  amount  of 
amounts,  if  any,  paid  in  the  earlier  instalment 
or instalments. 

On or before the 15th 

March 

The  whole  amount  of  such  advance  tax,  as 
reduced by the amount or amounts, if any, paid 
in the earlier instalment or instalments; 

(b)  3[an  assessee  who  declares  profits  and  gains  in  accordance  with  the  provisions  of  
sub-section  (1)  of section  44AD or  sub-section  (1)  of section  44ADA,  as  the  case  may  be],  to  the 
extent  of  the  whole  amount  of  such  advance  tax  during  each  financial  year  on  or  before  the  15th 
March: 

Provided that any amount paid by way of advance tax on or before the 31st day of March shall also be 

treated as advance tax paid during the financial year ending on that day for all the purposes of this Act.] 

(2) If the notice of demand issued under section 156 in pursuance of an order of the Assessing Officer 
under  sub-section  (3)  or  sub-section  (4)  of section  210 is  served  after  any  of  the  due  dates  specified  in 
sub-section (1), the appropriate part or, as the case may be, the whole of the amount of the advance tax 
specified in such notice shall be payable on or before each of such of those dates as fall after the date of 
service of the notice of demand.] 

212.  [Estimate  by  assessee.] Omitted  by the  Direct Tax  Laws  (Amendment)  Act,  1987 (4  of 1988), 

s. 81 (w.e.f. 1-4-1988). 

213. [Commission receipts.] Omitted by s.81, ibid. (w.e.f. 1-4-1988). 

1. Subs. by Act 4 of 1988, s. 80, for section 211 (w.e.f. 1-4-1988). 

2. Subs. by Act 28 of 2016, s. 89, for sub-section (1) (w.e.f. 1-6-2016). 

3. Subs. by  Act 7 of 2017, s. 74, for “an eligible assessee in respect of an eligible business referred to in section 44AD”  

(w.e.f. 1-4-2017). 

679 

 
 
 
 
                                                           
214. Interest  payable  by  Government.—(1)  The  Central  Government  shall  pay  simple  interest  at 
1[fifteen per cent.] per annum on the amount by which the aggregate sum of any instalments of advance 
tax  paid  during  any  financial  year  in  which  they  are  payable  under sections  207 to 213 exceeds  the 
amount of the 2[assessed tax] from the 1st day of April next following the said financial year to the date of 
the regular assessment for the assessment year immediately following the said financial year, and where 
any such instalment is paid after the expiry of the financial year, during which it is payable by reason of 
the provisions of section 213, interest as aforesaid shall also be payable on that instalment from the date 
of its payment to the date of regular assessment: 

3[Provided that in respect of any amount refunded on a provisional assessment under section 141A, 

no interest shall be paid for any period after the date of such provisional assessment.] 

4[(1A)  Where  as  a  result  of  an  order  under section  147 or section  154 or section  155 or section 
250 or section  254 or section  260 or section  262 or section  263 or section  264 5[or  an  order  of  the 
Settlement  Commission  under  sub-section  (4)  of section  245D],  the  amount  on  which  interest  was 
payable  under  sub-section  (1)  has  been  increased  or  reduced,  as  the  case  may  be,  the  interest  shall  be 
increased  or  reduced  accordingly,  and  in  a  case  where  the  interest  is  reduced,  the  6[Assessing  Officer] 
shall serve on the assessee, a notice of demand in the prescribed form specifying the amount of the excess 
interest payable and requiring him to pay such amount; and such notice of demand shall be deemed to be 
a notice under section 156 and the provisions of this Act shall apply accordingly.] 

(2)  On  any  portion  of  such  amount  which  is  refunded  under  this  Chapter,  interest  shall  be  payable 

only up to the date on which the refund was made. 

7[(3) This section and sections 215, 216 and 217 shall not apply in respect of any assessment for the 
assessment year commencing on the 1st day of April, 1989, or any subsequent assessment year and, in the 
application  of  the  said  sections  to  the  assessment  for  any  earlier  assessment  year,  references  therein 
[except in sub-section (1A) and sub-section (3) of section 215] to the other provisions of this Act shall be 
construed as references to those provisions as for the time being in force and applicable to the relevant 
assessment year.] 

8[Explanation 1.—In this section, “assessed tax” shall have the same meaning as in sub-section (5) 

of section 215. 

Explanation  2.—Where, in  relation to  an  assessment  year,  an  assessment  is  made  for  the  first time 
under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of 
this section.] 

215.  Interest  payable  by  assessee.—9[(1)Where,  in  any  financial  year,  an  assessee  has  paid 
10[advance  tax  under section  209A or section  212 on  the  basis  of  his  own  estimate  (including  revised 

1. Subs. by Act 67 of 1984, s. 24, for “twelve per cent.” (w.e.f. 1-10-1984). 

2. Subs. by s. 35, ibid., for “tax determined on regular assessment” (w.e.f. 1-4-1985). 

3. Added by Act 19 of 1968, s. 16 (w.e.f. 1-4-1968). 

4. Subs. by Act 67 of 1984, s. 35, for sub-section (1A) (w.e.f. 1-4-1985). 

5. Ins. by Act 4 of 1988, s. 82 (w.e.f. 1-4-1989). 

6. Subs. by s. 2, ibid., for “Income-tax Officer” (w.e.f. 1-4-1988). 

7. Ins. by s. 82, ibid. (w.e.f. 1-4-1989). 

8. Ins. by Act 67 of 1984, s. 35 (w.e.f. 1-4-1985). 

9. Subs. by Act 14 of 1969, s. 18, for sub-section (1) (w.e.f. 1-4-1970). 

10. Subs. by Act 19 of 1978, s. 27, for “advance tax under section 212 on the basis of his own estimate” (w.e.f. 1-6-1978). 

680 

                                                           
estimate)],  and  the  advance  tax  so  paid  is  less  than  seventy-five  per  cent.  of  the  assessed  tax,  simple 
interest  at  the  rate  of1[fifteen  per  cent.]  per  annum  from  the  1st  day  of  April  next  following  the  said 
financial year up to the date of the regular assessment shall be payable by the assessee upon the amount 
by which the advance tax so paid falls short of the assessed tax:] 

2[Provided that in the case of an assessee, being a company, the provisions of this sub-section shall 
have effect as if for the words “seventy-five per cent.”, the words “eighty-three and one-third per cent.” 
had been substituted.] 

3[(2)  Where  before  the  date  of  completion  of  a  regular  assessment,  tax  is  paid  by  the  assessee 

under section 140A or otherwise,— 

(i)  interest shall be calculated in accordance with the foregoing provision up to the date on which 

the tax is so paid ; and 

(ii) thereafter, interest shall be calculated at the rate aforesaid on the amount by which the tax as 

so paid (in so far as it relates to income subject to advance tax) falls short of the assessed tax.] 

4[(3)  Where  as  a  result  of  an  order  under section  147 or section  154 or section  155 or section 
250 or section  254 or section  260 or section  262 or section  263 or section  264 5[or  an  order  of  the 
Settlement  Commission  under  sub-section  (4)  of section  245D],  the  amount  on  which  interest  was 
payable  under  sub-section  (1)  has  been  increased  or  reduced,  as  the  case  may  be,  the  interest  shall  be 
increased or reduced accordingly, and— 

(i)  in a case where the interest is increased, the 6[Assessing Officer] shall serve on the assessee, a 
notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall 
be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly; 

(ii)  in a case where the interest is reduced, the excess interest paid, if any, shall be refunded.] 

(4) In such cases and under such circumstances as may be prescribed, the  6[Assessing Officer] may 

reduce or waive the interest payable by the assessee under this section. 

7[(5) In this section and sections 217 and 273, “assessed tax” means the tax determined on the basis of 
the  regular  assessment  (reduced  by  the  amount  of  tax  deductible  in  accordance  with  the  provisions 
of sections  192 to 194, 8[section  194A, section  194C]  9[, section  194D]  10[, section  195 and section 
196A] so far as such tax relates to income subject to advance tax and so far as it is not due to variations in 
the rates of tax made by the Finance Act enacted for the year for which the regular assessment is made.] 

11[(6) Where, in relation to an assessment year, an assessment is made for the first time under section 
147,  the  assessment  so  made  shall  be  regarded  as  a  regular  assessment  for  the purposes  of  this  section 
and sections 216, 217 and 273.] 

1. Subs. by Act 67 of 1984, s. 24, for “twelve per cent.” (w.e.f. 1-10-1984). 
2. Ins. by Act 44 of 1980, s. 32 (w.e.f. 1-9-1980). 
3. Subs. by Act 42 of 1970, s. 37, for sub-section (2) (w.e.f. 1-4-1971). 
4. Subs. by Act 67 of 1984, s. 36, for sub-section (3) (w.e.f. 1-4-1985). 
5. Ins. by Act 4 of 1988, s. 83 (w.e.f. 1-4-1989). 
6. Subs. by s. 2, ibid., for “Income-tax Officer” (w.e.f. 1-4-1988). 
7. Ins. by Act 14 of 1969, s. 18 (w.e.f. 1-4-1970). 
8. Subs. by Act 16 of 1972, s. 38, for “section 194A” (w.e.f. 1-4-1972). 
9. Ins. by Act 21 of 1973, s. 19 (w.e.f. 1-4-1973). 
10. Subs. by Act 3 of 1989, s. 33, for “and section 195” (w.e.f. 1-4-1989). 
11. Ins. by Act 67 of 1984, s. 36 (w.e.f. 1-4-1985). 

681 

                                                           
216. Interest payable by assessee in case of under-estimate, etc.—Where, on  making the regular 

assessment, the 1[Assessing Officer] finds that any assessee has— 

2[(a)  under 3[section  209A or section  212] under-estimated  the  advance  tax  payable  by  him  and 

thereby reduced the amount payable in either of the first two instalments; or 

(b) under section 213 wrongly deferred the payment of advance tax on a part of his income; 

he may direct that the assessee shall pay simple interest at 4[fifteen per cent.] per annum— 

 (i) in the case referred to in clause (a), for the period during which the payment was deficient, on 
the difference between the amount paid in each such instalment and the amount which should have 
been paid, having regard to the aggregate advance tax actually paid during the year; and 

(ii) in the case referred to in clause (b), for the period during which the payment of advance tax 

was so deferred. 

Explanation.—For the purposes of this section, any instalment due before the expiry of six months 
from the commencement of the previous year in respect of which it is to be paid shall be deemed to have 
become due fifteen days after the expiry of the said six months. 

217.  Interest  payable  by  assessee  when  no  estimate  made.—5[(1)  Where,  on  making  the  regular 

assessment, 6[the 1[Assessing Officer] finds— 

(a) that any such person as is referred to in clause (a) of sub-section (1) of section 209A has not 
sent  the  statement  referred  to  in  that  clause  or  the  estimate  in  lieu  of  such  statement  referred  to  in  
sub-section (2) of that section; or 

(b) that any such person as is referred to in clause (b) of sub-section (1) of section 209A has not 

sent the estimate referred to in that clause, 

simple interest at the rate of  4[fifteen per cent.] per annum] from the 1st day of April next following the 
financial  year  in  which  the  advance  tax  was  payable  in  accordance  with  7[the  said  sub-section  (1)  or       
sub-section (2)] up to the date of the regular assessment shall be payable by the assessee upon the amount 
equal to the assessed tax as defined in sub-section (5) of section 215. 

(1A) Where, on making the regular assessment, the  1[Assessing Officer] finds that 8[any person who 
is required to send an estimate under sub-section (4) of section 209A or] any such person as is referred to 
in sub-section (3A) of section 212 has not sent the estimate referred to therein, simple interest at the rate 
of 4[fifteen per cent.] per annum from the 1st day of April next following the financial year in which the 
advance tax was payable in accordance with 9[the said sub-section (4) or, as the case may be, sub-section 
(3A)] up to the date of the regular assessment shall be payable by the assessee upon the amount by which 
the advance tax paid by him falls short of the assessed tax as defined in sub-section (5) of section 215.] 

1. Subs. by Act 4 of 1988, s. 2, for “Income-tax officer” (w.e.f. 1-4-1988). 
2. Subs. by Act 14 of 1969, s. 19, for clause (a) (w.e.f. 1-4-1970). 
3. Subs. by Act 19 of 1978, s. 28, for “sub-section (1) or sub-section (2) or sub-section (3) or sub-section (3A) of section 

212” (w.e.f. 1-6-1978). 

4. Subs. by Act 67 of 1984, s. 24, for “twelve per cent.” (w.e.f. 1-10-1984). Earlier the quoted words were substituted by                  

Act 16 of 1972, s. 25 for “nine per cent.”  (w.e.f. 1-4-1972). 

5. Subs. by Act 14 of 1969, s. 20, for sub-section (1) (w.e.f. 1-4-1970). 
6. Subs. by Act 19 of 1978, s. 29, for “the Income-tax Officer finds that any such person as is referred to in sub-section (3)                    

of  section  212  has  not  sent  the  estimate  referred  to  therein,  simple  interest  at  the  rate  of  twelve  per  cent.  per  annum”                       
(w.e.f. 1-6-1978). 

7. Subs. by s. 29, ibid., for “the said sub-section” (w.e.f. 1-6-1978). 
8. Ins. by s. 29, ibid. (w.e.f. 1-6-1978). 
9. Subs. by s. 29, ibid., for “the said sub-section” (w.e.f. 1-6-1978). 

682 

                                                           
(2) The provisions of sub-sections (2), (3) and (4) of section 215 shall apply to interest payable under 

this section as they apply to interest payable under that section. 

1[218. When assessee deemed to be in default.—If any assessee does not pay on the date specified 
in sub-section (1) of section 211, any instalment of the advance tax that he is required to pay by an order 
of the Assessing Officer under sub-section (3) or sub-section (4) of section 210 and does not, on or before 
the  date  on  which  any  such  instalment  as  is  not  paid  becomes  due,  send  to  the  Assessing  Officer  an 
intimation under sub-section (5) of section 210 or does not pay on the basis of his estimate of his current 
income the advance tax payable by him under sub-section (6) of section 210, he shall be deemed to be an 
assessee in default in respect of such instalment or instalments.] 

219. Credit for advance tax.—Any sum, other than a penalty or interest, paid by or recovered from 
an assessee as advance tax in pursuance of this Chapter shall be treated as a payment of tax in respect of 
the income of the period which would be the previous year for an assessment for the assessment year next 
following the financial year in which it was payable, and credit therefor shall be given to the assessee in 
the regular assessment. 

2* 

* 

* 

* 

* 

D.—Collection and recovery 

220. When tax payable and when assessee deemed in default.—(1) Any amount, otherwise than by 
way  of  advance  tax,  specified  as  payable  in  a  notice  of  demand  under section  156 shall  be  paid  within 
3[thirty days] of the service of the notice at the place and to the person mentioned in the notice : 

Provided that, where the  4[Assessing Officer] has any reason to believe that it will be detrimental to 
revenue if the full period of 3[thirty days] aforesaid is allowed, he may, with the previous approval of the 
5[Joint  Commissioner],  direct  that  the  sum  specified  in  the  notice  of  demand  shall  be  paid  within  such 
period being a period less than the period of  3[thirty days] aforesaid, as may be specified by him in the 
notice of demand. 

6[(1A)  Where  any  notice  of  demand  has  been  served  upon  an  assessee  and  any  appeal  or  other 
proceeding, as the case may be, is filed or initiated in respect of the amount specified in the said notice of 
demand, then, such demand shall be deemed to be valid till the disposal of the appeal by the last appellate 
authority or disposal of the proceedings, as the case may be, and any such notice of demand shall have the 
effect  as  specified  in  section  3  of  the  Taxation  Laws  (Continuation  and  Validation  of  Recovery 
Proceedings) Act, 1964 (11 of 1964).] 

(2) If the amount specified in any notice of demand under section 156 is not paid within the period 
limited under sub-section (1), the assessee shall be liable to pay simple interest at  7[8[one per cent.] for 
every month or part of a month comprised in the period commencing from the day immediately following 
the end of the period mentioned in sub-section (1) and ending with the day on which the amount is paid]: 

1. Subs. by  Act 4 of 1988, s. 84, for section 218 (w.e.f. 1-4-1988). Earlier section 218 was amended by  Act 21 of 1979,                   

s. 19 (w.e.f. 1-4-1979) which was substituted by Act 19 of 1978, s. 30 (w.e.f. 1-6-1978). 

2. The proviso omitted by s. 126, ibid. (w.e.f. 1-4-1989). 
3. Subs. by s. 85, ibid.,for “thirty-five days” (w.e.f. 1-4-1989). 
4. Subs. by s. 2, ibid.,for “Income-tax Officer” (w.e.f. 1-4-1988). 
5. Subs. by Act 21 of 1998, s. 3, for “Deputy Commissioner” (w.e.f. 1-10-1998). Earlier the quoted words were substituted 

by Act 4 of 1988, s. 2, for “Inspecting Assistant Commissioner” (w.e.f. 1-4-1988). 

6. Ins. by Act 25 of 2014, s. 64 (w.e.f. 1-10-2014). 
7.  Subs.  by  Act  4  of  1988,  s.  85  for  “fifteen  per  cent.  per  annum  from  the  day  commencing  after  the  end  of  the  period 

mentioned  in sub-section (1)” (w.e.f. 1-4-1989). 

8. Subs. by Act 54 of 2003, s. 10, for “one and one-fourth per cent.” (w.e.f. 8-9-2003). Earlier the quoted words were subs. 

by Act 14 of 2001, s. 76, for “one and one-half per cent.” (w.e.f. 1-6-2001). 

683 

 
 
 
 
 
 
 
 
                                                           
1[Provided that,  where  as  a  result  of  an  order  under section  154,  or section  155,  or section  250, 
or section 254, or section 260, or section 262, or section 264 2[or an order of the Settlement Commission 
under sub-section (4) of section 245D], the amount on which interest was payable under this section had 
been  reduced,  the  interest  shall  be  reduced  accordingly  and  the  excess  interest  paid,  if  any,  shall  be 
refunded:] 

3[Provided further that where as a result of an order under sections specified in the first proviso, the 
amount on which interest was payable under this section had been reduced and subsequently as a result of 
an order under said sections or section 263, the amount on which interest was payable under this section 
is increased, the assessee shall be liable to pay interest under sub-section (2) from the day immediately 
following the end of the period mentioned in the first notice of demand, referred to in sub-section (1) and 
ending with the day on which the amount is paid:] 

2[4[Provided also] that in respect of any period commencing on or before the 31st day of March, 1989 
and ending after that date, such interest shall, in respect of so much of such period as falls after that date, 
be calculated at the rate of one and one-half per cent for every month or part of a month.] 

5[(2A) Notwithstanding anything contained in sub-section (2), 6[the 7[8[Principal Chief Commissioner 
or  Chief  Commissioner]  or  9[Principal  Commissioner  or  Commissioner]]  may]  reduce  or  waive  the 
amount  of  10[interest  paid  or  payable  by  an  assessee]  under  the  said  sub-section  if,  11[he  is  satisfied] 
that— 

 (i) payment of such amount 12[has caused or would cause genuine hardship] to the assessee; 

(ii) default in the payment of the amount on which 13[interest has been paid or was payable] under 

the said sub-section was due to circumstances beyond the control of the assessee; and 

(iii) theassessee has co-operated in any inquiry relating to the assessment or any proceeding for 

the recovery of any amount due from him:] 

14[Provided that the order accepting or rejecting the application of the assessee, either in full or in 
part,  shall  be  passed  within  a  period  of  twelve  months  from  the  end  of  the  month  in  which  the 
application is received: 

1. Ins. by Act 13 of 1963, s. 14 (w.r.e.f. 1-4-1962). 
2. Ins. by Act 4 of 1988, s. 85 (w.e.f. 1-4-1989). 
3. Ins. by Act 25 of 2014, s. 64 (w.e.f. 1-10-2014). 
4. Subs. by s. 64, ibid.,for “Provided further” (w.e.f. 1-10-2014). 
5. Ins. by Act 67 of 1984, s. 37 (w.e.f. 1-10-1984). 
6. Subs. by Act 46 of 1986, s. 13, for “the Board may” (w.e.f. 1-4-1987). 
7. Subs. by Act 4 of 1988, s. 2, for “Commisssioner” (w.e.f. 1-4-1988). 
8. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.r.e.f. 1-6-2013). 
9. Subs. by s. 4, ibid.,for “Commisssioner” (w.r.e.f. 1-6-2013). 
10. Subs. by Act 46 of 1986, s. 13, for “interest payable by an assessee” (w.r.e.f. 1-10-1984). 
11. Subs. by s. 13, ibid.,for “on the recommendation made by the Commissioner in this behalf, if is satisfied” (w.e.f. 1-4-

1987). 

12. Subs. by s. 13, ibid.,for “would cause genuine hardship” (w.r.e.f. 1-10-1984). 
13. Subs. by s. 13, ibid., for “interest was payable” (w.r.e.f. 1-10-1984). 
14. Ins. by Act 28 of 2016, s. 90 (w.e.f. 1-6-2016). 

684 

                                                           
Provided further that no order rejecting the application, either in full or in part, shall be passed unless 

the assessee has been given an opportunity of being heard: 

Provided also that where any application is pending as on the 1st day of June, 2016, the order shall be 

passed on or before the 31st day of May, 2017.] 

1[(2B)  Notwithstanding  anything  contained  in  sub-section  (2),  where  interest  is  charged  under  sub-
section (1A) of section 201 on the amount of tax specified in the intimation issued under sub-section (1) 
of section  200A for  any  period,  then,  no  interest  shall  be  charged  under  sub-section  (2)  on  the  same 
amount for the same period.] 

2[(2C)  Notwithstanding  anything  contained  in  sub-section  (2),  where  interest  is  charged  under  sub-
section (7) of section 206C on the amount of tax specified in the intimation issued under sub-section (1) 
of section  206CB for  any  period,  then,  no  interest  shall  be  charged  under  sub-section  (2)  on  the  same 
amount for the same period.] 

(3) Without prejudice to the provisions contained in sub-section (2), on an application made by the 
assessee before the expiry of the due date under sub-section (1), the 3[Assessing Officer] may extend the 
time  for  payment  or  allow  payment  by  instalments,  subject  to  such  conditions  as  he  may  think  fit  to 
impose in the circumstances of the case. 

(4)  If  the  amount  is  not  paid  within  the  time  limited  under  sub-section  (1)  or  extended  under  sub-
section (3), as the case may be, at the place and to the person mentioned in the said notice the assessee 
shall be deemed to be in default. 

(5) If, in a case where payment by instalments is allowed under sub-section (3), the assessee commits 
defaults in paying any one of the instalments within the time fixed under that sub-section, the assessee 
shall be deemed to be in default as to the whole of the amount then outstanding, and the other instalment 
or instalments shall be deemed to have been due on the same date as the instalment actually in default. 

(6) Where an assessee has presented an appeal under section 246 4[or section 246A] the  3[Assessing 
Officer]  may,  in  his  discretion  and  subject  to  such  conditions  as  he  may  think  fit  to  impose  in  the 
circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in 
the appeal, even though the time for payment has expired, as long as such appeal remains undisposed of. 

(7) Where an assessee has been assessed in respect of income arising outside India in a country the 
laws of which prohibit or restrict the remittance of money to India, the 3[Assessing Officer] shall not treat 
the assessee as in default in respect of that part of the tax which is due in respect of that amount of his 
income  which,  by  reason  of  such  prohibition  or  restriction,  cannot  be  brought  into  India,  and  shall 
continue to treat the assessee as not in default in respect of such part of the tax until the prohibition or 
restriction is removed. 

Explanation.—For  the  purposes  of  this  section,  income  shall  be  deemed  to  have  been  brought  into 
India  if  it  has  been  utilised  or  could  have  been  utilised  for  the  purposes  of  any  expenditure  actually 
incurred by the assessee outside India or if the income, whether capitalised or not, has been brought into 
India in any form. 

1. Ins. by Act 23 of 2012, s. 84 (w.e.f. 1-7-2012). 
2. Ins. by Act 20 of 2015, s. 56 (w.e.f. 1-6-2015). 
3. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
4. Ins. by Act 10 of 2000, s. 62 (w.e.f. 1-6-2000). 

685 

                                                           
221. Penalty payable when tax in default.—1[(1) When an assessee is in default or is deemed to be 
in default in making a payment of tax, he shall, in addition to the amount of the arrears and the amount of 
interest payable under sub-section (2) of section 220, be liable, by way of penalty, to pay such amount as 
the  2[Assessing  Officer]  may  direct,  and  in  the  case  of  a  continuing  default,  such  further  amount  or 
amounts as the 2[Assessing Officer] may, from time to time, direct, so, however, that the total amount of 
penalty does not exceed the amount of tax in arrears: 

Provided that before levying any such penalty, the assessee shall be given a reasonable opportunity of 

being heard: 

3[Provided further that where the assessee proves to the satisfaction of the  2[Assessing Officer] that 

the default was for good and sufficient reasons, no penalty shall be levied under this section.]] 

4[Explanation.—For the removal of doubt, it is hereby declared that an assessee shall not cease to be 
liable  to  any  penalty  under  this  sub-section  merely  by  reason  of  the  fact  that  before  the  levy  of  such 
penalty he has paid the tax.] 

(2) Where as a result of any final order the amount of tax, with respect to the default in the payment 
of which the penalty was levied, has been wholly reduced, the penalty levied shall be cancelled and the 
amount of penalty paid shall be refunded. 

222. Certificate to Tax Recovery Officer.—(1) 5[When an assessee is in default or is deemed to be 
in  default  in  making  a  payment  of  tax,  the  Tax  Recovery  Officer  may  draw  up  under  his  signature  a 
statement in the prescribed formspecifying the amount of arrears due from the assessee (such statement 
being hereafter in this Chapter and in the Second Schedule referred to as “certificate”) and shall proceed 
to  recover  from  such  assessee  the  amount  specified  in  the  certificate  by  one  or  more  of  the  modes 
mentioned below, in accordance with the rules laid down in the Second Schedule—] 

(a)  attachment and sale of the assessee’s movable property; 

(b)  attachment and sale of the assessee’s immovable property; 

(c)  arrest of the assessee and his detention in prison; 

(d)   appointing  a  receiver  for  the  management  of  the  assessee’s  movable  and  immovable 

properties. 

6[Explanation.—For the purposes of this sub-section, the assessee’s movable or immovable property 
shall  include  any  property  which  has  been  transferred,  directly  or  indirectly  on  or  after  the  1st  day  of 
June, 1973, by the assessee to his spouse or minor child or son’s wife or son’s minor child, otherwise than 
for adequate consideration, and which is held by, or stands in the name of, any of the persons aforesaid; 
and so far as the movable or immovable property so transferred to his minor child or his son’s minor child 
is concerned, it shall, even after the date of attainment of majority by such  minor child or son’s minor 
child, as the case may be, continue to be included in the assessee’s movable or immovable property for 
recovering any arrears due from the assessee in respect of any period prior to such date.] 

7[(2)  The  Tax  Recovery  Officer  may  take  action  under  sub-section  (1),  notwithstanding  that 

proceedings for recovery of the arrears by any other mode have been taken.] 

1. Subs. by Act 42 of 1970, s. 38, for sub-section (1) (w.e.f. 1-4-1971).  
2. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
3. Subs. by Act 46 of 1986, s. 14, for the second proviso (w.e.f. 10-9-1986). 
4. Ins. by Act 41 of 1975, s. 53 (w.e.f. 1-10-1975). 
5. Subs. by Act 4 of 1988, s. 86, for certain words (w.e.f. 1-4-1989). 
6. Ins. by Act 41 of 1975, s. 54 (w.e.f. 1-10-1975). 
7. Subs. by Act 4 of 1988, s. 86, for sub-section (2) (w.e.f. 1-4-1989). 

686 

                                                           
1[223. Tax Recovery Officer by whom recovery is to be effected.—(1) The Tax Recovery Officer 

competent to take action under section 222 shall be— 

(a)   the Tax  Recovery  Officer  within  whose jurisdiction  the  assessee  carries  on his  business  or 

profession or within whose jurisdiction the principal place of his business or profession is situate, or 

(b)  the Tax Recovery Officer within whose jurisdiction the assessee resides or any movable or 

immovable property of the assessee is situate, 

the  jurisdiction  for  this  purpose  being  the  jurisdiction  assigned  to  the  Tax  Recovery  Officer  under  the 
orders  or  directions  issued  by  the  Board,  or  by  the  2[Principal  Chief  Commissioner  or  Chief 
Commissioner]  or  3[Principal  Commissioner  or  Commissioner]  who  is  authorised  in  this  behalf  by  the 
Board in pursuance of section 120. 

(2)  Where  an  assessee  has  property  within  the jurisdiction  of  more  than  one Tax  Recovery  Officer 

and the Tax Recovery Officer by whom the certificate is drawn up— 

(a)   is  not  able  to  recover  the  entire  amount  by  sale  of  the  property,  movable  or  immovable, 

within his jurisdiction, or 

(b)  is of the opinion that, for the purpose of expediting or securing the recovery of the whole or 

any part of the amount under this Chapter, it is necessary so to do, 

he may send the certificate or, where only a part of the amount is to be recovered, a copy of the certificate 
certified in the prescribed mannerand specifying the amount to be recovered to a Tax Recovery Officer 
within whose jurisdiction the assessee resides or has property and, thereupon, that Tax Recovery Officer 
shall also proceed to recover the amount under this Chapter as if the certificate or copy thereof had been 
drawn up by him. 

224. Validity of certificate and cancellation or amendment thereof.—It shall not be open to the 
assessee to dispute the correctness of any certificate drawn up by the Tax Recovery Officer on any ground 
whatsoever, but it shall be lawful for the Tax Recovery Officer to cancel the certificate if, for any reason, 
he thinks it necessary so to do, or to correct any clerical or arithmetical mistake therein. 

225.  Stay  of  proceedings  in  pursuance  of  certificate  and  amendment  or  cancellation  
thereof.—(1) It shall be lawful for the Tax Recovery Officer to grant time for the payment of any tax and 
when he does so, he shall stay the proceedings for the recovery of such tax until the expiry of the time so 
granted. 

(2)  Where  the  order  giving  rise  to  a  demand  of  tax  for  which  a  certificate  has  been  drawn  up  is 
modified  in  appeal  or  other  proceeding  under  this  Act,  and,  as  a  consequence  thereof,  the  demand  is 
reduced but the order is the subject-matter of further proceeding under this Act, the Tax Recovery Officer 
shall  stay  the  recovery  of  such  part  of  the  amount  specified  in  the  certificate  as  pertains  to  the  said 
reduction for the period for which the appeal or other proceeding remains pending. 

(3) Where a certificate has been drawn up and subsequently the amount of the outstanding demand is 
reduced as a result of an appeal or other proceeding under this Act, the Tax Recovery Officer shall, when 
the  order  which  was  the  subject-matter  of  such  appeal  or  other  proceeding  has  become  final  and 
conclusive, amend the certificate, or cancel it, as the case may be.] 

1. Subs. by Act 4 of 1988, s. 87, for sections 223, 224 and 225 (w.e.f. 1-4-1989). 
2. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). 
3. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 

687 

                                                           
226. Other modes of recovery.—1[(1) Where no certificate has been drawn up under section 222, the 

Assessing Officer may recover the tax by any one or more of the modes provided in this section. 

(1A)  Where  a  certificate  has  been  drawn  up  under section  222,  the  Tax  Recovery  Officer  may, 
without prejudice to the modes of recovery specified in that section, recover the tax by any one or more of 
the modes provided in this section.] 

(2) If any assessee is in receipt of any income chargeable under the head “Salaries”, the  2[Assessing 
Officer] 3[or Tax Recovery Officer] may require any person paying the same to deduct from any payment 
subsequent to the date of such requisition any arrears of tax due from such assessee, and such person shall 
comply  with  any  such  requisition  and  shall  pay  the  sum  so  deducted  to  the  credit  of  the  Central 
Government or as the Board directs: 

Provided that any part of the salary exempt from attachment in execution of a decree of a civil court 
under section 60 of the Code of Civil Procedure, 1908 (5 of 1908), shall be exempt from any requisition 
made under this sub-section. 

(3) (i) The 2[Assessing Officer] 3[or Tax Recovery Officer] may, at any time or from time to time, by 
notice in writing require any person from whom money is due or may become due to the assessee or any 
person  who  holds  or  may  subsequently  hold  money  for  or  on  account  of  the  assessee  to  pay  to  the 
2[Assessing Officer] 3[or Tax Recovery Officer] either forthwith upon the money becoming due or being 
held or at or within the time specified in the notice (not being before the money becomes due or is held) 
so much of the money as is sufficient to pay the amount due by the assessee in respect of arrears or the 
whole of the money when it is equal to or less than that amount. 

(ii) A notice under this sub-section may be issued to any person who holds or may subsequently hold 
any  money for or on account of the assessee jointly with any other person and for the purposes of this  
sub-section, the shares of the joint holders in such account shall be presumed, until the contrary is proved, 
to be equal. 

(iii)  A  copy  of  the  notice  shall  be  forwarded  to  the  assessee  at  his  last  address  known  to  the 
2[Assessing Officer] 3[or Tax Recovery Officer], and in the case of a joint account to all the joint holders 
at their last addresses known to the 2[Assessing Officer] 3[or Tax Recovery Officer]. 

(iv) Save as otherwise provided in this sub-section, every person to whom a notice is issued under this 
sub-section shall be bound to comply with such notice, and, in particular, where any such notice is issued 
to  a  post  office,  banking  company  or  an  insurer,  it  shall  not  be  necessary  for  any  pass  book,  deposit 
receipt, policy or any other document to be produced for the purpose of any entry, endorsement or the like 
being made before payment is made, notwithstanding any rule, practice or requirement to the contrary. 

(v) Any claim respecting any property in relation to which a notice under this sub-section has been 

issued arising after the date of the notice shall be void as against any demand contained in the notice. 

(vi) Where a person to whom a notice under this sub-section is sent objects to it by a statement on 
oath that the sum demanded or any part thereof is not due to the assessee or that he does not hold any 
money for or on account of the assessee, then nothing contained in this sub-section shall be deemed to 
require such person to pay any such sum or part thereof, as the case may be, but if it is discovered that 
such  statement  was  false  in  any  material  particular,  such  person  shall  be  personally  liable  to  the 
2[Assessing Officer]  3[or Tax Recovery Officer] to the extent of his own liability to the assessee on the 
date of the notice, or to the extent of the assessee’s liability for any sum due under this Act, whichever is 
less. 

1. Subs. by Act 4 of 1988, s. 88, for sub-section (1) (w.e.f. 1-4-1989). 
2. Subs. by Act 3 of 1989, s. 36, for “Income-tax Officer” (w.e.f. 1-4-1988). 
3. Ins. by s. 37, ibid (w.e.f. 1-4-1989). 

688 

                                                           
 
(vii)  The  1[Assessing  Officer]  2[or  Tax  Recovery  Officer]  may,  at  any  time  or  from  time  to  time, 
amend or revoke any notice issued under this sub-section or extend the time for making any payment in 
pursuance of such notice. 

(viii) The 1[Assessing Officer] 2[or Tax Recovery Officer] shall grant a receipt for any amount paid in 
compliance with a notice issued under this sub-section, and the person so paying shall be fully discharged 
from his liability to the assessee to the extent of the amount so paid. 

(ix) Any person discharging any liability to the assessee after receipt of a notice under this sub-section 
shall be personally liable to the  1[Assessing Officer] 2[or Tax Recovery Officer] to the extent of his own 
liability to the assessee so discharged or to the extent of the assessee’s liability for any sum due under this 
Act, whichever is less. 

(x) If the person to whom a notice under this sub-section is sent fails to make payment in pursuance 
thereof to  the  1[Assessing  Officer]2[or  Tax  Recovery  Officer],  he  shall  be  deemed  to  be  an  assessee  in 
default in respect of the amount specified in the notice and further proceedings may be taken against him 
for  the  realisation  of  the  amount  as  if  it  were  an  arrear  of  tax  due  from  him,  in  the  manner  provided 
in sections  222 to 225 and  the  notice  shall  have  the  same  effect  as  an  attachment  of  a  debt  by  the  Tax 
Recovery Officer in exercise of his powers under section 222. 

(4)  The  1[Assessing  Officer]  2[or  Tax  Recovery  Officer]  may  apply  to  the  court  in  whose  custody 
there is money belonging to the assessee for payment to him of the entire amount of such money, or, if it 
is more than the tax due, an amount sufficient to discharge the tax. 

3[(5) The  1[Assessing Officer]  2[or Tax Recovery Officer] may, if so authorised by the  4[5[Principal 
Chief Commissioner or Chief Commissioner] or 6[Principal Commissioner or Commissioner]] by general 
or  special  order,  recover  any  arrears  of  tax  due  from  an  assessee  by  distraint  and  sale  of  his  movable 
property in the manner laid down in the Third Schedule.] 

227. Recovery through State Government.—If the recovery of tax in any area has been entrusted to 
a State Government under clause (1) of article 258 of the Constitution, the State Government may direct, 
with respect to that area or any part thereof; that tax shall be recovered therein with, and as an addition to, 
any municipal tax or local rate, by the same person and in the same manner as the municipal tax or local 
rate is recovered. 

228. [Recovery of Indian tax in Pakistan and Pakistan tax in India.] Omitted by the Direct Tax 

Laws (Amendment) Act, 1987 (4 of 1988), s. 89 (w.e.f. 1-4-1989). 

7[228A.  Recovery  of  tax  in  pursuance  of  agreements  with  foreign  countries.—(1)  Where  an 
agreement is entered into by the Central Government with the Government of any country outside India 
for  recovery  of  income-tax  under  this  Act  and  the  corresponding  law  in  force  in  that  country  and  the 
Government of that country or any authority under that Government which is specified in this behalf in 
such agreement sends to the Board a certificate for the recovery of any tax due under such corresponding 
law  from  a  person  having  any  property  in  India,  the  Board  may  forward  such  certificate  to  any  Tax 

1. Subs. by Act 3 of 1989, s. 36, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2. Ins. by s. 37, ibid. (w.e.f. 1-4-1989). 
3. Subs. by Act 10 of 1965, s. 54, for sub-section (5) (w.e.f. 1-4-1965). 
4. Subs. by Act 4 of 1988, s. 2, for “Commissioner” (w.e.f. 1-4-1988). 
5. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). 
6. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 
7. Ins. by Act 16 of 1972, s. 39 (w.e.f. 1-4-1972). 

689 

                                                           
Recovery Officer within whose jurisdiction such property is situated and thereupon such Tax Recovery 
Officer shall— 

(a)  proceed to recover the amount specified in the certificate in the manner in which he would 

proceed to recover the amount 1[specified in a certificate drawn up by him under section 222]; and 

(b)  remit any sum so recovered by him to the Board after deducting his expenses in connection 

with the recovery proceedings. 

2[(2) Where an assessee is in default or is deemed to be in default in making a payment of tax, the Tax 
Recovery Officer may, if the assessee has property in a country outside India (being a country with which 
the Central Government has entered into an agreement for the recovery of income-tax under this Act and 
the  corresponding  law  in  force  in  that  country),  forward  to  the  Board  a  certificate  drawn  up  by  him 
under section 222 and the Board may take such action thereon as it may deem appropriate having regard 
to the terms of the agreement with such country.]] 

229. Recovery of penalties, fine, interest and other sums.—Any sum imposed by way of interest, 
fine,  penalty,  or  any  other  sum  payable  under  the  provisions  of  this  Act,  shall  be  recoverable  in  the 
manner provided in this Chapter for the recovery of arrears of tax. 

230. Tax clearance certificate.—3[(1) Subject to such exceptions as the Central Government  may, 

by notification in the Official Gazette, specify in this behalf, no person,— 

(a)  who is not domiciled in India; 

(b)  who has come to India in connection with business, profession or employment; and 

(c)  who has income derived from any source in India, 

shall  leave  the  territory  of  India  by  land,  sea  or  air  unless  he  furnishes  to  such  authorityas  may  be 
prescribed— 

 (i)  an undertaking in the prescribed formfrom his employer; or 

(ii)  through whom such person is in receipt of the income, 

to the effect that tax payable by such person who is not domiciled in India shall be paid by the employer 
referred to in clause (i) or the person referred to in clause (ii), and the prescribed authorityshall, on receipt 
of the undertaking, immediately give to such person a no objection certificate, for leaving India: 

Provided that  nothing  contained  in  sub-section  (1)  shall  apply  to  a  person  who  is  not  domiciled  in 
India but visits India as a foreign tourist or for any other purpose not connected with business, profession 
or employment. 

(1A)  Subject  to  such  exceptions  as  the  Central  Government  may,  by  notification  in  the  Official 
Gazette, specify in this behalf, every person, who is domiciled in India at the time of his departure from 
India, shall furnish, in the prescribed formto the income-tax authority or such other authority as may be 
prescribed— 

(a)  the permanent account number allotted to him under section 139A: 

1. Subs. by Act 4 of 1988, s. 90, for “specified in a certificate received from an Assessing Officer” (w.e.f. 1-4-1989). 
2. Subs. by s. 90, ibid., for sub-section (2) (w.e.f. 1-4-1989). 
3. Subs. by Act 32 of 2003, s. 88, for sub-section (1) (w.e.f. 1-6-2003). 

690 

                                                           
Provided that  in  case  no  such  permanent  account  number  has  been  allotted  to  him,  or  his  total 
income is not chargeable to income-tax or he is not required to obtain a permanent account number 
under this Act, such person shall furnish a certificate in the prescribed form; 

(b)  the purpose of his visit outside India; 

(c)  the estimated period of his stay outside India: 

Provided that no person— 

(i)  who is domiciled in India at the time of his departure; and 

(ii)  in respect of whom circumstances exist which, in the opinion of an income-tax authority 

render it necessary for such person to obtain a certificate under this section, 

shall  leave  the  territory  of  India  by  land,  sea  or  air  unless  he  obtains  a  certificate  from  the  income-tax 
authority stating that he has no liabilities under this Act, or the Wealth-tax Act, 1957 (27 of 1957), or the 
Gift-tax  Act,  1958  (18  of  1958),  or  the  Expenditure-tax  Act,  1987  (35  of  1987),  or  that  satisfactory 
arrangements  have  been  made  for  the  payment  of  all  or  any  of  such  taxes  which  are  or  may  become 
payable by that person: 

Provided that  no  income-tax  authority  shall  make  it  necessary  for  any  person  who  is  domiciled  in 
India to obtain a certificate under this section unless he records the reasons therefor and obtains the prior 
approval of the 1[Principal Chief Commissioner or Chief Commissioner] of Income-tax.] 

(2) If the owner or charterer of any ship or aircraft carrying persons from any place in the territory of 
India  to  any  place  outside  India  allows  any  person  to  whom  sub-section  (1)  2[or  the  first  proviso  to  
sub-section (1A)] applies to travel by such ship or aircraft without first satisfying himself that such person 
is  in  possession  of a  certificate  as  required by  that sub-section,  he  shall  be  personally  liable  to pay  the 
whole or any part of the amount of tax, if any, payable by such person as the  3[Assessing Officer] may, 
having regard to the circumstances of the case, determine. 

(3)  In  respect  of  any  sum  payable  by  the  owner  or  charterer  of  any  ship  or  aircraft  under  
sub-section (2), the owner or charterer, as the case may be, shall be deemed to be an assessee in default 
for such sum, and such sum shall be recoverable from him in the manner provided in this Chapter as if it 
were an arrear of tax. 

(4) The Board may make rules for regulating any matter necessary for, or incidental to, the purpose of 

carrying out the provisions of this section. 

Explanation.—For the purposes of this section, the expressions “owner” and “charterer” include any 
representative, agent or employee empowered by the owner or charterer to allow persons to travel by the 
ship or aircraft. 

230A.  [Restrictions  on  registration  of  transfers  of 

immovable  property 

in  certain                      

cases.]—Omitted by the Finance Act, 2001 (14 of 2001), s. 77 (w.e.f. 1-6-2001). 

1. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). 

2. Ins. by Act 54 of 2003, s. 11 (w.e.f. 1-6-2003). 

3. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 

691 

                                                           
231.  [Period  for  commencing  recovery  proceedings.]—Omitted  by  the  Direct  Tax  Laws 

(Amendment) Act, 1987 (4 of 1988), s. 93 (w.e.f. 1-4-1989). 

232. Recovery by suit or under other law not affected.—The several modes of recovery specified 

in this Chapter shall not affect in any way— 

(a)  any other law for the time being in force relating to the recovery of debts due to Government; 

or 

(b)   the  right  of  the  Government  to  institute  a  suit  for  the  recovery  of  the  arrears  due  from  the 

assessee; 

and it shall be lawful for the 1[Assessing Officer] or the Government, as the case may be, to have recourse 
to  any  such  law  or  suit,  notwithstanding  that  the  tax  due  is  being  recovered  from  the  assessee  by  any 
mode specified in this Chapter. 

E.—Tax payable under provisional assessment 

233. [Recovery  of  tax  payable  under  provisional  assessment.]—Omitted  by  the  Taxation  Laws 

(Amendment) Act, 1970 (42 of 1970), s. 39 (w.e.f. 1-4-1971). 

234. [Tax paid by deduction or advance payment.]—Omitted by the Direct Tax Laws (Amendment) 

Act, 1987 (4 of 1988), s. 126 (w.e.f. 1-4-1989). 

2[F.—Interest chargeable in certain cases 

234A.Interest  for  defaults  in  furnishing  return  of  income.—(1)  Where  the  return  of  income  for 
any assessment year under sub-section (1) or sub-section (4) of  section 139, or in response to a notice 
under sub-section (1) of section 142, is furnished after the due date, or is not furnished, the assessee shall 
be liable to pay simple interest at the rate of 3[one per cent.] for every month or part of a month comprised 
in the period commencing on the date immediately following the due date, and,— 

(a)  where the return is furnished after the due date, ending on the date of furnishing of the return; 

or 

(b)  where no return has been furnished, ending on the date of completion of the assessment under 

section 144, 

4[on the amount of the tax on the total income as determined under sub-section (1) of section 143, and 
where  a  regular  assessment  is  made,  on  the  amount  of  the  tax  on  the  total  income  determined  under 
regular assessment, as reduced by the amount of,— 

(i)  advance tax, if any, paid; 

(ii)  any tax deducted or collected at source; 

(iii) any relief of tax allowed under section 90 on account of tax paid in a country outside India; 

(iv)  any  relief  of  tax  allowed  under section  90A on  account  of  tax  paid  in  a  specified  territory 

outside India referred to in that section; 

(v)  any deduction, from the Indian income-tax payable, allowed under section 91, on account of 

tax paid in a country outside India; and 

1. Subs. by Act 4 of 1988, s. 2, for “Income-tax” (w.e.f. 1-4-1988). 
2. Ins. by s. 94, ibid. (w.e.f. 1-4-1989). 
3. Subs. by  Act  54 of  2003,  s. 12,  for  “one  and one-fourth per  cent.”  (w.e.f.  8-9-2003). Earlier  substitution  by  Act  27  of 

1999, s. 81 (w.e.f. 1-6-1999). 

4. Subs.  by Act 21 of 2006, s. 48, for "on the amount of the tax on the total income as determined under sub-section (1) of 
section  143  or  on  regular  assessment  as  reduced  by  the  advance  tax,  if  any,  paid  and  any  tax  deducted  or  collected  at 
source" (w.e.f. 1-4-2007).Earlier were amended by 3 of 1989, s. 38 (w.e.f. 1-4-1989). 

692 

                                                           
(vi)  any  tax  credit  allowed  to  be  set  off  in  accordance  with  the  provisions  of section 

115JAA 1[or section 115JD].] 

Explanation  1.—In  this  section,  “due  date”  means  the  date  specified  in  sub-section  (1)  of section 

139 as applicable in the case of the assessee. 

2[Explanation  2.—In  this sub-section,  "tax  on the  total income  as  determined  under sub-section (1) 

of section 143" shall not include the additional income-tax, if any, payable under section 143.] 

Explanation  3.—Where, in  relation to  an  assessment  year,  an  assessment  is  made  for  the  first time 
3[under section 147 or section 153A], the assessment so made shall be regarded as a regular assessment 
for the purposes of this section. 

4* 

* 

* 

* 

* 

(2)  The  interest  payable  under  sub-section  (1)  shall  be  reduced  by  the  interest,  if  any,  paid 

under section 140A towards the interest chargeable under this section. 

(3)  Where  the  return  of  income  for  any  assessment  year,  required  3[by  a  notice  under section 
148 or section 153A] issued  5[after the determination of income under sub-section (1) of section 143 or] 
after the completion of an assessment under sub-section (3) of section 143 or section 144 or section 147, 
is furnished after the expiry of the time allowed under such notice, or is not furnished, the assessee shall 
be liable to pay simple interest at the rate of 6[one per cent.] for every month or part of a month comprised 
in the period commencing on the day immediately following the expiry of the time allowed as aforesaid, 
and,— 

(a)   where  the  return  is  furnished  after  the  expiry  of  the  time  aforesaid,  ending  on  the  date  of 

furnishing the return; or 

(b)  where no return has been furnished, ending on the date of completion of the reassessment or 

recomputation under section 147 7[or reassessment under section 153A], 

on  the  amount  by  which  the  tax  on  the  total  income  determined  on  the  basis  of  such  reassessment  or 
recomputation exceeds the tax on the total 8[income determined under sub-section (1) of section 143 or on 
the basis of the earlier assessment aforesaid]. 

9* 

* 

* 

* 

* 

(4)  Where  as  a  result  of  an  order  under section  154 or section  155 or section  250 or  section 
254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission 
under sub-section (4) of section 245D, the amount of tax on which interest was payable under sub-section 
(1) or sub-section (3) of this section has been increased or reduced, as the case may be, the interest shall 
be increased or reduced accordingly, and— 

 (i)  in a case where the interest is increased, the Assessing Officer shall serve on the assessee a 
notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall 
be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly; 

(ii)  in a case where the interest is reduced, the excess interest paid, if any, shall be refunded. 

(5)  The  provisions  of  this  section  shall  apply  in  respect  of  assessments  for  the  assessment  year 

commencing on the 1st day of April, 1989 and subsequent assessment years.] 

1. Ins. by Act 23 of 2012, s. 85 (w.e.f. 1-4-2013). 
2. Subs. by Act 3 of 1989, s. 38, for Explanation (w.e.f. 1-4-1989). 
3. Subs. by Act 32 of 2003, s. 89, for “under section 147” (w.e.f. 1-6-2003).  
4. Explanation omitted by Act 14 of 2001, s. 78 (w.r.e.f. 1-4-1989). 
5. Ins. by Act 3 of 1989, s. 38 (w.e.f. 1-4-1989). 
6. Subs. by Act 54 of 2003, s. 12, for “one and one-fourth per cent.” (w.e.f. 8-9-2003).Earlier substitution by Act 27 of 1999,          

s.  81 (w.e.f. 1-6-1999). 

7. Ins. by 32 of 2003, s. 89 (w.e.f 1-6-2003). 
8. Subs. by Act 3 of 1989, s. 38, for “income determined on the basis of the earlier assessment aforesaid” (w.e.f.  1-4-1989). 
9. The Explanation omitted by s. 38, ibid. (w.e.f. 1-4-1989). 

693 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
234B. Interest for defaults in payment of advance tax.—(1) Subject to the other provisions of this 
section, where, in any financial year, an assessee who is liable to pay advance tax under section 208 has 
failed  to  pay  such  tax  or,  where  the  advance  tax  paid  by  such  assessee  under  the  provisions  of section 
210 is less than ninety per cent. of the assessed tax, the assessee shall be liable to pay simple interest at 
the rate of 1[one per cent.] for every month or part of a month comprised in the period from the 1st day of 
April  next  following  such  financial  year  2[to  the  date  of  determination  of  total  income  under  
sub-section  (1)  of section  143 3[and  where  a  regular  assessment  is  made,  to  the  date  of  such  regular 
assessment, on an amount]] equal to the assessed tax or, as the case may be, on the amount by which the 
advance tax paid as aforesaid falls short of the assessed tax. 

4[Explanation 1.—In this section, “assessed tax” means the tax on the total income determined under 
sub-section  (1)  of  section  143  and  where  a  regular  assessment  is  made,  the  tax  on  the  total  income 
determined under such regular assessment as reduced by the amount of,— 

(i) any tax deducted or collected at source in accordance with the provisions of Chapter XVII on 
any  income  which  is  subject  to  such  deduction  or  collection  and  which  is  taken  into  account  in 
computing such total income; 

(ii) any relief of tax allowed under section 90 on account of tax paid in a country outside India; 

(iii)  any  relief  of  tax  allowed  under section  90A  on  account  of  tax  paid  in  a  specified  territory 

outside India referred to in that section; 

(iv) any deduction, from the Indian income-tax payable, allowed under section 91, on account of 

tax paid in a country outside India; and 

(v)  any  tax  credit  allowed  to  be  set  off  in  accordance  with  the  provisions  of  section  115JAA  

5[or section 115JD].] 

Explanation  2.—Where, in  relation to  an  assessment  year,  an  assessment  is  made  for  the  first time 
6[under section 147 or section 153A], the assessment so made shall be regarded as a regular assessment 
for the purposes of this section. 

7[Explanation 3.—In Explanation 1 and in sub-section (3) “tax on the total income determined under 
sub-section  (1)  of  section  143”  shall  not  include  the  additional  income-tax,  if  any,  payable  under  
section 143.] 

(2) Where, before the date of 8[determination of total income under sub-section (1) of section 143 or] 

completion of a regular assessment, tax is paid by the assessee under section 140A or otherwise,— 

(i) interest shall be calculated in accordance with the foregoing provisions of this section up to the 
date on which the tax is so paid, and reduced by the interest, if any, paid under section 140A towards 
the interest chargeable under this section; 

1. Subs. by Act 54 of 2003, s. 13, for “one and one-fourth per cent.” (w.e.f. 8-9-2003). 
2. Subs. by Act 3 of 1989, s. 39, for “to the date of the regular assessment” (w.e.f. 1-4-1989). 
3. Subs. by Act 22 of 1995, s. 42, for “or regular assessment, on an amount” (w.e.f. 1-4-1989). 
4. Subs. by Act 21 of 2006, s. 49, for Explanation 1 (w.e.f. 1-4-2007). 
5. Ins. by Act 23 of 2012, s. 86 (w.e.f. 1-4-2013). 
6. Subs. by Act 32 of 2003, s. 90, for “under section 147” (w.e.f. 1-6-2003). 
7. Subs. by Act 3 of 1989, s. 39, for Explanation 3 (w.e.f.1-4-1989). 
8. Ins. by s. 39, ibid (w.e.f. 1-4-1989). 

694 

                                                           
(ii) thereafter, interest shall be calculated at the rate aforesaid on the amount by which the tax so 

paid together with the advance tax paid falls short of the assessed tax. 

1[(2A)  (a)  where  an  application  under  sub-section  (1)  of  section  245C  for  any  assessment  year  has 
been made, the assessee shall be liable to pay simple interest at the rate of one per cent. for every month 
or part of a month comprised in the period commencing on the 1st day of April of such assessment year 
and ending on the date of making such application, on the additional amount of income-tax referred to in 
that sub-section; 

(b) where as a result of an order of the Settlement Commission under sub-section (4) of section 245D 
for any assessment year, the amount of total income disclosed in the application under sub-section (1) of 
section 245C is increased, the assessee shall be liable to pay simple interest at the rate of one per cent. for 
every  month  or  part  of  a  month  comprised  in  the  period  commencing  on  the  1st  day  of  April  of  such 
assessment year and ending on the date of such order, on the amount by which the tax on the total income 
determined  on  the  basis  of  such  order  exceeds  the  tax  on  the  total  income  disclosed  in  the  application 
filed under sub-section (1) of section 245C; 

(c)  where,  as  a  result  of  an  order  under  sub-section  (6B)  of  section  245D,  the  amount  on  which 
interest was payable under clause (b) has been increased or reduced, as the case may be, the interest shall 
be increased or reduced accordingly;] 

2[(3)  where,  as  a  result  of  an  order  of  reassessment  or  recomputation  under  section  147  or  
section 153A, the amount on which interest was payable in respect of shortfall in payment of advance tax 
for any financial year under sub-section (1) is increased, the assessee shall be liable to pay simple interest 
at the rate of one per cent. for every month or part of a month comprised in the period commencing on the 
1st  day  of  April  next  following  such  financial  year  and  ending  on  the  date  of  the  reassessment  or 
recomputation under section 147 or section 153A, on the amount by which the tax on the total income 
determined  on  the  basis  of  the  reassessment  or  recomputation  exceeds  the  tax  on  the  total  income 
determined under sub-section (1) of section 143 or on the basis of the regular assessment as referred to in 
sub-section (1), as the case may be;] 

(4) where, as a result of an order under section 154 or section 155 or section 250 or section 254 or 
section 260 or section 262 or section 263 or section 264 3***, the amount on which interest was payable 
under sub-section (1) or sub-section (3) has been increased or reduced, as the case may be, the interest 
shall be increased or reduced accordingly, and— 

(i) in a case where the interest is increased, the Assessing Officer shall serve on the assessee a 
notice of demand in the prescribed form specifying the sum payable and such notice of demand shall 
be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly; 

(ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded; 

(5)  the  provisions  of  this  section  shall  apply  in  respect  of  assessments  for  the  assessment  year 

commencing on the 1st day of April, 1989 and subsequent assessment years.] 

1. Ins. by Act 20 of 2015, s. 57 (w.e.f. 1-6-2015). 

2. Subs. by s. 57, ibid., for sub-section (3) (w.e.f. 1-6-2015). 

3. The words, brackets, figures and letter “or an order of the Settlement Commission under sub-section (4) of section 245D” 

omitted by s. 57, ibid (w.e.f. 1-6-2015). 

695 

 
                                                           
234C. Interest for deferment of advance tax.—1[(1) Where in any financial year,— 

2[(a) an assessee, other than 3[the assessee referred to in clause (b)], who is liable to pay advance 

tax under section 208 has failed to pay such tax or— 

(i) the advance tax paid by such assessee on its current income on or before  the 15th day of 
June is less  than fifteen  per  cent.  of the tax due  on  the  returned income  or  the amount  of  such 
advance tax paid on or before the 15th day of September is less than forty-five per cent. of the tax 
due on the returned income or the amount of such advance tax paid on or before the 15th day of 
December  is  less  than  seventy-five  per  cent.  of  the  tax  due  on  the  returned  income,  then,  the 
assessee shall be liable to pay simple interest at the rate of one per cent. per month for a period of 
three  months  on  the  amount  of  the  shortfall  from  fifteen  per  cent  or  forty-five  per  cent.  or 
seventy-five per cent., as the case may be, of the tax due on the returned income; 

(ii) the advance tax paid by the assessee on the current income on or before the 15th day of 
March is less than the tax due on the returned income, then, the assessee shall be liable to pay 
simple interest at the rate of one per cent. on the amount of the shortfall from the tax due on the 
returned income:] 

Provided that if the advance tax paid by the assessee on the current income, on or before the 
15th day of June or the 15th day of September, is not less than twelve per cent or, as the case may 
be, thirty-six per cent. of the tax due on the returned income, then, the assessee shall not be liable 
to pay any interest on the amount of the shortfall on those dates;] 

(b)  4[5[an  assessee  who  declares  profits  and  gains  in  accordance  with  the  provisions  of  
sub-section  (1)  of section  44AD or  sub-section  (1)  of section  44ADA,  as  the  case  may  be],  who  is 
liable to pay advance tax under section 208 has failed to pay such tax or the advance tax paid by the 
assessee  on  its  current  income  on  or  before  the  15th  day  of  March  is  less  than  the  tax  due  on  the 
returned income, then, the assessee shall be liable to pay simple interest at the rate of one per cent on 
the amount of the shortfall from the tax due on the returned income:] 

6[Provided that nothing contained in this sub-section shall apply to any shortfall in the payment of the 
tax  due  on  the  returned  income  where  such  shortfall  is  on  account  of  under-estimate  or  failure  to 
estimate— 

(a) the amount of capital gains; or 

(b) income of the nature referred to in sub-clause (ix) of clause (24) of 7[section 2; or] 

8[(c)  income  under  the  head  “Profits  and  gains  of  business  or  profession”  in  cases  where  the 

income accrues or arises under the said head for the 9[first time; or]] 

10[(d) income of the nature referred to in sub-section (1) of section 115BBDA,] 

1. Subs. by Act 32 of 1994, s. 45, for certain words (w.e.f. 1-4-1995). 
2. Subs. by Act 28 of 2016, s. 91, for clause (a) (w.e.f. 1-6-2016). 
3. Subs. by Act 7 of 2017, s. 75, for “an eligible assessee in respect of the eligible business referred to in section 44AD”  

(w.e.f. 1-4-2017). 

4. Subs. by Act 28 of 2016, s. 91, for certain words (w.e.f. 1-6-2016). 
5. Subs. by Act 7 of 2017, s. 75, for “an eligible assessee in respect of the eligible business referred to in section 44AD”  

(w.e.f. 1-4-2017). 

6. Ins. by Act 3 of 1989, s. 40 (w.e.f. 1-4-1989). 
7. Subs. by Act 28 of 2016, s. 91, for “section 2” (w.e.f. 1-6-2016). 
8. Ins. by s. 91, ibid. (w.e.f. 1-6-2016).  
9. Subs. by Act 7 of 2017, s. 75, for “first time,” (w.e.f. 1-4-2017).  
10. Ins. by s. 75, ibid (w.e.f. 1-4-2017). 

696 

 
                                                           
and  the  assessee  has  paid  the  whole  of  the  amount  of  tax  payable  in  respect  of  income  referred  to  in 
clause (a) 1[or clause (b) or clause (c) 2[or clause (d)]], as the case may be, had such income been a part of 
the total income, as part of the  3[remaining instalments of advance tax which are due or where no such 
instalments are due], by the 31st day of March of the financial year:] 

4[Provided  further that  nothing  contained  in  this  sub-section  shall  apply  to  any  shortfall  in  the 
payment of the tax due on the returned income where such shortfall is on account of increase in the rate of 
surcharge  under  section  2  of  the  Finance  Act,  2000  (10  of  2000),  as  amended  by  the  Taxation  Laws 
(Amendment) Act, 2000 (1 of 2001), and the assessee has paid the amount of shortfall, on or before the 
15th day of March, 2001 in respect of the instalment of advance tax due on the 15th day of June, 2000, 
the 15th day of September, 2000 and the 15th day of December, 2000:] 

5[Provided also that nothing contained in this sub-section shall apply to any shortfall in the payment 
of  the  tax  due  on  the  returned  income  where  such  shortfall  is  on  account  of  increase  in  the  rate  of 
surcharge  under  section  2  of  the  Finance  Act,  2000  (10  of  2000)  as  amended  by  the  Taxation  Laws 
(Amendment) Act, 2001 (4 of 2001) and the assessee has paid the amount of shortfall on or before the 
15th day of March, 2001 in respect of the instalment of advance tax due on the 15th day of June, 2000, 
the 15th day of September, 2000 and 15th day of December, 2000.] 

6[Explanation.—In  this  section,  “tax  due  on  the  returned  income”  means  the  tax  chargeable  on  the 
total  income  declared  in  the  return  of  income  furnished  by  the  assessee  for  the  assessment  year 
commencing on the 1st day of April immediately following the financial year in which the advance tax is 
paid or payable, as reduced by the amount of,— 

(i) any tax deductible or collectible at source in accordance with the provisions of Chapter XVII 
on  any  income  which is  subject to  such deduction  or  collection and  which  is  taken  into  account in 
computing such total income; 

(ii) any relief of tax allowed under section 90 on account of tax paid in a country outside India; 

(iii)  any  relief  of  tax  allowed  under section  90A on  account  of  tax  paid  in  a  specified  territory 

outside India referred to in that section; 

(iv) any deduction, from the Indian income-tax payable, allowed under section 91, on account of 

tax paid in a country outside India; and 

(v)  any  tax  credit  allowed  to  be  set  off  in  accordance  with  the  provisions  of section 

115JAA 7[or section 115JD].] 

(2)  The  provisions  of  this  section  shall  apply  in  respect  of  assessments  for  the  assessment  year 

commencing on the 1st day of April, 1989 and subsequent assessment years.]] 

1. Subs. by Act 28 of 2016, s. 91, for “or clause (b)” (w.e.f. 1-6-2016). 
2. Ins. by Act 7 of 2017, s. 75 (w.e.f. 1-4-2017). 
3. Subs. by Act 33 of 1996, s. 54, for “instalment of advance tax which is immediately due or where no such instalment is so 

due” (w.e.f. 1-4-1997). 

4. Ins. by Act 1 of 2001, s. 4 (w.e.f. 4-1-2001). 
5. Ins. by Act 4 of 2001, s. 7 (w.e.f 3-2-2001). 
6. Subs. by Act 21 of 2006, s. 50, for the Explanation (w.e.f. 1-4-2007). 
7. Ins. by Act 23 of 2012, s. 87 (w.e.f. 1-4-2013). 

697 

                                                           
1[234D. Interest on excess refund.—(1) Subject to the other provisions of this Act, where any refund 

is granted to the assessee under sub-section (1) of section 143, and— 

(a) no refund is due on regular assessment; or 

(b) the amount refunded under sub-section (1) of section 143 exceeds the amount refundable on 

regular assessment, 

the assessee shall be liable to pay simple interest at the rate of  2[one-half per cent.] on the whole or the 
excess amount so refunded, for every month or part of a month comprised in the period from the date of 
grant of refund to the date of such regular assessment. 

(2)  Where,  as  a  result  of  an  order  under section  154 or section  155 or section  250 or section 
254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission 
under  sub-section  (4)  of section  245D,  the  amount  of  refund  granted  under  sub-section  (1)  of section 
143 is  held  to  be  correctly  allowed,  either  in  whole  or  in  part,  as  the  case  may  be,  then,  the  interest 
chargeable, if any, under sub-section (1) shall be reduced accordingly. 

3[Explanation 1].—Where, in relation to an assessment year, an assessment is made for the first time 
under section 147 or section 153A, the assessment so made shall be regarded as a regular assessment for 
the purposes of this section.] 

4[Explanation 2.—For the removal of doubts, it is hereby declared that the provisions of this section 
shall also apply to an assessment year commencing before the 1st day of June, 2003 if the proceedings in 
respect of such assessment year is completed after the said date.] 

5[G.—Levy of fee in certain cases 

234E. Fee for default in furnishing statements.—(1) Without prejudice to the provisions of the Act, 
where  a  person  fails  to  deliver  or  cause  to  be  delivered  a  statement  within  the  time  prescribed  in  
sub-section (3) of section 200 or the proviso to sub-section (3) of section 206C, he shall be liable to pay, 
by way of fee, a sum of two hundred rupees for every day during which the failure continues. 

(2) The amount of fee referred to in sub-section (1) shall not exceed the amount of tax deductible or 

collectible, as the case may be. 

(3) The amount of fee referred to in sub-section (1) shall be paid before delivering or causing to be 
delivered a statement in accordance with sub-section (3) of section 200 or the proviso to sub-section (3) 
of section 206C. 

(4)  The  provisions  of  this  section  shall  apply  to  a  statement  referred  to  in  sub-section  (3)  of  
section  200 or  the  proviso  to  sub-section  (3)  of section  206C which  is  to  be  delivered  or  caused  to  be 
delivered for tax deducted at source or tax collected at source, as the case may be, on or after the 1st day 
of July, 2012.] 

1. Ins. by Act 32 of 2003, s. 91 (w.e.f. 1-6-2003). 

2. Subs. by Act 54 of 2003, s. 15, for “two-third per cent.” (w.e.f. 8-9-2003). 

3. The Explanation numbered as Explanation 1 by Act 23 of 2012, s. 88 (w.e.f. 1-6-2003). 

4. Ins. by s. 88, ibid. (w.e.f. 1-6-2003). 

5. Ins. by s. 89, ibid. (w.e.f. 1-7-2012). 

698 

                                                           
1[234F. Fee for default in furnishing return of income.—(1) Without prejudice to the provisions of 
this Act, where a person required to furnish a return of income under section 139, fails to do so within the 
time prescribed in sub-section (1) of the said section, he shall pay, by way of fee, a sum of,— 

(a) five thousand rupees, if the return is furnished on or before the 31st day of December of the 

assessment year; 

(b) ten thousand rupees in any other case: 

Provided that if the total income of the person does not exceed five lakh rupees, the fee payable 

under this section shall not exceed one thousand rupees. 

(2) The provisions of this section shall apply in respect of return of income required to be furnished 

for the assessment year commencing on or after the 1st day of April, 2018.] 

CHAPTER XVIII 

RELIEF RESPECTING TAX ON DIVIDENDS IN CERTAIN CASES 

235. Relief 

to 

shareholders 

in  respect  of  agricultural 

income-tax  attributable 

to             

dividends.—[Omitted  by  the  Finance  (No.  2)  (Act,  32  of  1971),  s.  28  (w.e.f.  1-4-1972).  Prior  to  its 
omission, it was amended by the Taxation Laws (Amendment) (Act, 42 of 1970), s. 41 (w.e.f. 1-4-1971) 
and with retrospective effect from 1-4-1962, the Finance Act, (13 of 1966), s. 27 (w.e.f. 1-4-1966) and the 
Finance Act, 10 of 1965, s. 55 (w.e.f. 1-4-1965).] 

236. Relief  to  company  in  respect  of  dividend  paid  out  of  past  taxed  profits.—(1)  Where              

in  respect  of  any  previous  year  relevant  to  the  assessment  year  commencing  after  the  31st  day  of      
March,  1960,  an  Indian  company  or  a  company  which  has  made  the  prescribed  arrangements  for  the 
declaration and payment of dividends within India, pays any dividend wholly or partly out of its profits 
and  gains  actually  charged  to  income-tax  for  any  assessment  year  ending  before  the  1st  day  of  April, 
1960,  and  deducts  tax  therefrom  in  accordance  with  the  provisions  of  Chapter  XVIIB,  credit  shall  be 
given to the company against the income-tax, if any, payable by it on the profits and gains of the previous 
year  during  which  the  dividend  is  paid,  of  a  sum  calculated  in  accordance  with  the  provisions  of  sub-
section  (2),  and,  where  the  amount  of  credit  so  calculated  exceeds  the  income-tax  payable  by  the 
company as aforesaid, the excess shall be refunded. 

(2) The amount of income-tax to be given as credit under sub-section (1) shall be a sum equal to ten 
per cent of so much of the dividends referred to in sub-section (1) as are paid out of the profits and gains 
actually charged to income-tax for any assessment year ending before the 1st day of April, 1960. 

Explanation  1.—For  the  purposes  of  this  section,  the  aggregate  of  the  dividends  declared  by  a 
company  in  respect  of  any  previous  year  shall  be  deemed  first  to  have  come  out  of  the  distributable 
income  of  that  previous  year  and  the  balance,  if  any,  out  of  the  undistributed  part  of  the  distributable 
income  of  one  or  more  previous  years  immediately  preceding  that  previous  year  as  would  be  just 
sufficient  to  cover  the  amount  of  such  balance  and  as  has  not  likewise  been  taken  into  account  for 
covering such balance of any other previous year. 

1. Ins. by Act 7 of 2017, s. 76 (w.e.f. 1-4-2018). 

699 

                                                           
Explanation  2.—The  expression  “distributable  income  of  any  previous  year”  shall  mean  1[the  total 
income (as computed before making any deduction under Chapter VIA) assessed for that year] as reduced 
by— 

(i) the amount of tax payable by the company in respect of 2[its total income]; 

(ii) the amount of any other tax levied under any law for the time being in force on the company 
by the Government or by a local authority in excess of the amount, if any, which has been allowed in 
computing the total income; 

3[(iii)  any  sum  with  reference  to  which  a  deduction  is  allowable  to  the  company  under  the 

provisions of section 80G;  and] 

(iv)  in  the  case  of  a  banking  company,  the  amount  actually  transferred to  a  reserve  fund  under 

section 17 of the Banking Companies Act, 1949 (10 of 1949), 

and as increased by— 

(a)  any  profits  and  gains  or  receipts  of  the  company,  not  included  in  its  4[total  income                   

(as computed before making any deduction under Chapter VIA)]; and 

(b)  any  amountattributable  to  any  allowance  made  in  computing  the  profits  and  gains  of  the 
company for purposes of assessment, which the company has not taken into account in its profit and 
loss account. 

5[236A. Relief  to  certain  charitable  institutions  or  funds  in  respect  of  certain  dividends.—(1) 
6[Where  seventy-five  per  cent  of  the  share  capital  of  any  company  is  throughout  the  previous  year 
beneficially held by an institution or fund established in India for a charitable purpose the income from 
dividend whereof is exempt under section 11], credit shall be given to the institution or fund against the 
tax,  if  any,  payable  by  it,  of  a  sum  calculated  in  accordance  with  the  provisions  of  sub-section  (2),  in 
respect of its income from dividends (other than dividends on preference shares) declared or distributed 
during  the  previous  year  relevant  to  any  assessment  year  beginning  on  or  after  the  7[1st  day  of  April, 
1966] 8[by such company], and where the amount of credit so calculated exceeds the tax, if any, payable 
by the said institution or fund, the excess shall be refunded. 

9[(2) The amount to be given as credit under sub-section (1) shall be a sum which bears to the amount 
of the tax payable by the company under the provisions of the annual Finance Act with reference to the 
relevant  amount of  distributions  of  dividends  by  it  the  same  proportion  as  the amount  of the  dividends 
(other than dividends on preference shares) received by the institution or fund from the company bears to 
the total amount of dividends (other than dividends on preference shares) declared or distributed by the 
company during the previous year. 

1. Subs. by Act 20 of 1967, s. 33 and the Third Schedule for “the total income assessed for that year” (w.e.f. 1-4-1967).  
2. Subs. by s. 33 and the Third Schedule, ibid., for “the said total income” (w.e.f. 1-4-1968).  
3. Subs. by s. 33 and the Third Schedule,ibid., for clause (iii) (w.e.f. 1-4-1968). 
4. Subs by s. 33 and the Third Schedule, ibid.,for “total income” (w.e.f. 1-4-1968). 
5. Ins. by Act 31 of 1964, s. 11(w.e.f. 1-4-1964). 
6. Subs. by Act 11 of 1987, s. 74, for “In the case of an institution or fund referred to in clause (iii) of sub-section (2) of 

section 104” (w.e.f. 1-4-1988). 

7. Subs. by Act 13 of 1966, s. 28, for “1st day of April, 1964” (w.e.f. 1-4-1966). 
8. Subs. by Act 11 of 1987, s. 74, for “by such a company as is referred to in the said clause” (w.e.f. 1-4-1988).  
9. Subs. by Act 13 of 1966, s. 28, for sub-section (2) (w.e.f. 1-4-1966). 

700 

                                                           
Explanation.—In  sub-section  (2)  of this  section  and  in  section  280ZB,  the expression  “the  relevant 
amount of distributions of dividends” has the meaning assigned to it in the Finance Act of the relevant 
year.]] 

CHAPTER XIX 

REFUNDS 

237. Refunds.—If any person satisfies the 1[AssessingOfficer] that the amount of tax paid by him or 
on his behalf or treated as paid by him or on his behalf for any assessment year exceeds the amount with 
which he is properly chargeable under this Act for that year, he shall be entitled to a refund of the excess. 

238. Person entitled to claim refund in certain special cases.—(1) Where the income of one person 
is included under any provision of this Act in the total income of any other person, the latter alone shall 
be entitled to a refund under this Chapter in respect of such income. 

2[(1A) Where the value of fringe benefits provided or deemed to have been provided by one employer 
is included under any provisions of Chapter XII-H in the value of fringe benefits provided or deemed to 
have been provided by any other employer, the latter alone shall be entitled to a refund under this Chapter 
in respect of such fringe benefits.] 

(2)  Where  through  death,  incapacity,  insolvency,  liquidation  or  other  cause,  a  person  is  unable  to 
claim or receive any refund due to him, his legal representative or the trustee or guardian or receiver, as 
the  case  may  be,  shall  be entitled to  claim  or  receive  such refund  for the  benefit  of such  person  or  his 
estate. 

239. Formof claim for refund and limitation.—(1) Every claim for refund under this Chapter shall 

be made in the prescribed form and verified in the prescribed manner. 

3[(2)  No  such  claim  shall  be  allowed,  unless  it  is  made  within  the  period  specified  hereunder,     

namely:— 

(a)  where  the  claim  is  in  respect  of  income  which  is  assessable  for  any  assessment  year 
commencing on or before the 1st day of April, 1967, four years from the last day of such assessment 
year; 

(b)  where  the  claim  is  in  respect  of  income  which  is  assessable  for  the  assessment  year 

commencing on the first day of April, 1968, three years from the last day of the assessment year; 

(c)  where  the  claim  is  in  respect  of  income  which  is  assessable  for  any  other  assessment  year, 

4[one year] from the last day of such assessment year;] 

5[(d) where the claim is in respect of fringe benefits which are assessable for any assessment year 

commencing  on  or  after  the  first  day  of  April,  2006,  one  year  from  the  last  day  of  such               
assessment year.] 

240.  Refund on appeal, etc.—Where, as a result of any order passed in appeal or other proceeding 
under this Act, refund of any amount becomes due to the assessee, the 1[AssessingOfficer] shall, except as 
otherwise provided in this Act, refund the amount to the assessee without his having to make any claim in 
that behalf: 

1. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988).    
2. Ins. by Act 18 of 2005, s. 54, (w.e.f.1-4-2006). 
3. Subs. by Act 19 of 1968, s. 18, for sub-section (2) (w.e.f. 1-4-1968). 
4. Subs. by Act 18 of 1992, s. 82, for “two years” (w.e.f. 1-4-1993). 
5. Ins. by Act 18 of 2005, s. 55 (w.e.f. 1-4-2006). 

701 

                                                           
1[Provided that where, by the order aforesaid,— 

 (a)  an  assessment  is  set  aside  or  cancelled  and  an  order  of  fresh  assessment  is  directed  to  be 

made, the refund, if any, shall become due only on the making of such fresh assessment; 

 (b) the assessment is annulled, the refund shall become due only of the amount, if any, of the tax 

paid in excess of the tax chargeable on the total income returned by the assessee.] 

241. [Power to withhold refund in certain cases. ]—Omitted by the Finance Act, 14 of 2001, s. 81 

(w.e.f. 1-6-2001). 

2[241A. Withholding  of  refund  in  certain  cases.—For  every  assessment  year  commencing  on  or 
after  the  1st  day  of  April,  2017,  where  refund  of  any  amount  becomes  due  to  the  assessee  under  the 
provisions of sub-section (1) of section 143 and the Assessing Officer is of the opinion, having regard to 
the fact that a notice has been issued under sub-section (2) of  section 143 in respect of such return, that 
the  grant  of  the  refund  is  likely  to  adversely  affect  the  revenue,  he  may,  for  reasons  to  be  recorded  in 
writing and with the previous approval of the Principal Commissioner or Commissioner, as the case may 
be, withhold the refund up to the date on which the assessment is made.] 

242. Correctness of assessment not to be questioned. — In a claim under this Chapter, it shall not 
be open to the assessee to question the correctness of any assessment or other matter decided which has 
become final and conclusive or ask for a review of the same, and the assessee shall not be entitled to any 
relief on such claim except refund of tax wrongly paid or paid in excess. 

243.  Interest  on  delayed  refunds.—3[(1)  If  the  4[Assessing  Officer]  does  not  grant  the         

refund,— 

(a)  in  any  case  where  the  total  income  of  the  assessee  does  not  consist  solely  of  income  from 
interest on securities or dividends, within three months from the end of the month in which the total 
income is determined under this Act, and 

(b)  in  any  other  case,  within  three  months  from  the  end  of  the  month  in  which  the  claim  for 

refund is made under this Chapter, 

the  Central  Government  shall  pay  the  assessee  simple  interest  at  5[fifteen  per  cent.]  per  annum  on  the 
amount  directed  to  be  refunded  from  the  date  immediately  following  the  expiry  of  the  period  of  three 
months aforesaid to the date of the order granting the refund. 

Explanation.—If  the  delay  in  granting  the  refund  within  the  period  of  three  months  aforesaid  is 
attributable to the assessee, whether wholly or in part, the period of the delay attributable to him shall be 
excluded from the period for which interest is payable.] 

(2)  Where  any  question  arises  as  to  the  period  to  be  excluded  for  the  purposes  of  calculation  of 
interest under the provisions of this section, such question shall be determined by the  6[7[Principal Chief 
Commissioner or Chief Commissioner] or  8[Principal Commissioner or Commissioner]] whose decision 
shall be final. 

9[(3) The  provisions  of this  section  shall  not apply  in respect  of  any  assessment for the  assessment 

year commencing on the 1st day of April, 1989 or any subsequent assessment years.] 

1. The proviso added by Act 4 of 1988, s. 95 (w.e.f. 1-4-1989). 
2. Ins. by Act 7 of 2017, s. 77 (w.e.f. 1-4-2017). 
3. Subs. by Act 42 of 1970, s. 42, for sub-section (1) (w.e.f. 1-4-1971). 
4. Subs. by Act 4 of 1988, s. 2, for “Income-tax” (w.e.f. 1-4-1988). 
5. Subs. by Act 67 of 1984, s. 24, for “twelve per cent.” (w.e.f. 1-10-1984).  
6. Subs. by Act 4 of 1988, s. 2 for “Commissioner” (w.e.f. 1-4-1988). 
7. Subs. by Act 25 of 2014, s. 4 for “Chief Commissioner” (w.e.f. 1-6-2013). 
8.  Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 
9. Ins. by Act 4 of 1988, s. 96, (w.e.f. 1-4-1989). 

702 

                                                           
244. Interest on refund where no claim is needed.—(1) Where a refund is due to the assessee in 
pursuance  of  an  order  referred  to  in section  240 and  the  1[Assessing  Officer]  does  not  grant  the  refund 
2[within a period of three months from the end of the month in which such order is passed], the Central 
Government shall pay to the assessee simple interest at  3[fifteen per cent.] per annum on the amount of 
refund due from the date immediately following the expiry of  4[the period of three months aforesaid] to 
the date on which the refund is granted. 

5[(1A) Where the whole or any part of the refund referred to in sub-section (1) is due to the assessee, 
as a result of any amount having been paid by him after the 31st day of March, 1975, in pursuance of any 
order of assessment or penalty and such amount or any part thereof having been found in appeal or other 
proceeding  under this  Act to  be  in excess of the amount  which such assessee is  liable  to  pay  as tax or 
penalty,  as  the  case  may  be,  under  this  Act,  the  Central  Government  shall  pay  to  such  assessee  simple 
interest at the rate specified in sub-section (1) on the amount so found to be in excess from the date on 
which such amount was paid to the date on which the refund is granted : 

Provided that where the amount so found to be in excess was paid in instalments, such interest shall 
be payable on the amount of each such instalment or any part of such instalment, which was in excess, 
from the date on which such instalment was paid to the date on which the refund is granted : 

Provided  further that  no  interest  under  this  sub-section  shall  be  payable  for  a  period  of  one  month 

from the date of the passing of the order in appeal or other proceeding: 

Provided  also that  where  any  interest  is  payable  to  an  assessee  under  this  sub-section,  no  interest 

under sub-section (1) shall be payable to him in respect of the amount so found to be in excess.] 

6[(1B) Where refund of any amount becomes due to the deductor in respect of any amount paid to the 
credit  of  the  Central  Government  under  Chapter  XVIIB,  such  deductor  shall  be  entitled  to  receive,  in 
addition to the said amount, simple interest thereon calculated at the rate of one-half per cent. for every 
month or part of a month comprised in the period, from the date on which–– 

(a) claim for refund is made in the prescribed form; or 

(b) tax is paid, where refund arises on account of giving effect to an order under section 250 or 

section 254 or section 260 or section 262,  

to the date on which the refund is granted.] 

(2) Where a refund is withheld under the provisions of section 241, the Central Government shall pay 
interest at the aforesaid rate on the amount of refund ultimately determined to be due as a result of the 
appeal or further proceeding for the period commencing after the expiry of 7[three months from the end of 
the month in which the order referred to in section 241 is passed] to the date the refund is granted. 

1. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2. Subs. by Act 42 of 1970, s. 43, for “six months from the date of such order” (w.e.f. 1-4-1971). 
3. Subs. by Act 67 of 1984, s. 24, for “twelve per cent.” (w.e.f. 1-10-1984). 
4. Subs. by Act 42 of 1970, s. 43, for “the period of six moths aforesaid” (w.e.f. 1-4-1971). 
5. Ins. by Act 41 of 1975, s. 56 (w.e.f. 1-10-1975). 
6. Ins. by Act 7 of 2017, s. 78 (w.e.f. 1-4-2017). 
7. Subs. by Act 42 of 1970, s. 43, for “six months from the date of the order referred to in section 241” (w.e.f. 1-4-1971). 

703 

                                                           
1[(3) The  provisions  of this  section  shall  not apply  in respect  of  any  assessment for the  assessment 

year commencing on the 1st day of April, 1989, or any subsequent assessment years.] 

2[244A. Interest on refunds.—(1) 3[Where refund of any amount becomes due to the assessee under 
this Act], he shall, subject to the provisions of this section, be entitled to receive, in addition to the said 
amount, simple interest thereon calculated in the following manner, namely:— 

4[(a) where the refund is out of any tax collected at source under section 206C or paid by way of 
advance tax or treated as paid under section 199, during the financial year immediately preceding the 
assessment year, such interest shall be calculated at the rate of one-half per cent for every month or 
part of a month comprised in the period,— 

(i) from the 1st day of April of the assessment year to the date on which the refund is granted, 

if  the  return  of  income  has  been  furnished  on  or  before  the  due  date  specified  under                  
sub-section (1) of section 139; or 

(ii) from the date of furnishing of return of income to the date on which the refund is granted, 

in a case not covered under sub-clause (i); 

(aa) where the refund is out of any tax paid under section 140A, such interest shall be calculated 
at the rate of 5[one-half per cent.] for every month or part of a month comprised in the period, from 
the date of furnishing of return of income or payment of tax, whichever is later, to the date on which 
the refund is granted: 

Provided that no interest under clause (a) or clause (aa) shall be payable, if the amount of refund 
is less than ten per cent of the tax as determined under sub-section (1) of section 143 or on regular 
assessment;] 

 (b) in any other case, such interest shall be calculated at the rate of 5[one-half per cent.] for every 
month or part of a month comprised in the period or periods from the date or, as the case may be, 
dates of payment of the tax or penalty to the date on which the refund is granted. 

Explanation.—For the purposes of this clause, “date of payment of tax or penalty” means the date on 
and from which the amount of tax or penalty specified in the notice of demand issued under section 156 is 
paid in excess of such demand. 

6[(1A)  In  a  case  where  a  refund  arises  as  a  result  of  giving  effect  to  an  order  under section 
250 or section 254 or section 260 or section 262 or section 263 or section 264, wholly or partly, otherwise 
than by making a fresh assessment or reassessment, the assessee shall be entitled to receive, in addition to 
the interest payable under sub-section (1), an additional interest on such amount of refund calculated at 
the rate of three per cent per annum, for the period beginning from the date following the date of expiry of 
the time allowed under sub-section (5) ofsection 153 to the date on which the refund is granted.] 

1. Ins. by Act 4 of 1988, s. 97 (w.e.f. 1-4-1989). 
2. Ins. by s. 98, ibid. (w.e.f. 1-4-1989). 
3.  Subs.  by  Act  3  of  1989,  s.  41,  for  “Where,  in  pursuance  of  any  order  passed  under  this  Act,  refund  of  any  amount 

becomes due to the assessee” (w.e.f. 1-4-1989). 

4. Subs. by Act 28 of 2016, s. 92, for clause (a) (w.e.f. 1-6-2016). 
5. Subs. by Act 54 of 2003, s. 16, for “two-third per cent.” (w.e.f. 8-9-2003). 
6. Ins. by Act 28 of 2016, s. 92 (w.e.f. 1-6-2016).  

704 

                                                           
1[(1B) Where refund of anyamount becomes due to the deductor in respect of any amount paid to the 
credit  of  the  Central  Government  under  Chapter  XVII-B,  such  deductor  shall  be  entitled  to  receive,  in 
addition to the said amount, simple interest thereon calculated at the rate of one-half per cent for every 
month or part of a month comprised in the period, from the date on which— 

(a) claim for refund is made in the prescribed form; or 

(b)  tax  is  paid,  where  refundarises  on  account  of  giving  effect  to  an  order  under section 

250 or section 254 or section 260 or  section 262, 

to the date on which the refund is granted.] 

(2) If the proceedings resulting in the refund are delayed for reasons attributable to the assessee  1[or 
the deductor, as the case may be,] whether wholly or in part, the period of the delay so attributable to him 
shall be excluded from the period for which interest is payable 2[under sub-section (1) or (1A)] 1[or (1B)], 
and where any question arises as to the period to be excluded, it shall be decided by the 3[Principal Chief 
Commissioner  or  Chief  Commissioner]  or  4[Principal  Commissioner  or  Commissioner]  whose  decision 
thereon shall be final. 

(3)  Where,  as  a 

5[result  of  an  order  under 

sub-section 

(3)  of section  115WE or                                   

section  115WF or section  115WG or]  6[sub-section  (3)  of section  143 or section  144 or]  section  147 or 
section  154 or section  155 or section  250 or section  254 or section  260 or section  262 or section 
263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the 
amount on which interest was payable under sub-section (1) has been increased or reduced, as the case 
may be, the interest shall be increased or reduced accordingly, and in a case where the interest is reduced, 
the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the 
amount of the excess interest paid and requiring him to pay such amount; and such notice of demand shall 
be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly. 

(4)  The  provisions  of  this  section  shall  apply  in  respect  of  assessments  for  the  assessment  year 

commencing on the 1st day of April, 1989, and subsequent assessment years:] 

7[Provided that  in  respect  of  assessment  of  fringe  benefits,  the  provisions  of  this  sub-section  shall 

have effect as if for the figures “1989”, the figures “2006” had been substituted.] 

245. Set off of refunds against tax remaining payable.—Where under any of the provisions of this 
Act,  a  refund  is  found  to  be  due  to  any  person,  the  8[Assessing  Officer],  9[Deputy  Commissioner 
(Appeals)] 10[, or the Commissioner (Appeals) or Commissioner or  11[3[Principal Chief Commissioner or 
Chief Commissioner] or  4[Principal Commissioner or Commissioner]]], as the case may be, may, in lieu 
of payment of the refund, set off the amount to be refunded or any part of that amount, against the sum, if 
any, remaining payable under this Act by the person to whom the refund is due, after giving an intimation 
in writing to such person of the action proposed to be taken under this section. 

1. Ins. by Act 7 of 2017, s. 78 (w.e.f. 1-4-2017). 
2. Ins. by Act 28 of 2016, s. 92 (w.e.f. 1-6-2016). 
3. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). 
4. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 
5. Subs. by Act 18 of 2005, s. 56, for “result of an order” (w.e.f. 1-4-2006). 
6. Ins. by Act 3 of 1989, s. 41(w.e.f. 1-4-1989). 
7.  The proviso ins. by Act 18 of 2005, s. 56 (w.e.f. 1-4-2006). 
8. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
9. Subs. by s. 2, ibid., “Appellate Assistant Commissioner” (w.e.f. 1-4-1988). 
10. Ins. by Act 29 of 1977, s. 39 and the Fifth Schedule (w.e.f. 10-7-1978). 
11. Subs. by Act 4 of 1988, s. 2, for “Commissioner” (w.e.f. 1-4-1988). 

705 

                                                           
1[CHAPTER XIXA 

SETTLEMENTOF CASES 

2[245A. Definitions.—In this Chapter, unless the context otherwise requires,— 

(a) “Bench” means a Bench of the Settlement Commission; 

3[(b) “case” means any proceeding for assessment under this Act, of any person in respect of any 
assessment year or assessment years which may be pending before an Assessing Officer on the date 
on which an application under sub-section (1) of section 245C is made. 

4* 

* 

* 

* 

* 

Explanation.—For the purposes of this clause— 

5[(i)  a  proceeding  for  assessment  or  reassessment  or  recomputation  under section  147 shall  be 

deemed to have commenced— 

(a) from the date on which a notice under section 148 is issued for any assessment year; 

(b)  from  the  date  of  issuance  of  the  notice  referred  to  in  sub-clause  (a),  for  any  other 
assessment year or assessment years for which a notice under section 148 has not been issued, but 
such notice could have been issued on such date, if the return of income for the other assessment 
year  or  assessment  years  has  been  furnished  under section  139 or  in  response  to  a  notice 
under section 142;] 

6* 

* 

* 

* 

* 

7[(iii)  a  proceeding  for  making  fresh  assessment 

in  pursuance  of  an  order  under  
section 254 or section 263 or section 264, setting aside or cancelling an assessment shall be deemed 
to have commenced from the date on which such order, setting aside or cancelling an assessment was 
passed;] 

8[(iiia) a proceeding for assessment or reassessment for any of the assessment years, referred to in 
clause  (b)  of  sub-section  (1)  of section  153A in  case  of  a  person  referred  to  in section  153Aor  
section  153C,  shall  be  deemed  to  have  commenced  on  the  date  of  issue  of  notice  initiating  such 
proceeding and concluded on the date on which the assessment is made;] 

(iv)  a  proceeding  for  assessment  for  any  assessment  year,  other  than  the  proceedings  of 
assessment or reassessment referred to in 9[clause (i) or clause (iii) or clause (iiia)], shall be deemed 
to  have  commenced   10[from  the  date  on  which  the  return  of  income  for  that  assessment  year  is 
furnished under section 139 or in response to a notice served under section 142 and concluded on the 
date on which the assessment is made; or on the expiry of 11[the time specified for making assessment 
under sub-section (1) of section 153], in case where no assessment is made];] 

(c) “Chairman” means the Chairman of the Settlement Commission; 

1. Ins. by Act 41 of 1975, s. 57 (w.e.f. 1-4-1976). 
2. Subs. by Act 11 of 1987, s. 57, for section 245A (w.e.f. 1-6-1987). 
3. Subs. by Act 22 of 2007, s. 62, for clause (b) (w.e.f. 1-6-2007). 
4. The proviso omitted by Act 25 of 2014, s. 65 (w.e.f. 1-10-2014). 
5. Subs. by Act 20 of 2015, s. 58, for clause (i) (w.e.f. 1-6-2015). 
6. Clause (ii) omitted by Act 14 of 2010, s. 45 (w.e.f. 1-6-2010). 
7. Subs. by Act 25 of 2014, s. 65, for clause (iii) (w.e.f. 1-10-2014). 
8. Ins. by Act 14 of 2010, s. 45 (w.e.f. 1-6-2010). 
9.  Subs.  by  Act  25  of  2014,  s.  65,  for  “clause  (i)  or  clause  (iv)  of  the  proviso  or  clause  (iiia)  of  the  Explanation”  

(w.e.f. 1-10-2014). 

10. Subs. by Act 20 of 2015, s. 58, for “from the 1st day of the assessment year  and concluded on the date on which the 

assessment is made” (w.e.f. 1-6-2015). 

11. Subs. by Act 7 of 2017, s. 79, for “two years from the end of the relevant assessment year” (w.e.f. 1-4-2017). 

706 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
(d) “income-tax authority” means an income-tax authority specified in section 116; 

(e) “Member” means a Member of the Settlement Commission, and includes the Chairman and a 

Vice-Chairman; 

(f)  “Settlement  Commission”  means  the  Income-tax  Settlement  Commission  constituted 

under section 245B; 

(g)  “Vice-Chairman”  means  a  Vice-Chairman  of  the  Settlement  Commission  1[and  includes  a 

Member who is senior amongst the Members of a Bench].] 

245B.  Income-tax  Settlement  Commission.—(1)  The  Central  Government  shall  constitute  a 
Commission to be called the Income-tax Settlement Commission  2*** for the settlement of cases under 
this Chapter. 

(2) The Settlement Commission shall consist of a Chairman  3[and as many Vice-Chairmen and other 
members as the Central Government thinks fit] and shall function within the Department of the Central 
Government dealing with direct taxes. 

4* 

* 

* 

* 

* 

(3)  The  Chairman  5[,  Vice-Chairman]  and  other  members  of  the  Settlement  Commission  shall  be 
appointed by the Central Government from amongst persons of integrity and outstanding ability, having 
special knowledge of, and, experience in, problems relating to direct taxes and business accounts: 

Provided that, where a member of the Board is appointed as the Chairman 5[, Vice-Chairman] or as a 

member of the Settlement Commission, he shall cease to be a member of the Board. 

6* 

* 

* 

* 

* 

7[245BA. Jurisdiction and powers of Settlement Commission.—(1) Subject to the other provisions 
of this Chapter, the jurisdiction, powers and authority of the Settlement Commission may be exercised by 
Benches thereof. 

(2) Subject to the other provisions of this section, a Bench shall be presided over by the Chairman or 

a Vice-Chairman and shall consist of two other Members. 

 (3) The Bench for which the Chairman is the Presiding Officer shall be the principal Bench and the 

other Benches shall be known as additional Benches. 

(4) Notwithstanding anything contained in sub-sections (1) and (2), the Chairman may authorise the 
Vice-Chairman  or  other  Member  appointed  to  one  Bench  to  discharge  also  the  functions  of  the  
Vice-Chairman or, as the case may be, other Member of another Bench. 

(5) Notwithstanding anything contained in the foregoing provisions of this section, and subject to any 
rules that may be made in this behalf, when one of the persons constituting a Bench (whether such person 
be  the  Presiding  Officer  or  other  Member  of  the  Bench)  is  unable  to  discharge  his  functions  owing  to 
absence, illness or any other cause or in the event of the occurrence of any vacancy either in the office of 
the  Presiding  Officer  or  in  the  office  of  one  or  the  other  Members  of  the  Bench,  the  remaining  two 
persons may function as the Bench and if the Presiding Officer of the Bench is not one of the remaining 
two persons, the senior among the remaining persons shall act as the Presiding Officer of the Bench: 

1. Ins. by Act 22 of 2007, s. 62 (w.e.f. 1-6-2007). 
2. The brackets  and words ‘(hereafter in this Chapter referred to as “the Settlement Commission”)’ omitted by  Act 11 of 

1987, s. 58 (w.e.f. 1-6-1987). 

3. Subs. by Act 46 of 1986, s. 15, for “and two other members” (w.e.f. 10-9-1986). 
4. Sub-section (2A) omitted by s. 15, ibid. (w.e.f. 10-9-1986). 
5. Ins. by s. 15, ibid (w.e.f. 10-9-1986). 
6. The second proviso omitted by s. 15, ibid. (w.e.f. 10-9-1986). 
7. Ins. by Act 11 of 1987, s. 59 (w.e.f. 1-6-1987). 

707 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
Provided that  if  at  any  stage  of  the  hearing  of  any  such  case  or  matter,  it  appears  to  the  Presiding 
Officer that the case or matter is of such a nature that it ought to be heard of by a Bench consisting of 
three  Members,  the  case  or  matter  may  be  referred  by  the  Presiding  Officer  of  such  Bench  to  the 
Chairman for transfer to such Bench as the Chairman may deem fit. 

1[(5A) Notwithstanding anything contained in the foregoing provisions of this section, the Chairman 
may,  for  the  disposal  of  any  particular  case,  constitute  a  Special  Bench  consisting  of  more  than  three 
Members.] 

(6) Subject to the other provisions of this Chapter, the places at which the principal Bench and the 
additional Benches shall ordinarily sit shall be such as the Central Government may, by notification in the 
Official Gazette, specify 1[and the Special Bench shall sit at a place to be fixed by the Chairman].] 

2[245BB. Vice-Chairman  to  act  as  Chairman  or  to  discharge  his  functions  in  certain 
circumstances.—(1)  In  the  event  of  the  occurrence  of  any  vacancy  in  the  office  of  the  Chairman  by 
reason of his death, resignation or otherwise, the Vice-Chairman or, as the case may be, such one of the 
Vice-Chairmen as the Central Government may, by notification in the Official Gazette, authorise in this 
behalf, shall act as the Chairman until the date on which a new Chairman, appointed in accordance with 
the provisions of this Chapter to fill such vacancy, enters upon his office. 

(2) When the  Chairman  is  unable  to  discharge  his  functions  owing  to  absence, illness  or any  other 
cause,  the  Vice-Chairman  or,  as  the  case  may  be,  such  one  of  the  Vice-Chairmen  as  the  Central 
Government  may,  by  notification  in  the  Official  Gazette,  authorise  in  this  behalf,  shall  discharge  the 
functions of the Chairman until the date on which the Chairman resumes his duties.] 

2[245BC. Power of Chairman to transfer cases from one Bench to another.— On the application  
of  the  assessee  or  the  3[  4[Principal  Chief  Commissioner  or  Chief  Commissioner]  or  5[Principal 
Commissioner  or  Commissioner]]and  after  notice  to  them,  and  after  hearing  such  of  them  as  he  may 
desire  to  be  heard,  or  on  his  own  motion  without  such  notice,  the  Chairman  may  transfer  any  case 
pending before one Bench, for disposal, to another Bench.] 

2[245BD.  Decision to be by majority.— If the Members of a Bench differ in opinion on any point, 
the  point  shall  be  decided  according  to  the  opinion  of  the  majority,  if  there  is  a  majority,  but  if  the 
Members  are  equally  divided,  they  shall  state  the  point  or  points  on  which  they  differ,  and  make  a 
reference to the Chairman who shall either hear the point or points himself or refer the case for hearing on 
such point or points by one or more of the other Members of the Settlement Commission and such point 
or  points  shall  be  decided  according  to  the  opinion  of  the  majority  of  the  Members  of  the  Settlement 
Commission who have heard the case, including those who first heard it.] 

245C. Application for settlement of cases.—6[(1) An assessee may, at any stage of a case relating to 
him, make an application in such form and in such manner as may be prescribed, and containing a full 
and  true  disclosure  of  his  income  which  has  not  been  disclosed  before  the  7[Assessing  Officer],  the 
manner  in  which  such  income  has  been  derived,  the  additional  amount  of  income-tax  payable  on  such 
income and such other particulars as may be prescribed, to the Settlement Commission to have the case 
settled and any such application shall be disposed of in the manner hereinafter provided: 

1. Ins. by Act 49 of 1991, s. 65 (w.e.f. 1-10-1991). 
2. Ins. by Act 11 of 1987, s. 59 (w.e.f. 1-6-1987) 
3. Subs. by Act 4 of 1988, s. 2 for “Commissioner” (w.e.f. 1-4-1988). 
4. Subs. by Act 25 of 2014, s. 4 for “Chief Commissioner” (w.e.f. 1-6-2013). 
5. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 
6. Subs. by Act 67 of 1984, s. 40 for sub-section (1) (w.e.f. 1-10-1984). 
7. Subs. by Act 4 of 1988, s. 2, for “Income tax” (w.e.f. 1-4-1988). 

708 

                                                           
1[Provided that no such application shall be made unless,— 

(i) in a case where proceedings for assessment or reassessment for any of the assessment  years 
referred to in clause (b) of sub-section (1) of section 153A  or clause (b) of sub-section (1) of section 
153B in  case  of  a  person  referred  to  in  section  153A or  section  153C have  been  initiated,  the 
additional  amount  of  income-tax  payable  on  the  income  disclosed  in  the  application  exceeds           
fifty lakh rupees, 

2[(ia) in a case where— 

(A) the applicant is related to the person referred to in clause (i) who has filed an application 

(hereafter in this sub-section referred to as “specified person”); and 

(B) the proceedings for assessment or re-assessment for any of the assessment years referred 

to  in  clause  (b)  of  sub-section  (1)  of  section  153A or  clause  (b)  of  sub-section  (1)  of              
section 153B in case of the applicant, being a person referred to in section 153A or section 153C, 
have been initiated, 

the  additional  amount  of  income-tax  payable  on  the  income  disclosed  in  the  application  exceeds             
ten lakh rupees,] 

(ii) in any other case, the additional amount of income-tax payable on the income disclosed in the 

application exceeds ten lakh rupees, 

and such tax and the interest thereon, which would have been paid under the provisions of this Act had 
the income disclosed in the application been declared in the return of income before the Assessing Officer 
on the date of application, has been paid on or before the date of making the application and the proof of 
such payment is attached with the application.] 

2[Explanation.—For the purposes of clause (ia),— 

(a) the applicant, in relation to the specified person referred to in clause (ia), means,— 

(i) where the specified person is an individual, any relative of the specified person; 

(ii) where the specified person is a company, firm, association of persons or Hindu undivided 
family, any director of the company, partner of the firm, or member of the association or family, 
or any relative of such director, partner or member; 

(iii) any individual who has a substantial interest in the business or profession of the specified 

person, or any relative of such individual; 

(iv) a company, firm, association of persons or Hindu undivided family having a substantial 
interest in the business or profession of the specified person or any director, partner or member of 
such company, firm, association or family, or any relative of such director, partner or member; 

(v) a company, firm, association of persons or Hindu undivided family of which a director, 
partner or member, as the case may be, has a substantial interest in the business or profession of 
the  specified  person;  or  any  director,  partner  or  member  of  such  company,  firm,  association  or 
family or any relative of such director, partner or member; 

(vi) any person who carries on a business or profession,— 

(A)  where  the  specified  person  being  an  individual,  or  any  relative  of  such  specified 

person, has a substantial interest in the business or profession of that person; or 

(B) where the specified person being a company, firm, association of persons or Hindu 
undivided family,  or  any  director  of such  company,  partner  of  such  firm  or  member  of  the 
association or family, or any relative of such director, partner or member, has a substantial 
interest in the business or profession  of that person; 

1. The proviso subs. by Act 14 of 2010, s. 46, (w.e.f. 1-6-2010).  
2. Ins. by Act 8 of 2011, s. 29, (w.e.f. 1-6-2011). 

709 

                                                           
(b) a person shall be deemed to have a substantial interest in a business or profession, if— 

(A)  in  a  case  where  the  business  or  profession  is  carried  on  by  a  company,  such  person  is, 
1[on the date of search], the beneficial owner of shares (not being shares entitled to a fixed rate of 
dividend, whether with or without a right to participate in profits) carrying not less than twenty 
per cent of the voting power; and 

(B) in any other case, such person is, 1[on the date of search], beneficially entitled to not less 

than twenty per cent of the profits of such business or profession.] 

(1A)  For  the  purposes  of  sub-section  (1)  of  this  section  2***,  the  additional  amount  of  income-tax 
payable in respect of the income disclosed in an application made under sub-section (1) of this section 
shall be the amount calculated in accordance with the provisions of sub-sections (1B) to (1D). 

3[(1B) Where the income disclosed in the application relates to only one previous year,— 

(i) if the applicant has not furnished a return in respect of the total income of that year, then, tax 
shall be calculated on the income disclosed in the application as if such income were the total income; 

(ii) if the applicant has furnished a return in respect of the total income of that year, tax shall be 
calculated on the aggregate of the total income returned and the income disclosed in the application as 
if such aggregate were the total income.] 

4[(1C)  The  additional  amount  of  income-tax  payable  in  respect  of  the  income  disclosed  in  the 

application relating to the previous year referred to in sub-section (1B) shall be,— 

(a) in a case referred to in clause (i) of that sub-section, the amount of tax calculated under that 

clause; 

(b) in a case referred to in clause (ii) of that sub-section, the amount of tax calculated under that 

clause as reduced by the amount of tax calculated on the total income returned for that year; 

5* 

* 

* 

* 

* 

(1D)  Where  the  income  disclosed  in  the  application  relates  to  more  than  one  previous  year,  the 
additional  amount  of  income-tax  payable  in  respect of  the income  disclosed  for  each  of  the  years  shall 
first be calculated in accordance with the provisions of sub-sections (1B) and (1C) and the aggregate of 
the amount so arrived at in respect of each of the years for which the application has been made under 
sub-section (1) shall be the additional amount of income-tax payable in respect of the income disclosed in 
the application. 

6* 

* 

* 

* 

* 

(2)  Every  application  made  under  sub-section  (1)  shall  be  accompanied  by  such  fees  as  may  be 

prescribed. 

(3) An application made under sub-section (1) shall not be allowed to be withdrawn by the applicant. 

7[(4)  An  assessee  shall,  on the  date  on  which  he  makes  an  application  under  sub-section  (1)  to  the 
Settlement  Commission,  also  intimate  the  Assessing  Officer  in  the  prescribed  manner of  having  made 
such application to the said Commission.] 

1. Subs. by Act 23 of 2012, s. 90, for “at any time during the previous year” (w.e.f. 1-7-2012). 
2. The words, brackets, figures and letters “and sub-sections (2A) to (2D) of section 245D” omitted by Act 22 of 2007, s. 63 

(w.e.f. 1-6-2007). 

3. Subs. by Act 11 of 1987, s. 60 for sub-sections (IB) or (IC) (w.e.f. 1-6-1987). 
4.  Subs.  by  22  of  2007,  s.  63,  for  sub-section  (IB)  (w.e.f.  1-6-2007).  Earlier  it  was  substituted  by  Act  11  of  1987,  s.  60 

(w.e.f. 1-6-1987).  

5. Clause (c) omitted by Act 22 of 2007, s. 63 (w.e.f. 1-6-2007).   
6. Sub-section (1E) omitted by Act 94 of 2002, s. 94 (w.e.f. 1-6-2002). 
7. Ins. by Act 22 of 2007, s. 63 (w.e.f. 1-6-2007). 

710 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
245D.  Procedure  on  receipt  of  an  application  under  section  245C.—1[(1)  On  receipt  of  an 
application  under section  245C,  the  Settlement  Commission  shall,  within  seven  days  from  the  date  of 
receipt of the application, issue a notice to the applicant requiring him to explain as to why the application 
made by him be allowed to be proceeded with, and on hearing the applicant, the Settlement Commission 
shall, within a period of fourteen days from the date of the application, by an order in writing, reject the 
application or allow the application to be proceeded with: 

Provided that  where  no  order  has  been  passed  within  the  aforesaid  period  by  the  Settlement 

Commission, the application shall be deemed to have been allowed to be proceeded with.] 

2* 

* 

* 

* 

* 

(2) A copy of every order under sub-section (1) shall be sent to the applicant and to the  3[Principal 

Commissioner or Commissioner]. 

4[(2A) Where an application was made under section 245C before the 1st day of June, 2007, but an 
order  under  the  provisions  of  sub-section  (1)  of  this  section,  as  they  stood  immediately  before  their 
amendment  by  the  Finance  Act,  2007,  has  not  been  made  before  the  1st  day  of  June,  2007,  such 
application shall be deemed to have been allowed to be proceeded with if the additional tax on the income 
disclosed in such application and the interest thereon is paid on or before the 31st day of July, 2007. 

Explanation.—In respect of the applications referred to in this sub-section, the 31st day of July, 2007 
shall be deemed to be the date of the order of rejection or allowing the application to be proceeded with 
under sub-section (1). 

(2B) The Settlement Commission shall,— 

(i)  in  respect  of  an  application  which  is  allowed  to  be  proceeded  with  under  sub-section  (1), 

within thirty days from the date on which the application was made; or 

(ii)  in  respect  of  an  application  referred  to  in  sub-section  (2A)  which  is  deemed  to  have  been 

allowed to be proceeded with under that sub-section, on or before the 7th day of August, 2007, 

call for a report from the 3[Principal Commissioner or Commissioner], and the 3[Principal Commissioner 
or Commissioner] shall furnish the report within a period of thirty days of the receipt of communication 
from the Settlement Commission. 

(2C)  Where  a  report  of  the  3[Principal  Commissioner  or  Commissioner]  called  for  under  
sub-section (2B) has been furnished within the period specified therein, the Settlement Commission may, 
on the basis of the report and within a period of fifteen days of the receipt of the report, by an order in 
writing,  declare  the  application  in  question  as  invalid,  and  shall  send  the  copy  of  such  order  to  the 
applicant and the 3[Principal Commissioner or Commissioner]: 

1. Subs. by Act 22 of 2007, s. 64, for sub-section (1) (w.e.f. 1-6-2007). 

2. Sub-section (1A) omitted by Act 49 of 1991, s. 66 (w.e.f. 27-9-1991). 

3. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.e.f. 1-6-2013). 

4. Subs. by Act 22 of 2007, s. 64, for sub-sections (2A), (2B), (2C) and (2D) (w.e.f. 1-6-2007). 

711 

 
 
 
 
 
 
 
                                                           
Provided that an application shall not be declared invalid unless an opportunity has been given to the 

applicant of being heard: 

Provided  further that  where  the  1[Principal  Commissioner  or  Commissioner]  has  not  furnished  the 
report within the aforesaid period, the Settlement Commission shall proceed further in the matter without 
the report of the 1[Principal Commissioner or Commissioner]. 

(2D)  Where  an  application  was  made  under  sub-section  (1)  of section  245C before  the  1st  day  of 
June, 2007 and an order under the provisions of sub-section (1) of this section, as they stood immediately 
before their amendment by the Finance Act, 2007, allowing the application to have been proceeded with, 
has been passed before the 1st day of June, 2007, but an order under the provisions of sub-section (4), as 
they stood immediately before their amendment by the Finance Act, 2007, was not passed before the 1st 
day of June, 2007, such application shall not be allowed to be further proceeded with unless the additional 
tax on the income disclosed in such application and the interest thereon, is, notwithstanding any extension 
of time already granted by the Settlement Commission, paid on or before the 31st day of July, 2007.] 

2[(3) The Settlement Commission, in respect of— 

(i) an application which has not been declared invalid under sub-section (2C); or 

(ii) an application referred to in sub-section (2D) which has been allowed to be further proceeded 

with under that sub-section, 

may call for the records from the  1[Principal Commissioner or Commissioner] and after examination of 
such records, if the Settlement Commission is of the opinion that any further enquiry or investigation in 
the matter is necessary, it may direct the 1[Principal Commissioner or Commissioner] to make or cause to 
be  made  such  further  enquiry  or  investigation  and  furnish  a  report  on  the  matters  covered  by  the 
application and any other matter relating to the case, and the 1[Principal Commissioner or Commissioner] 
shall  furnish  the  report  within  a  period  of  ninety  days  of  the  receipt  of  communication  from  the 
Settlement Commission: 

Provided that  where  the  1[Principal  Commissioner  or  Commissioner]  does  not  furnish  the  report 
within  the  aforesaid  period,  the  Settlement  Commission  may  proceed  to  pass  an  order  under  
sub-section (4) without such report. 

(4)  After  examination  of  the  records  and  the  report  of  the  1[Principal  Commissioner  or 

Commissioner], if any, received under— 

(i) sub-section (2B) or sub-section (3), or 

(ii)  the  provisions  of  sub-section  (1)  as  they  stood  immediately  before  their  amendment  by  the 

Finance Act, 2007, 

and after giving an opportunity to the applicant and to the 1[Principal Commissioner or Commissioner] to 
be heard, either in person or through a representative duly authorised in this behalf, and after examining 
such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in 
accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the 

1. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.e.f. 1-6-2013). 

2. Subs. by Act 22 of 2007, s. 64, for sub-sections (3), (4) and (4A) (w.e.f. 1-6-2007). 

712 

                                                           
application and any other matter relating to the case not covered by the application, but referred to in the 
report of the 1[Principal Commissioner or Commissioner]. 

(4A) The Settlement Commission shall pass an order under sub-section (4),— 

(i) in respect of an application referred to in sub-section (2A) or sub-section (2D), on or before the 

31st day of March, 2008; 

(ii) in respect of an application made on or after the 1st day of June, 2007  2[but before the 1st day 
of June, 2010], within twelve months from the end of the month in which the application was made;] 

3[(iii)  in  respect  of  an  application  made  on  or  after  the  1st  day  of  June,  2010,  within  eighteen 

months from the end of the month in which the application was made.] 

4[(5)  Subject  to  the  provisions  of section  245BA,  the  materials  brought  on  record  before  the 
Settlement Commission shall be considered by the Members of the concerned Bench before passing any 
order under sub-section (4) and, in relation to the passing of such order, the provisions of section 245BD 
shall apply.] 

(6) Every order passed under sub-section (4) shall provide for the terms of settlement including any 
demand by way of  5[tax, penalty or interest], the manner in which any sum due under the settlement shall 
be paid and all other matters to make the settlement effective and shall also provide that the settlement 
shall be void if it is subsequently found by the Settlement Commission that it has been obtained by fraud 
or misrepresentation of facts. 

6[(6A)  Where  any  tax  payable  in  pursuance  of  an  order  under  sub-section  (4)  is  not  paid  by  the 
assessee  within  thirty-five  days  of  the  receipt  of  a  copy  of  the  order  by  him,  then,  whether  or  not  the 
Settlement Commission has extended the time for payment of such tax or has allowed payment thereof by 
instalments, the assessee shall be liable to pay simple interest at  7[one and one-fourth per cent. for every 
month  or  part  of  a  month]  on  the  amount  remaining  unpaid  from  the  date  of  expiry  of  the  period  of  
thirty-five days aforesaid.] 

8[(6B)  The  Settlement  Commission  may,  with  a  view  to  rectifying  any  mistake  apparent  from  the 

record, amend any order passed by it under sub-section (4)— 

(a) at any time within a period of six months from the end of the month in which the order was 

passed; or 

(b) at any time within the period of six months from the end of the month in which an application 
for rectification has been made by the Principal Commissioner or the Commissioner or the applicant, 
as the case may be: 

1. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.e.f. 1-6-2013). 
2. Ins. by Act 14 of 2010, s. 47 (w.e.f. 1-4-2010). 
3. Ins. by s. 47, ibid. (w.e.f. 1-6-2010). 
4. Ins. by Act 11 of 1987, s. 61 (w.e.f. 1-6-1987). 
5. Subs. by s. 61, ibid., for “tax or penalty” (w.e.f. 1-6-1987). 
6. Ins. by Act 67 of 1984, s. 41 (w.e.f. 1-10-1984). 
7. Subs. by Act 22 of 2007, s. 64, for “fifteen per cent. per annum” (w.e.f. 1-4-2008). 
8. Subs. by Act 20 of 2015, s. 59, for sub-section (6B) (w.e.f. 1-6-2015). 

713 

                                                           
Provided that  no  application  for  rectification  shall  be  made  by  the  Principal  Commissioner  or  the 
Commissioner or the applicant after the expiry of six months from the end of the month in which an order 
under sub-section (4) is passed by the Settlement Commission: 

Provided further that an amendment which has the effect of modifying the liability of the applicant 
shall  not  be  made  under  this  sub-section  unless  the  Settlement  Commission  has  given  notice  to  the 
applicant and the Principal Commissioner or Commissioner of its intention to do so and has allowed the 
applicant and the Principal Commissioner or Commissioner an opportunity of being heard.] 

(7) Where a settlement becomes void as provided under sub-section (6), the proceedings with respect 
to the matters covered by the settlement shall be deemed to have been revived from the stage at which the 
application  was  allowed  to  be  proceeded  with  by  the  Settlement  Commission  and  the  income-tax 
authority  concerned,  may,  notwithstanding  anything  contained  in  any  other  provision  of  this  Act, 
complete such proceedings at any time before the expiry of two years from the end of the financial year in 
which the settlement became void. 

1[(8) For the removal of doubts, it is hereby declared that nothing contained in section 153 shall apply 
to any order passed under sub-section (4) or to any order of assessment, reassessment or recomputation 
required to be made by the  2[Assessing Officer] in pursuance of any directions contained in such order 
passed  by  the  Settlement  Commission  3[and  nothing  contained  in  the  proviso  to  sub-section  (1)  of  
section 186 shall apply to the cancellation of the registration of a firm required to be made in pursuance of 
any such directions as aforesaid.]] 

4[245DD.  Power  of  Settlement  Commission  to  order  provisional  attachment  to  protect  
revenue.—(1) Where, during the pendency of any proceeding before it, the Settlement Commission is of 
the opinion that for the purpose of protecting the interests of the revenue it is necessary so to do, it may, 
by  order,  attach  provisionally  any  property  belonging  to  the  applicant  in  the  manner  provided  in  the 
Second Schedule: 

Provided that  where  a  provisional  attachment  made  under section  281B is  pending  immediately 
before  an  application  is  made  under section  245C,  an  order  under  this  sub-section  shall  continue  such 
provisional  attachment  up  to  the  period  up  to  which  an  order  made  under section  281B would  have 
continued if such application had not been made: 

Provided further that where the Settlement Commission passes an order under this sub-section after 
the expiry of the period referred to in the preceding proviso, the provisions of sub-section (2) shall apply 
to such order as if the said order had originally been passed by the Settlement Commission. 

(2)  Every  provisional  attachment  made  by  the  Settlement  Commission  under  sub-section  (1)  shall 
cease  to  have  effect  after  the  expiry  of  a  period  of  six  months  from  the  date  of  the  order  made  under  
sub-section (1): 

Provided that  the  Settlement  Commission  may,  for  reasons  to  be  recorded  in  writing,  extend  the 

aforesaid period by such further period or periods as it thinks fit 5***.] 

1. Ins. by Act 67 of 1984, s. 41 (w.e.f. 1-10-1984). 
2. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
3. Ins. by Act 11 of 1987, s. 61 (w.e.f. 1-6-1987). 
4. Ins. by Act 26 of 1988, s. 42 (w.e.f. 1-4-1988). 
5.  The  words  “,  so,  however,  that  the  total  period  of  extension  shall  not  in  any  case  exceed  two  years”  omitted  by                       

Act 22 of 2007, s. 65 (w.e.f. 1-6-2008). 

714 

                                                           
245E.   Power  of  Settlement  Commission  to  reopen  completed  proceedings.—If  the  Settlement 
Commission is of the opinion (the reasons for such opinion to be recorded by it in writing) that,  for the 
proper  disposal  of  the  case  pending  before  it,  it  is  necessary  or  expedient  to  reopen  any  proceeding 
connected with the case but which has been completed  1*** under this Act by any income-tax authority 
before  the  application  under section  245C was  made,  it  may,  with  the  concurrence  of  the  applicant, 
reopen such proceeding and pass such order thereon as it thinks fit, as if the case in relation to which the 
application  for  settlement  had  been  made  by  the  applicant  under  that  section  covered  such  proceeding 
also: 

2[Provided that no proceeding shall be reopened by the Settlement Commission under this section if 
the  period  between  the  end  of  the  assessment  year  to  which  such  a  proceeding  relates  and  the  date  of 
application for settlement under section 245C exceeds nine years:] 

3[Provided  further that  no  proceeding  shall  be  reopened  by  the  Settlement  Commission  under  this 

section in a case where an application under section 245C is made on or after the 1st day of June, 2007.] 

245F. Powers and procedure of Settlement Commission.—(1) In addition to the powers conferred 
on  the  Settlement  Commission  under  this  Chapter,  it  shall  have  all  the  powers  which  are  vested  in  an 
income-tax authority under this Act. 

(2)  Where  an  application  made  under section  245C has  been  allowed  to  be  proceeded  with 
under section 245D, the Settlement Commission shall, until an order is passed under sub-section (4) of 
section 245D, have, subject to the provisions of sub-section (3) of that section, exclusive jurisdiction to 
exercise the powers and perform the functions of an income-tax authority under this Act in relation to the 
case: 

4[Provided that  where  an  application  has  been  made  under section  245C on  or  after  the  1st  day  of 
June, 2007, the Settlement Commission shall have such exclusive jurisdiction from the date on which the 
application was made: 

Provided further that where— 

(i)  an  application  made  on  or  after  the  1st  day  of  June,  2007,  is  rejected  under  sub-section  (1) 

of section 245D; or 

(ii) an application is not allowed to be proceeded with under sub-section (2A) of section 245D, or, 

as the case may be, is declared invalid under sub-section (2C) of that section; or 

(iii) an application is not allowed to be further proceeded with under sub-section (2D) of section 

245D, 

the Settlement Commission, in respect of such application shall have such exclusive jurisdiction upto the 
date on which the application is rejected, or, not allowed to be proceeded with, or, declared invalid, or, 
not allowed to be further proceeded with, as the case may be.] 

(3) Notwithstanding anything contained in sub-section (2) and in the absence of any express direction 
to the contrary by the Settlement Commission, nothing contained in this section shall affect the operation 
of any other provision of this Act requiring the applicant to pay tax on the basis of self-assessment 5*** in 
relation to the matters before the Settlement Commission. 

(4) For the removal of doubt, it is hereby declared that, in the absence of any express direction by the 
Settlement Commission to the contrary, nothing in this Chapter shall affect the operation of the provisions 
of this Act in so far as they relate to any matters other than those before the Settlement Commission. 

6[7*  

* 

* 

* 

* 

1. The word and figures “under the Indian Income-tax Act, 1922, or” omitted by Act 67 of 1984, s. 42 (w.e.f. 1-10-1984).  
2. Subs. by Act 11 of 1987, s. 62, for the proviso (w.e.f. 1-6-1987). 
3. Ins. by Act 22 of 2007, s. 66 (w.e.f. 1-6-2007).  
4. Ins. by s. 67, ibid. (w.e.f. 1-6-2007). 
5. The words “or by way of advance tax” omitted by the 11 of 1987, s. 63 (w.e.f. 1-6-1987).  
6. Subs. by Act 46 of 1986, s. 17, for sub-section (5) (w.e.f. 10-9-1986). 
7. Sub-sections (5) and (6) omitted by Act 11 of 1987, s. 63 (w.e.f. 1-6-1987). 

715 

 
 
 
 
 
 
 
                                                           
(7)  The  Settlement  Commission  shall,  subject  to  the  provisions  of  this  Chapter,  have  power  to 
regulate its own procedure and the procedure of Benches thereof in all matters arising out of the exercise 
of  its  powers  or  of  the  discharge  of  its  functions, including  the  places  at  which  the  Benches  shall  hold 
their sittings.] 

245G. Inspection, etc., of reports.—No person shall be entitled to inspect, or obtain copies of, any 
reports made by any income-tax authority to the Settlement Commission; but the Settlement Commission 
may, in its discretion, furnish copies thereof to any such person on an application made to it in this behalf 
and on payment of the prescribed fee: 

Provided that, for the purpose of enabling any person whose case is under consideration to rebut any 
evidence  brought  on  record  against  him  in  any  such  report,  the  Settlement  Commission  shall,  on  an 
application made in this behalf, and on payment of the prescribed fee by such person, furnish him with a 
certified copy of any such report or part thereof relevant for the purpose. 

245H. Power of Settlement Commission to grant immunity from prosecution and penalty.—(1) 
The Settlement Commission may, if it is satisfied that any person who made the application for settlement 
under section 245C has co-operated with the Settlement Commission in the proceedings before it and has 
made  a  full  and  true disclosure  of  his income  and  the  manner in  which such  income  has  been  derived, 
grant  to  such  person,  subject  to  such  conditions  as  it  may  think  fit  to  impose 1[for  the  reasons  to  be 
recorded in writing], immunity from prosecution for any offence under this Act or under the Indian Penal 
Code (45 of 1860) or under any other Central Act for the time being in force  2[and also (either wholly or 
in  part)  from  the  imposition  of  any  penalty]  under  this  Act,  with  respect  to  the  case  covered  by  the 
settlement: 

3[Provided that no such immunity shall be granted by the Settlement Commission in cases where the 
proceedings for the prosecution for any such offence have been instituted before the date of receipt of the 
application under section 245C:] 

4[Provided further that the Settlement Commission shall not grant immunity from prosecution for any 
offence under the Indian Penal Code (45 of 1860) or under any Central Act other than this Act and the 
Wealth-tax Act, 1957 (27 of 1957) to a person who makes an application under section 245C on or after 
the 1st day of June, 2007.] 

3[(1A)  An  immunity  granted  to  a  person  under  sub-section  (1)  shall  stand  withdrawnif  such  person 
fails  to  pay  any  sum  specified  in  the  order  of  settlement  passed  under  sub-section  (4)  of section 
245D within  the  time  specified  in  such  order  or  within  such  further  time  as  may  be  allowed  by  the 
Settlement Commission, or fails to comply with any other condition subject to which the immunity was 
granted and thereupon the provisions of this Act shall apply as if such immunity had not been granted.] 

(2)  An  immunity  granted to  a  person  under  sub-section  (1)  may,  at  any  time,  be  withdrawn  by  the 
Settlement  Commission,  if  it  is  satisfied  that  such  person  5***  had,  in  the  course  of  the  settlement 
proceedings,  concealed  any  particulars  material  to  the  settlement  or  had  given  false  evidence,  and 
thereupon such person may be tried for the offence with respect to which the immunity was granted or for 
any other offence of which he appears to have been guilty in connection with the settlement and shall also 
become  liable  to  the  imposition  of  any  penalty  under  this  Act  to  which  such  person  would  have  been 
liable, had not such immunity been granted. 

6[245HA. Abatement of proceeding before Settlement Commission.—(1) Where— 

(i)   an  application  made  under section  245C on  or  after  the  1st  day  of  June,  2007  has  been 

rejected under sub-section (1) of section 245D; or 

1. Ins. by Act 20 of 2015, s. 60 (w.e.f. 1-6-2015). 
2. Subs. by Act 67 of 1984, s. 43, for “and also from the imposition of any penalty” (w.e.f. 1-10-1984). 
3. Ins. by Act 11 of 1987, s. 64 (w.e.f. 1-6-1987). 
4. Ins. by Act 22 of 2007, s. 68 (w.e.f. 1-6-2007). 
5. The words “has not complied with the conditions subject to which the immunity was granted or that such person” omitted 

by Act 11 of 1987, s. 64 (w.e.f. 1-6-1987). 

6. Ins. by Act 22 of 2007, s. 69 (w.e.f. 1-6-2007). Earlier section 245HA was inserted by Act 11 of 1987, s. 65 (w.e.f. 1-6-
1987) which was amended by Act 4 of 1988, s. 2 (w.e.f. 1-4-1988) and later on omitted by Act 20 of 2002, s. 96 (w.e.f. 1-
6-2002). 

716 

                                                           
(ii)   an  application  made  under section  245C has  not  been  allowed  to  be  proceeded  with  under 

sub-section (2A) or further proceeded with under sub-section (2D) of section 245D; or 

(iii) an application made under section 245C has been declared as invalid under sub-section (2C) 

of section 245D; or 

1[(iiia)  in  respect  of  any  application  made  under section  245C,  an  order  under  sub-section  (4) 

of section 245D has been passed not providing for the terms of settlement; or] 

(iv) in respect of any other application made under section 245C, an order under sub-section (4) 
of section  245D has  not  been  passed  within  the  time  or  period  specified  under  sub-section  (4A) 
of section 245D, 

the proceedings before the Settlement Commission shall abate on the specified date. 

Explanation.—For the purposes of this sub-section, "specified date" means— 

(a)  in  respect  of  an  application  referred  to  in  clause  (i),  the  day  on  which  the  application  was 

rejected; 

(b) in respect of an application referred to in clause (ii), the 31st day of July, 2007; 

(c) in respect of an application referred to in clause (iii), the last day of the month in which the 

application was declared invalid; 

1[(ca) in respect of an application referred to clause (iiia), the day on which the order under sub-

section (4) of section 245D was passed not providing for the terms of settlement;] 

(d) in respect of an application referred to in clause (iv), on the date on which the time or period 

specified in sub-section (4A) of section 245D expires. 

(2) Where a  proceeding before the Settlement Commission abates, the Assessing Officer, or, as the 
case  may  be,  any  other  income-tax  authority  before  whom  the  proceeding  at  the  time  of  making  the 
application was pending, shall dispose of the case in accordance with the provisions of this Act as if no 
application under section 245C had been made. 

(3) For the purposes of sub-section (2), the Assessing Officer, or, as the case may be, other income-
tax  authority,  shall  be  entitled  to  use  all  the  material  and  other  information  produced  by  the  assessee 
before  the  Settlement  Commission  or  the  results  of  the  inquiry  held  or  evidence  recorded  by  the 
Settlement  Commission  in  the  course  of  the  proceedings  before  it,  as  if  such  material,  information, 
inquiry  and  evidence  had been  produced  before  the Assessing  Officer  or  other  income-tax  authority  or 
held or recorded by him in the course of the proceedings before him. 

(4)  For  the  purposes  of  the  time-limit  under sections  149, 153, 153B, 154, 155, 158BE and 231 and 
for the purposes of payment of interest under section 243 or 244 or, as the case may be, section 244A, for 
making  the  assessment  or reassessment  under  sub-section  (2), the  period commencing  on and  from  the 
date  of  the  application  to  the  Settlement  Commission  under section  245C and  ending  with  “specified 
date” referred to in sub-section (1) shall be excluded; and where the assessee is a firm, for the purposes of 
the time-limit for cancellation of registration of the firm under sub-section (1) of section 186, the period 
aforesaid shall, likewise, be excluded. 

245HAA. Credit for tax paid in case of abatement of proceedings.—Where an application made 
under section  245C on  or  after  the  1st  day  of  June,  2007,  is  rejected  under  sub-section  (1)  of section 
245D,  or  any  other  application  made  under section  245C is  not  allowed  to  be  proceeded  with  under      
sub-section (2A) of section 245D or is declared invalid under sub-section (2C) of section 245D or has not 
been  allowed  to  be  further  proceeded  with  under  sub-section  (2D)  of section  245D or  an  order  under    
sub-section  (4)  of section  245D has  not  been  passed  within  the  time  or  period  specified  under               
sub-section (4A) of section 245D, the Assessing Officer shall allow the credit for the tax and interest paid 
on or before the date of making the application or during the pendency of the case before the Settlement 
Commission.] 

1. Ins. by Act 20 of 2015, s. 61 (w.e.f. 1-6-2015). 

717 

                                                           
245-I. Order of settlement to be conclusive.—Every order of settlement passed under sub-section 
(4)  of section  245D shall  be  conclusive  as  to  the  matters  stated  therein  and  no  matter  covered  by  such 
order shall, save as otherwise provided in this Chapter, be reopened in any proceeding under this Act or 
under any other law for the time being in force. 

245J. Recovery  of  sums  due  under  order  of  settlement.—Any  sum  specified  in  an  order  of 
settlement passed under sub-section (4) of section 245D may, subject to such conditions, if any, as may 
be specified therein, be recovered, and any penalty for default in making payment of such sum may be 
imposed and recovered in accordance with the provisions of Chapter XVII, by the  1[Assessing Officer] 
having jurisdiction over the person who made the application for settlement under section 245C. 

2[245K. Bar on subsequent application for settlement.—(1) Where— 

(i)  an  order  of  settlement  passed  under  sub-section  (4)  of  section  245D provides  for  the 
imposition of a penalty on the person who made the application under section 245C for settlement, on 
the ground of concealment of particulars of his income; or 

(ii) after the passing of an order of settlement under the said sub-section (4) in relation to a case, 

such person is convicted of any offence under Chapter XXII in relation to that case; or 

(iii)  the  case  of  such  person  was  sent  back  to  the  Assessing  Officer  by  the  Settlement 

Commission on or before the 1st day of June, 2002, 

then, 3[he or any person related to such person (herein referred to as related person) shall not be entitled to 
apply] for settlement under section 245C in relation to any other matter. 

(2) Where a person has made an application under section 245C on or after the 1st day of June, 2007 
and  if  such  application  has  been  allowed  to  be  proceeded  with  under  sub-section  (1)  of  section  245D, 
such  person 4[or  any  related  person  shall  not  be  subsequently  entitled]  to  make  an  application  under 
section 245C.] 

5[Explanation.—For the purposes of this section, “related person” with respect to a person means,— 

(i) where such person is an individual, any company in which such person holds more than fifty 
per cent of the shares or voting rights at any time, or any firm or association of persons or body of 
individuals in which such person is entitled to more than fifty per cent of the profits at any time, or 
any Hindu undivided family in which such person is a karta; 

(ii)  where  such  person  is  a  company,  any  individual  who  held  more  than  fifty  per  cent  of  the 
shares  or  voting  rights  in  such  company  at  any  time  before  the  date  of  application  before  the 
Settlement Commission by such person; 

1. Subs. by Act 4 of 1988, s. 2, for “Income tax Officer” (w.e.f. 1-4-1988).  
2. Subs. by Act 22 of 2007, s. 70, for section 245K (w.e.f. 1-6-2007). 
3. Subs. by Act 20 of 2015, s. 62, for “he shall not be entitled to apply” (w.e.f. 1-6-2015).  
4. Subs. by s. 62, ibid., for “shall not be subsequently entitled” (w.e.f. 1-6-2015). 
5. Ins. by s. 62, ibid. (w.e.f. 1-6-2015). 

718 

                                                           
(iii) where such person is a firm or association of persons or body of individuals, any individual 
who was entitled to more than fifty per cent of the profits in such firm, association of persons or body 
of individuals, at any time before the date of application before the Settlement Commission by such 
person; 

(iv) where such person is a Hindu undivided family, the karta of that Hindu undivided family.] 

245L. Proceedings  before  Settlement  Commission  to  be  judicial  proceedings.—Any  proceeding 
under this Chapter before the Settlement Commission shall be deemed to be a judicial proceeding within 
the meaning of sections 193 and 228, and for the purposes of section 196, of the Indian Penal Code (45 of 
1860). 

245M. Certain  persons  who  have  filed  appeals  to  the  Appellate  Tribunal  entitled  to  make 
applications to the Settlement Commission.—[Omitted by the Finance Act11of1987 s. 67, (w.e.f. 1-6-
1987).] 

1[CHAPTER XIX-B 

ADVANCE RULINGS 

245N. Definitions.—In this Chapter, unless the context otherwise requires,— 

2[(a) “advance ruling” means— 

(i) a determination by the Authority in relation to a transaction which has been undertaken or 

is proposed to be undertaken by a non-resident applicant; or 

(ii) a determination by the Authority in relation to the  3[tax liability of a non-resident arising 
out  of]  a  transaction  which  has  been  undertaken  or  is  proposed  to  be  undertaken  by  a  resident 
applicant with 4[such non-resident]; 5[or] 

5[(iia) a determination by the Authority in relation to the tax liability of a resident applicant, 
arising out of a transaction which has been undertaken or is proposed to be undertaken by such 
applicant,] 

and such determination shall include the determination of any question of law or of fact specified in 
the application; 

(iii)  a  determination  or  decision  by  the  Authority  in  respect  of  an  issue  relating  to 
computation of total income which is pending before any income-tax authority or the Appellate 
Tribunal  and  such  determination  or  decision  shall  include  the  determination  or  decision  of  any 
question  of  law  or  of  fact  relating  to  such  computation  of  total  income  specified  in  the 
application; 

1. Chapter XIX-B, consisting of sections 245N to 245V, inserted by Act 38 of 1993, s. 31 (w.e.f. 1-6-1993).   

2. Subs. by Act 10 of 2000, s. 63, for clauses (a) and (b) (w.e.f. 1-6-2000). 

3. Ins. by Act 32 of 2003, s. 92 (w.e.f. 1-6-2000). 

4. Subs. by s. 92, ibid., for “a non-resident” (1-6-2000).  

5. Ins. by Act 25 of 2014, s. 66 (w.e.f. 1-10-2014). 

719 

                                                           
1[(iv)  a  determination  or  decision  by  the  Authority  whether  an  arrangement,  which  is 
proposed to be undertaken by any person being a resident or a non-resident, is an impermissible 
avoidance arrangement as referred to in Chapter X-A or not:] 

2[Provided that where an advance ruling has been pronounced, before the date on which the 
Finance  Act,  2003  receives  the  assent  of  the  President,  by  the  Authority  in  respect  of  an 
application  by  a  resident  applicant  referred  to  in  sub-clause  (ii)  of  this  clause  as  it  stood 
immediately  before  such  date,  such  ruling  shall  be  binding  on  the  persons  specified  in  section 
245S;] 
3[(b) “applicant” means— 

(A) any person who— 

(I) is a non-resident referred to in sub-clause (i)of clause(a);or 

(II) is a resident referred to in sub-clause(ii)of clause(a); or 

(III)  is  a  resident  referred  to  in  sub-clause  (iia)  of  clause  (a)  falling  within  any  such 
class or category of persons as the Central Government may, by notification in the Official 
Gazette, specify; or 

(IV)  is  a  resident  falling  within  any  such  class  or  category  of  persons  as  the  Central 

Government may, by notification in the Official Gazette, specify in this behalf; or 

(V) is referred to in sub-clause (iv) of clause (a), 

and makes an application under sub-section (1) of section 245Q; 

(B)  an  applicant  as  defined  in  clause  (c)  of  section 28E  of  the  Customs  Act,  1962  (52  of 

1962); 

(C) an applicant as defined in clause (c) of section 23A of the Central Excise Act, 1944 (1 

of 1944); 

(D)  an  applicant  as  defined 

in  clause 

(b)  of  section  96A  of 

the  Finance                                       

Act, 1994 (32 of 1994);]] 

(c)  “application”  means  an  application  made  to  the  Authority  under  sub-section  (1)  of                    

section 245Q; 

(d) “Authority” means the Authority for Advance Rulings constituted under section 245-O; 

(e) “Chairman” means the Chairman of the Authority; 
4[(f)  “Member”  means  a  Member  of  the  Authority  and  includes  the  Chairman  and                         

Vice-chairman; 

(g) “Vice-chairman” means the Vice-chairman of the Authority.] 

245-O. Authority for Advance Rulings.—(1) The Central Government shall constitute an Authority 

for giving advance rulings, to be known as “Authority for Advance Rulings”: 

5[Provided that the Authority shall cease to act as an Authority for Advance Rulings for the purposes 
of Chapter V of the Customs Act, 1962 on and from the date of appointment of the Customs Authority for 
Advance Rulings under section 28EA of that Act.] 

5[(1A) On and from the date of appointment of the Customs Authority for Advance Rulings referred 
to in the proviso to sub-section (1), the Authority shall act as an Appellate Authority, for the purpose of 
Chapter V of the Customs Act, 1962: 

1. Ins. by Act 17 of 2013, s. 53 (w.e.f. 1-4-2015). 
2. Ins. by Act 32 of 2003, s. 92 (w.e.f. 14-5-2003). 
3. Subs. by Act 7 of 2017, s. 80 (w.e.f. 1-4-2017). 
4. Subs. by Act 25 of 2014, s. 66, for clause (f) (w.e.f. 1-10-2014). 
5. Ins. by Act 13 of 2018, s. 50 (w.e.f. 1-4-2018). 

720 

                                                           
Provided that the Authority shall not admit any appeal against any ruling or order passed earlier by it 
in  the  capacity  of  the  Authority  for  Advance  Rulings  in  relation  to  any  matter  under  Chapter  V  of  the 
Customs Act, 1962 after the date of such appointment of the Customs Authority for Advance Rulings.] 

1[(2)  The  Authority  shall  consist  of  a  Chairman  and  such  number  of  Vice-chairmen,  revenue 

Members and law Members as the Central Government may, by notification, appoint. 

(3) A person shall be qualified for appointment as— 

 (a) Chairman, who has been a Judge of the Supreme Court 2[or the Chief Justice of a High Court 

or for at least seven years a Judge of a High Court]; 

 (b) Vice-chairman, who has been Judge of a High Court; 
3[(c) a revenue Member— 

(i) from the Indian Revenue Service, who is, or is qualified to be, a Member of the Board; or 

(ii)  from  the  Indian  Customs  and  Central  Excise  Service,  who  is,  or  is  qualified  to  be,  a 

Member of the Central Board of Excise and Customs, 

on the date of occurrence of vacancy;] 

4[(d)  a  law  Member  from  the  Indian  Legal  Service, who  is,  or is  qualified  to  be,  an  Additional 

Secretary to the Government of India 2[on the date of occurrence of vacancy].] 

(4) The terms and conditions of service and the salaries and allowances payable to the Members shall 

be such as may be prescribed. 

(5) The Central Government shall provide to the Authority with such officers and employees, as may 

be necessary, for the efficient discharge of the functions of the Authority under this Act. 

(6)  The  powers  and  functions  of  the  Authority  may  be  discharged  by  its  Benches  as  may  be 

constituted by the Chairman from amongst the Members thereof. 

2[(6A) In the event of the occurrence of any vacancy in the office of the Chairman by reason of his 
death, resignation or otherwise, the senior-most Vice-chairman shall act as the Chairman until the date on 
which  a  new  Chairman,  appointed  in  accordance  with  the  provisions  of  this  Act  to  fill  such  vacancy, 
enters upon his office. 

(6B) In case the Chairman is unable to discharge his functions owing to absence, illness or any other 
cause,  the  senior-most  Vice-Chairman  shall  discharge  the  functions  of  the  Chairman  until  the  date  on 
which the Chairman resumes his duties.] 

(7) A Bench shall consist of the Chairman or the Vice-chairman and one revenue Member and one 

law Member: 

5[Provided  that  where  the  Authority  is  dealing  with  an  application  seeking  advance  ruling  in  any 

matter  relating  to  this  Act,  the  revenue  Member  of  the  Bench  shall  be  such  Member  as  referred  to  in              
sub-clause (i) of clause (c) of sub-section (3).] 

(8) The Authority shall be located in the National Capital Territory of Delhi and its Benches shall be 

located at such places as the Central Government may, by notification specify.] 

6[245-OA.  Qualifications,  terms  and  conditions  of  service  of  Chairman,  Vice-Chairman  and 
Member.—Notwithstanding  anything  contained  in  this  Act,  the  qualifications,  appointment,  term  of 
office, salaries and allowances, resignation, removal and the other terms and conditions of service of the 
Chairman,  Vice-Chairman  and  other  Members  of  the  Authority  appointed  after  the  commencement  of 
Part XIV of Chapter VI of the Finance Act, 2017, shall be governed by the provisions of section 184 of 
that Act: 

1. Subs. by Act 25 of 2014, s. 67, for sub-sections (2), (3), (4) and (5) (w.e.f. 1-10-2014). 
2. Ins. by Act 7 of 2017, s. 81 (w.e.f. 1-4-2017). 
3. Subs. by s. 81, ibid., for clause (c) (w.e.f. 1-4-2017). 
4. Subs. by Act 20 of 2015, s. 63, for clause (d) (w.e.f. 1-4-2015). 
5. Ins. by Act 13 of 2018, s. 50 (w.e.f. 1-4-2018). 
6. Ins. by Act 7 of 2017, s. 174 (w.e.f. 1-4-2017). 

721 

                                                           
Provided  that  the  Chairman,  Vice-Chairman  and  Member  appointed  before  the  commencement  of 
Part XIV of Chapter VI of the Finance Act, 2017, shall continue to be governed by the provisions of this 
Act and the rules made thereunder as if the provisions of section 184 of the Finance Act, 2017 had not 
come into force.] 

245P. Vacancies, etc., not to invalidate proceedings.—No proceeding before, or pronouncement of 
advance  ruling  by,  the  Authority  shall  be  questioned  or  shall  be  invalid  on  the  ground  merely  of  the 
existence of any vacancy or defect in the constitution of the Authority. 

245Q. Applicationfor  advance  ruling.—(1)  An  applicant  desirous  of  obtaining  an  advance  ruling 
under  this  Chapter 1[2***  or  under  Chapter  IIIA  of  the  Central  Excise  Act,  1944  (1  of  1944)  or  under 
Chapter VA of the Finance Act, 1994 (32 of 1994)] may make an application in such form and in such 
manner as may be prescribed, stating the question on which the advance ruling is sought. 

(2)  The  application  shall  be  made  in  quadruplicate  and  be  accompanied  by  a  fee  of  3[ten  thousand 

rupees or such fee as may be prescribed in this behalf, whichever is higher]. 

(3) An applicant may withdraw an application within thirty days from the date of the application. 

245R. Procedure on receipt of application.—(1) On receipt of an application, the Authority shall 
cause  a  copy  thereof  to  be  forwarded  to  the  4[Principal  Commissioner  or  Commissioner]  and,  if 
necessary, call upon him to furnish the relevant records: 

Provided that where any records have been called for by the Authority in any case, such records shall, 

as soon as possible, be returned to the 3[Principal Commissioner or Commissioner]. 

(2)  The  Authority  may,  after  examining  the  application  and  the  records  called  for,  by  order,  either 

allow or reject the application: 

5[Provided that  the  Authority  shall  not  allow  the  application  where  the  question  raised  in  the 

application,— 

(i) is already pending before any income-tax authority or Appellate Tribunal [except in the case 

of a resident applicant falling in sub-clause (iii) of clause (b) of section 245N] or any court; 

(ii) involves determination of fair market value of any property; 

(iii) relates to a transaction or issue which is designed prima facie for the avoidance of income-
tax  [except  in  the  case  of  a  resident  applicant  falling  in  sub-clause  (iii)  of  clause  (b)  ofsection 
245N 6*** 7[or in the case of an applicant falling in sub-clause (iiia) of clause (b) of section 245N]]:] 

Provided further that no application shall be rejected under this sub-section unless an opportunity 

has been given to the applicant of being heard: 

Provided also that where the application is rejected, reasons for such rejection shall be given in 

the order. 

(3)  A  copy  of  every  order  made  under  sub-section  (2)  shall  be  sent  to  the  applicant  and  to  the 

3[Principal Commissioner or Commissioner]. 

(4) Where an application is allowed under sub-section (2), the Authority shall, after examining such 
further material as may be placed before it by the applicant or obtained by the Authority, pronounce its 
advance ruling on the question specified in the application. 

1. Ins. by Act 7 of 2017, s. 82 (w.e.f. 1-4-2017). 
2.  The  words  and  figures  “or  under  Chapter  V  of  the  Customs  Act,  1962  (52  of  1962)”  shall  stand  omitted  (date  to  be 

notified) by Act 13 of 2018, s. 51. 

3. Subs. by Act 23 of 2012, s. 92, for “two thousand five hundred rupees” (w.e.f. 1-7-2012). 
4. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.e.f. 1-6-2013). 
5. Subs. by Act 10 of 2000, s. 64, for the proviso (w.e.f. 1-6-2000). 
6. The words “or in the case of an applicant falling in sub-clause (iiia) of clause (b) of section 245N” omitted by Act 17 of 

2013, s. 54 (w.e.f. 1-4-2013). 

7. Ins. by s. 54, ibid. (w.e.f.  1-4-2015). 

722 

                                                           
(5)  On  a  request  received  from  the  applicant,  the  Authority  shall,  before  pronouncing  its  advance 
ruling,  provide  an  opportunity  to  the  applicant  of  being  heard,  either  in  person  or  through  a  duly 
authorised representative. 

Explanation.—For  the  purposes  of  this  sub-section,  “authorised  representative”  shall  have  the 

meaning assigned to it in sub-section (2) of section 288, as if the applicant were an assessee. 

(6) The Authority shall pronounce its advance ruling in writing within six months of the receipt of 

application. 

(7)  A  copy  of  the  advance  ruling  pronounced  by  the  Authority,  duly  signed  by  the  Members  and 
certified in the prescribed manner shall be sent to the applicant and to the  1[Principal Commissioner or 
Commissioner], as soon as may be, after such pronouncement. 

2[245RR.Appellate  authority  not  to  proceed  in  certain  cases.—No  income-tax  authority  or  the 
Appellate Tribunal shall proceed to decide any issue in respect to which an application has been made by 
an applicant, being a resident, 3[under sub-section(1) of section 245Q]]. 

245S. Applicability  of  advance  ruling.—(1)  The  advance  ruling  pronounced  by  the  Authority 

under section 245R shall be binding only— 

(a) on the applicant who had sought it; 

(b) in respect of the transaction in relation to which the ruling had been sought; and 

(c)  on  the  1[Principal  Commissioner  or  Commissioner],  and  the  income-tax  authorities 

subordinate to him, in respect of the applicant and the said transaction. 

(2) The  advance  ruling  referred  to  in  sub-section (1) shall  be  binding  as  aforesaid  unless  there  is a 

change in law or facts on the basis of which the advance ruling has been pronounced. 

245T. Advance ruling to be void in certain circumstances.—(1) Where the Authority finds, on a 
representation  made  to  it  by  the  1[Principal  Commissioner  or  Commissioner]  or  otherwise,  that  an 
advance ruling pronounced by it under sub-section (6) of section 245R has been obtained by the applicant 
by  fraud  or  misrepresentation  of  facts,  it  may,  by  order,  declare  such  ruling  to  be  void ab  initio and 
thereupon all the provisions of this Act shall apply (after excluding the period beginning with the date of 
such advance ruling and ending with the date of order under this sub-section) to the applicant as if such 
advance ruling had never been made. 

(2) A copy of the order made under sub-section (1) shall be sent to the applicant and the  1[Principal 

Commissioner or Commissioner]. 

245U.Powers of the Authority.—(1) The Authority shall, for the purpose of exercising its powers, 
have all the powers of a civil court under the Code of Civil Procedure, 1908 (5 of 1908) as are referred to 
in section 131 of this Act. 

(2) The Authority shall be deemed to be a civil court for the purposes of section 195, but not for the 
purposes of Chapter XXVI, of the Code of Criminal Procedure, 1973 (2 of 1974) and every proceeding 
before the Authority shall be deemed to be a judicial proceeding within the meaning of sections 193 and 
228, and for the purpose of section 196, of the Indian Penal Code (45 of 1860). 

245V. Procedure of Authority.—The Authority shall, subject to the provisions of this Chapter, have 
power to regulate its own procedure in all matters arising out of the exercise of its powers under this Act.] 

1. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.e.f. 1-6-2013). 
2. Ins. by Act 21 of 1998, s. 48 (w.e.f. 1-10-1998). 
3. Subs. by Act 23 of 2004, s. 52, for “under sub-section (1) of section 245R” (w.e.f. 1-10-1998). 

723 

                                                           
CHAPTER XX 

APPEALSAND REVISION 

1[A.—Appeals2*** to the Deputy Commissioner (Appeals) and Commissioner (Appeals) 

246.Appealable orders.—(1) Subject to the provisions of sub-section (2), any assessee aggrieved by 
any of the following orders of an Assessing Officer (other than the Deputy Commissioner) may appeal to 
the Deputy Commissioner (Appeals) 3[before the 1st day of June, 2000] against such order— 

(a) an order against the assessee, where the assessee denies his liability to be assessed under this 
Act  4[or  an  intimation  under  sub-section  (1)  or  sub-section  (1B)  of section  143, where  the  assessee 
objects  to  the  making  of  adjustments,]  or  any  order  of  assessment  under  sub-section  (3)  of  
section  143 or section  144,  where  the  assessee  objects  to  the  amount  of  income  assessed,  or  to  the 
amount  of  tax  determined,  or  to  the  amount  of  loss  computed,  or  to  the  status  under  which  he  is 
assessed; 

(b) an order of assessment, reassessment or recomputation under section 147 or section 150; 

(c)  an  order  under section  154 or section  155 having  the  effect  of  enhancing  the  assessment  or 
reducing a refund or an order refusing to allow the claim made by the assessee under either of the said 
sections; 

(d) an order made under section 163 treating the assessee as the agent of a non-resident; 

(e) an order under sub-section (2) or sub-section (3) of section 170; 

(f) an order under section 171; 

(g)  any  order  under  clause  (b)  of  sub-section  (1)  or  under  sub-section  (2)  or  sub-section  (3)  or 
sub-section  (5)  of section  185  5*** 6[in  respect  of  any  assessment  for  the  assessment  year 
commencing on or before the 1st day of April, 1992]; 

(h)  an order cancelling  the  registration  of a firm  under sub-section (1)  or  under  sub-section (2) 
of section 186 5*** 6[in respect of any assessment for the assessment year commencing on or before 
the 1st day of April, 1992]; 

(i) an order under section 201; 

(j) an order under section 216 in respect of any assessment for the assessment year commencing 

on the 1st day of April, 1988 or any earlier assessment year; 

(k) an order under section 237; 

1. Subs. by Act 4 of 1988, s. 99, for the Sub-heading and section 246 (w.e.f. 1-4-1989). 

2. The words “or applications” omitted by Act 3 of 1989, s. 42 (w.e.f. 1-4-1989). 

3. Ins. by Act 10 of 2000, s. 65 (w.e.f. 1-6-2000). 

4. Ins. by Act 32 of 1994, s. 46 (w.e.f. 1-6-1994). 

5. The words, figures and letters “in respect of any assessment for the assessment year commencing on the 1st day of April, 

1988 or any earlier assessment year” omitted by Act 3 of 1989, s. 43 (w.e.f. 1-4-1989). 

6. Ins. by Act 18 of 1992, s. 83 (w.e.f. 1-4-1993). 

724 

                                                           
(l) an order imposing a penalty under— 

(i) section 221, or 

(ii)  section  271, section  271A, section  271B, 1[***  section  272A, section  272AA or  

section 272BB]; 

(iii)  2*** section 272, section 272B or section 273, as they stood immediately before the 1st 
day of April, 1989, in respect of any assessment for the assessment year commencing on the 1st 
day of April, 1988 or any earlier assessment years. 

3[(1A) Notwithstanding anything contained in sub-section (1), every appeal filed, on or after the 1st 
day of October, 1998 but before the 1st day of June, 2000, before the Deputy Commissioner (Appeals) 
and  any  matter  arising  out  of  or  connected  with  such  appeal  and  which  is  so  pending  shall  stand 
transferred  to  the  Commissioner  (Appeals)  and  the  Commissioner  (Appeals)  may  proceed  with  such 
appeal or matter from the stage at which it was on that day.] 

(2)  Notwithstanding  anything  contained  in  sub-section  (1),  any  assessee  aggrieved  by  any  of  the 
following  orders  (whether  made  before  or  after  the  appointed  day)  may  appeal  to  the  Commissioner 
(Appeals) 3[before the 1st day of June, 2000] against such order— 

(a)  4[an  intimation  or  order  specified  in  sub-section  (1)  where  such  intimation  is  sent  or  such 
order] is made by the Deputy Commissioner in exercise of the powers or functions conferred on or 
assigned to him under section 120 or section 124; 

(b) an order specified in clauses (a) to (e) (both inclusive) and clauses (i) to (l) (both inclusive) of 
sub-section (1)  5[or an order under section 104, as it stood immediately before the 1st day of April, 
1988 in respect of any assessment for the assessment year commencing on the 1st day of April, 1987 
or any earlier assessment year] made against the assessee, being a company; 

(c)  an  order  of  assessment  made  after  the  30th  day  of  September,  1984,  on  the  basis  of  the 

directions issued by the Deputy Commissioner under section 144A; 

(d) an order made by the Deputy Commissioner under section 154; 

6[(da) an order of assessment made by an Assessing Officer under clause (c) of section 158BC, in 
respect  of  search  initiated  under section  132 or  books  of  account,  other  documents  or  any  assets 
requisitioned under section 132A, on or after the 1st day of January, 1997; 

(db) an order imposing a penalty under sub-section (2) of section 158BFA;] 

1. The words, figures and letters “section 271C, section 271D, section 271E,”omitted by Act 12 of 1990, s. 41 (w.e.f. 1-4-
1990). Earlier “Section 271E,  Section 272A, Section 272AA or Section 272BB” were substituted for “Section 271E or 
Section 272A” by Act 3 of 1989, s. 43 (w.e.f. 1-4-1989). 

2. The words, brackets and figures “sub-section (1) of section 271,” omitted by Act 3 of 1989, s. 43 (w.e.f. 1-4-1989). 

3. Ins. by Act 10 of 2000, s. 65 (w.e.f. 1-6-2000). 

4. Subs. by Act 32 of 1994, s. 46, for “an order specified in sub-section (1) where such order” (w.e.f. 1-6-1994). 

5. Ins. by Act 3 of 1989, s. 43 (w.e.f. 1-4-1989). 

6. Ins. by Act 14 of 1997, s. 8 (w.e.f. 1-1-1997). 

725 

                                                           
(e) an order imposing a penalty under section 271B 1[or section 271BB]; 

2[(ee)  an  order  made  by  a  Deputy  Commissioner  imposing  a  penalty  under section  271C,  

section 271D or section 271E;] 

(f)  an  order  made  by  a  Deputy  Commissioner  or  a  Deputy  Director  imposing  a  penalty 

under section 272A; 

3[(ff) an order made by a Deputy Commissioner imposing a penalty under section 272AA;] 

4[(g) an order imposing a penalty under Chapter XXI by the Income-tax Officer or the Assistant 
Commissioner  where  such  penalty  has  been  imposed  with  the  previous  approval  of  the  Deputy 
Commissioner under sub-section (2) of section 274;] 

(h)  an  order  made  by  an  Assessing  Officer  (other  than  Deputy  Commissioner)  under  the 
provisions  of  this  Act  in  the  case  of  such  person  or  classes  of  persons  as  the  Board  may,  having 
regard to the nature of the cases, the complexities involved and other relevant considerations, direct. 

(3)  Notwithstanding  anything  contained  in  sub-section  (1),  the  Board  or  the  5[Principal  Director 
General  or  Director  General],  or  the  6[Principal  Chief  Commissioner  or  Chief  Commissioner]  or 
7[Principal  Commissioner  or  Commissioner]  if  so  authorised  by  the  Board,  may,  by  order  in  writing, 
transfer any appeal which is pending before a Deputy Commissioner (Appeals) and any matter arising out 
of or connected with such appeal and which is so pending, to the Commissioner (Appeals) if the Board or, 
as  the  case  may  be,  the  5[Principal  Director  General  or  Director  General]  or  6[Principal  Chief 
Commissioner or Chief Commissioner] or 7[Principal Commissioner or Commissioner] (at the request of 
the appellant or otherwise) is satisfied that it is necessary or expedient so to do having regard to the nature 
of the case, the complexities involved and other relevant considerations and the Commissioner (Appeals) 
may proceed with such appeal or matter, from the stage at which it was before it was so transferred: 

Provided that the appellant may demand that before proceeding further with the appeal or matter, the 

previous proceeding or any part thereof be re-opened or that he be reheard. 

Explanation.—For the purposes of this section,— 

(a)  “appointed  day”  means  the  10th  day  of  July,  1978,  being  the  day  appointed  under  

section 39 of the Finance (No. 2) Act, 1977 (29 of 1977); 

(b)  “status”  means  the  category  under  which  the  assessee  is  assessed  as  “individual”,  “Hindu 

undivided family” and so on.] 

1. Ins. by Act 12 of 1990, s. 50 (w.e.f. 1-4-1990). 

2. Ins. by s. 41, ibid. (w.e.f. 1-4-1990). 

3. Ins. by Act 3 of 1989, s. 43 (w.e.f. 1-4-1989). 

4. Subs. by s. 43, ibid., for clause (g) (w.e.f. 1-4-1989). 

5. Subs. by Act 25 of 2014, s. 4, for “Director General” (w.e.f. 1-6-2013). 

6. Subs. by s. 4, ibid., for “Chief Commissioner” (w.e.f. 1-6-2013). 

7. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 

726 

                                                           
1[246A. Appealable orders before Commissioner (Appeals).—(1)  2[Any assessee or any deductor 
3[or any collector] aggrieved] by any of the following orders (whether made before or after the appointed 
day) may appeal to the Commissioner (Appeals) against— 

(a)  4[an  order  passed  by  a  Joint  Commissioner  under  clause  (ii)  of  sub-section  (3)  of section 
115VP or an order against the assessee] where the assessee denies his liability to be assessed under 
this  Act  or  an intimation  under  sub-section  (1)  or sub-section  (1B)  of 5[section 143 or 6[sub-section 
(1)  of section  200A or  sub-section  (1)  of section  206CB,  where  the  assessee  or  the  deductor  or  the 
collector]  objects]  to  the  making  of  adjustments,  or  any  order  of  assessment  under  sub-section  (3) 
of section  143 7[except  an  order  passed  in  pursuance  of  directions  of  the  Dispute  Resolution  Panel 
8***  9[or  an  order  referred  to  in  sub-section  (12)  of section  144BA]]  or section  144,  to  the  income 
assessed, or to the amount of tax determined, or to the amount of loss computed, or to the status under 
which he is assessed; 

10[(aa) an order of assessment under sub-section (3) of section 115WE  or section 115WF, where 

the assessee, being an employer objects to the value of fringe benefits assessed; 

(ab) an order of assessment or reassessment under section 115WG; 

(b)  an  order  of  assessment,  reassessment  or  recomputation  under  section  147 7[except  anorder 
passed  in  pursuance  of  directions  of  the  Dispute  Resolution  Panel  8***  9[or  an  order  referred  to in 
sub-section (12) of section 144BA]] or section 150; 

11[(ba) an order of assessment or reassessment  12[under section 153A 7[except an order passed in 
pursuance  of  directions  of  the  13[Dispute  Resolution  Panel]]  8***  9[or  an  order  referred  to  in  sub-
section (12) ofsection 144BA];] 

14[(bb) an order of assessment or reassessment under sub-section (3) of section 92CD;] 

(c) an order made under section 154 or section 155 having the effect of enhancing the assessment 
or reducing a refund or an order refusing to allow the claim made by the assessee under either of the 
said sections 15*** 9[except an order referred to in sub-section (12) of section 144BA]; 

1. Ins. by Act 21 of 1998, s. 49 (w.e.f. 1-10-1998). 
2. Subs. by Act 23 of 2012, s. 94, for “Any assessee aggrieved” (w.e.f. 1-7-2012). 
3. Ins. by Act 20 of 2015, s. 64, (w.e.f. 1-6-2015). 
4. Subs. by Act 23 of 2004, s. 53, for “an order against the assessee” (w.e.f. 1-10-2004). 
5. Subs. by Act 23 of 2012, s. 94, for “section 143, where the assessee objects” (w.e.f. 1-7-2012). 
6.  Subs. by  Act  20  of  2015,  s.  64,  for  “sub-section  (1)  of  section  200A,  where  the  assessee  or  the  deductor”  (w.e.f.  1-6-

2015). 

7. Subs. by Act 23 of 2012, s. 94, for “except an order passed in pursuance of directions of the Dispute Resolution Panel”             

(w.e.f. 1-4-2013). 

8.  The  words,  brackets,  figures  and  letters  “or  an  order  referred  to  in  sub-section  (12)  of  section  144BA”  omitted  by                             

Act 17 of 2013, s. 55 (w.e.f. 1-4-2013). 

9. Ins. by s. 55, ibid. (w.e.f. 1-4-2016). 
10. Ins. by Act 18 of 2005, s. 57 (w.e.f. 1-4-2006).   
11. Ins. by Act 32 of 2003, s. 93 (w.e.f. 1-6-2003). 
12. Subs. by Act 23 of 2012, s. 94, for “under section 153A” (w.r.e.f. 1-10-2009).   
13. Subs. by s. 94, ibid., for “Dispute Resolution Panel” (w.e.f. 1-4-2013).  
14. Ins. by s. 94, ibid. (w.e.f. 1-7-2012).  
15. The words, brackets, figures and letters “except where it is in respect of an order as referred to in sub-section (12) of                   

section 144BA” omitted by Act 17 of 2013, s. 55 (w.e.f. 1-4-2013).  

727 

                                                           
(d) an order made under section 163 treating the assessee as the agent of a non-resident; 

(e) an order made under sub-section (2) or sub-section (3) of section 170; 

(f) an order made under section 171; 

(g) an order made under clause (b) of sub-section (1) or under sub-section (2) or sub-section (3) 
or sub-section (5) of section 185 in respect of an assessment for the assessment year commencing on 
or before the 1st day of April, 1992; 

(h)  an order cancelling  the  registration  of a firm  under sub-section (1)  or  under  sub-section (2) 
of section 186 in respect of any assessment for the assessment year commencing on or before the 1st 
day of April, 1992 or any earlier assessment year; 

1[(ha) an order made under section 201;] 

2[(hb) an order made under sub-section (6A) of section 206C;] 

(i) an order made under section 237; 

(j) an order imposing a penalty under— 

(A) section 221; or 

(B) 

section271, section 

271A, 2[section 

271AAA,] 

3[section 

271AAB,] 4[section 

271F, section 271FB,] section 272AA or section 272BB; 

(C) section 272, section 272B or section 273, as they stood immediately before the 1st day of 
April, 1989, in respect of an assessment for the assessment year commencing on the 1st day of 
April, 1988, or any earlier assessment years; 

5[(ja) an order of imposing or enhancing penalty under sub-section (1A) of section 275;] 

 (k) an order of assessment made by an Assessing Officer under clause (c) of section 158BC, in 
respect  of  search  initiated  under section  132 or  books  of  account,  other  documents  or  any  assets 
requisitioned under section 132A on or after the 1st day of January, 1997; 

(l) an order imposing a penalty under sub-section (2) of section 158BFA; 

(m) an order imposing a penalty under section 271B or section 271BB; 

(n) an order made by a Deputy Commissioner imposing a penalty under 6[section 271C, section 

271CA,] section 271D or section 271E; 

1. Ins. by Act 10 of 2000, s. 66 (w.e.f. 1-6-2000). 
2. Ins. by Act 22 of 2007, s. 71 (w.e.f. 1-6-2007). 
3. Ins. by Act 23 of 2012, s. 94 (w.e.f. 1-7-2012). 
4. Subs. by Act 18 of 2005, s. 57, for “Section 271F” (w.e.f. 1-4-2006).   
5. Ins. by Act 29 of 2006, s. 17 (w.e.f. 13-7-2006). 
6. Subs. by Act 21 of 2006, s. 51, for “section 271C” (w.e.f. 1-4-2007). 

728 

                                                           
(o)  an  order  made  by  a  Deputy  Commissioner  or  a  Deputy  Director  imposing  a  penalty 

under section 272A; 

(p) an order made by a Deputy Commissioner imposing a penalty under section 272AA; 

(q) an order imposing a penalty under Chapter XXI; 

(r)  an  order  made  by  an  Assessing  Officer  other  than  a  Deputy  Commissioner  under  the 
provisions of this Act in the case of such person or class of persons, as the Board may, having regard 
to the nature of the cases, the complexities involved and other relevant considerations, direct. 

Explanation.—For the purposes of this sub-section, where on or after the 1st day of October, 1998, 
the post of Deputy Commissioner has been redesignated as Joint Commissioner and the post of Deputy 
Director  has  been  redesignated  as  Joint  Director,  the  references  in  this  sub-section  for  “Deputy 
Commissioner” and “Deputy Director” shall be substituted by “Joint Commissioner” and “Joint Director” 
respectively. 

1[(1A) Every appeal filed by an assessee in default against an order under section 201 on or after the 
1st day of October, 1998 but before the 1st day of June, 2000 shall be deemed to have been filed under 
this section.] 

2[(1B) Every appeal filed by an assessee in default against an order under sub-section (6A) of section 
206C on or after the 1st day of April, 2007 but before the 1st day of June, 2007 shall be deemed to have 
been filed under this section.] 

(2) Notwithstanding anything contained in sub-section (1) of section 246, every appeal under this Act 
which is pending immediately before the appointed day, before the Deputy Commissioner (Appeals) and 
any matter arising out of or connected with such appeals and which is so pending shall stand transferred 
on  that  date  to  the  Commissioner  (Appeals)  and  the  Commissioner  (Appeals)  may  proceed  with  such 
appeal or matter from the stage at which it was on that day : 

Provided that the appellant may demand that before proceeding further with the appeal or matter, the 

previous proceeding or any part thereof be reopened or that he be re-heard. 

Explanation.—For  the  purposes  of  this  section,  “appointed  day”  means  the  day  appointed  by  the 

Central Government by notification in the Official Gazette.] 

247. [Appeal by partner].—Omitted by the Finance Act, 1992 (18 of 1992), s. 84 (w.e.f. 1-4-1993). 
3[248. Appeal  by  a  person  denying  liability  to  deduct  tax  in  certain  cases.—Where  under  an 

agreement  or  other  arrangement,  the  tax  deductible  on  any  income,  other  than  interest,  under               
section 195 is to be borne by the person by whom the income is payable, and such person having paid 
such tax to the credit of the Central Government, claims that no tax was required to be deducted on such 
income,  he  may  appeal  to the  Commissioner  (Appeals)  for  a  declaration that  no  tax  was  deductible  on 
such income.] 

249. Form of appeal and limitation. (1) Every appeal under this Chapter shall be in the prescribed 
form and  shall  be  verified  in  the  prescribed  manner  4[and  shall,  in  case  of  an  appeal  made  to  the 
Commissioner (Appeals) on or after the 1st day of October, 1998, irrespective of the date of initiation of 
the assessment proceedings relating thereto be accompanied by a fee of,— 

(i)  where the  total  income  of  the  assessee  as  computed  by  the  Assessing  Officer  in  the  case to 

which the appeal relates is one hundred thousand rupees or less, two hundred fifty rupees; 

1. Ins. by Act 10 of 2000, s. 66 (w.e.f. 1-6-2000). 

2. Ins. by Act 22 of 2007, s. 71 (w.e.f. 1-6-2007). 

3. Subs. by s. 72, ibid., for section 248 (w.e.f. 1-6-2007). Earlier it was substituted by Act 29 of 1977, s. 39 and the fifth 

Schedule (w.e.f. 10-7-1978). 

4. Ins. by Act 21 of 1998, s. 50 (w.e.f. 1-10-1998). 

729 

                                                           
(ii) where the total income of the assessee, computed as aforesaid, in the case to which the appeal 
relates is  more  than  one  hundred  thousand rupees  but  not  more than two  hundred  thousand rupees, 
five hundred rupees; 

(iii) where the total income of the assessee, computed as aforesaid, in the case to which the appeal 

relates is more than two hundred thousand rupees, one thousand rupees;] 

1[(iv)  where  the  subject  matter  of  an  appeal  is  not  covered  under  clauses  (i),  (ii)  and  (iii),  two 

hundred fifty rupees.] 

(2) The appeal shall be presented within thirty days of the following date, that is to say,— 

2[(a) where the appeal is under section 248, the date of payment of the tax, or] 

3[(b) where the appeal relates to any assessment or penalty, the date of service of the notice of 

demand relating to the assessment or penalty: 

 Provided that,  where  an  application  has  been  made  under section  146 for  reopening  an 
assessment, the period from the date on which the application is made to the date on which the order 
passed on the application is served on the assessee shall be 4[excluded :]] 

5[Provided  further that  where  an  application  has  been  made  under  sub-section  (1)  of section 
270AA, the period beginning from the date on which the application is made, to the date on which the 
order rejecting the application is served on the assessee, shall be excluded or:] 

 (c) in any other case, the date on which intimation of the order sought to be appealed against is 

served. 

6[(2A) Notwithstanding anything contained in sub-section (2), where an order has been made under 
section 201 on or after the 1st day of October, 1998 but before the 1st day of June, 2000 and the assessee 
in default has not presented any appeal within the time specified in that sub-section, he may present such 
appeal before the 1st day of July, 2000.] 

(3) The 7[*** Commissioner (Appeals)] may admit an appeal after the expiration of the said period if 

he is satisfied that the appellant had sufficient cause for not presenting it within that period. 

8[(4) No appeal under this Chapter shall be admitted unless at the time of filing of the appeal,— 

(a) where a return has been filed by the assessee, the assessee has paid the tax due on the income 

returned by him; or 

1. Ins. by Act 27 of 1999, s. 83 (w.e.f. 1-6-1999). 
2. Subs. by Act 22 of 2007, s. 73, for clause (a) (w.e.f. 1-6-2007). 
3. Subs. by Act 41 of 1975, s. 59, for clause (b) (w.e.f. 1-10-1975). 
4. Subs. by Act 28 of 2016, s. 93, for “excluded, or” (w.e.f. 1-4-2017).  
5. The proviso inserted by s. 93, ibid. (w.e.f. 1-4-2017). 
6. Ins. by Act 10 of 2000, s. 67 (w.e.f. 1-6-2000). 
7. The words and brackets “Deputy Commissioner (Appeals) or, as the case may be, the” omitted by Act 21 of 1998, s. 50        
(w.e.f. 1-10-1998). Earlier “Deputy Commissioner (Appeals)” was substituted for “Appellate Assistant Commissioner”  
by Act 4 of 1988, s. 2 (w.e.f. 1-4-198) and the words and brackets “or, as the case may be, the Commissioner (Appeals)” 
were inserted by Act 29 of 1977, s. 39 and the Fifth Schedule (w.e.f. 10-7-1978).  

8. Ins. by Act 41 of 1975, s. 59 (w.e.f. 1-10-1975). 

730 

                                                           
(b) where no return has been filed by the assessee, the assessee has paid an amount equal to the 

amount of advance tax which was payable by him: 

Provided that, 1[in a case falling under clause (b) and] on an application made by the appellant in 
this  behalf,  the  2[***  Commissioner  (Appeals)]  may,  for  any  good  and  sufficient  reason  to  be 
recorded in writing, exempt him from the operation of the provisions of 3[that clause].] 

250. Procedure in appeal.—(1) The 4[*** Commissioner (Appeals)] shall fix a day and place for the 
hearing of the appeal, and shall give notice of the same to the appellant and to the  5[Assessing Officer] 
against whose order the appeal is preferred. 

(2) The following shall have the right to be heard at the hearing of the appeal— 

 (a) the appellant, either in person or by an authorised representative; 

 (b) the 5[Assessing Officer,] either in person or by a representative. 

(3)  The  4[***  Commissioner  (Appeals)]  shall  have  the  power  to  adjourn  the  hearing  of  the  appeal 

from time to time. 

(4)  The  4[***  Commissioner  (Appeals)]  may,  before  disposing  of  any  appeal,  make  such  further 
inquiry as he thinks fit, or may direct the 5[Assessing Officer] to make further inquiry and report the result 
of the same to the 4[*** Commissioner (Appeals)]. 

(5) The  4[*** Commissioner (Appeals)] may, at the hearing of an appeal, allow the appellant to go 
into any ground of appeal not specified in the grounds of appeal, if the 4[*** Commissioner (Appeals)] is 
satisfied that the omission of that ground from the form of appeal was not wilful or unreasonable. 

(6) The order of the  4[*** Commissioner (Appeals)] disposing of the appeal shall be in writing and 

shall state the points for determination, the decision thereon and the reason for the decision. 

6[(6A) In every appeal, the 4[*** Commissioner (Appeals)], where it is possible, may hear and decide 
such appeal within a period of one year from the end of the financial year in which such appeal is filed 
before him under sub-section (1) of section 246A.] 

(7)  On the  disposal of the appeal, the  4[***  Commissioner  (Appeals)]  shall  communicate the order 
passed  by  him  to  the  assessee  and  to  the  7[8[Principal  Chief  Commissioner  or  Chief  Commissioner]  or 
9[Principal Commissioner or Commissioner]]. 

1. Ins. by Act 3 of 1989, s. 45 (w.e.f. 1-4-1989). 
2. The words and brackets “Deputy Commissioner (Appeals) or, as the case may be, the” omitted by Act 21 of 1998, s. 50        
(w.e.f. 1-10-1998). Earlier “Deputy Commissioner (Appeals)” was substituted for “Appellate Assistant Commissioner”  
by Act 4 of 1988, s. 2 (w.e.f. 1-4-198) and the words and brackets “or, as the case may be, the Commissioner (Appeals)” 
were inserted by Act 29 of 1977, s. 39 and the Fifth Schedule (w.e.f. 10-7-1978).  

3. Subs. by Act 3 of 1989, s. 45, for “this sub-section” (w.e.f. 1-4-1989).  
4. The words and brackets “Deputy Commissioner (Appeals) or, as the case may be, the” omitted by Act 21 of 1998, s. 65            

(w.e.f.1-10-1998).  Earlier  “Deputy  Commissioner  (Appeals)”  was  substituted  for  “Appellate  Assistant  Commissioner”  
by Act 4 of 1988, s. 2 (w.e.f. 1-4-198) and the words and brackets “or, as the case may be, the Commissioner (Appeals)” 
were inserted by Act 29 of 1977, s. 39 and the Fifth Schedule (w.e.f. 10-7-1978).  

5. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
6. Ins. by Act 27 of 1999, s. 84 (w.e.f. 1-6-1999). 
7. Subs. by Act 4 of 1988, s. 2, for “Commissioner” (w.e.f. 1-4-1988). 
8. Subs. by Act 25 of 2014, s. 4 for “Chief Commissioner” (w.e.f. 1-6-2013). 
9. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 

731 

                                                           
251.  Powers  of  the  1[***  Commissioner  (Appeals)].—(1)  In  disposing  of  an  appeal,  the  1[*** 

Commissioner (Appeals)] shall have the following powers— 

(a)  in  an  appeal  against  an  order  of  assessment,  he may  confirm,  reduce,  enhance  or  annul  the 

assessment2***; 

3[(aa) in an appeal against the order of assessment in respect of which the proceeding before the 
Settlement Commission abates under section 245HA, he may, after taking into consideration all the 
material and other information produced by the assessee before, or the results of the inquiry held or 
evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such 
other material as may be brought on his record, confirm, reduce, enhance or annul the assessment;] 

(b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary 

it so as either to enhance or to reduce the penalty; 

(c) in any other case, he may pass such orders in the appeal as he thinks fit. 

(2) The  1[*** Commissioner (Appeals)] shall not enhance an assessment or a penalty or reduce the 
amount  of  refund  unless  the  appellant  has  had  a reasonable  opportunity  of  showing  cause  against  such 
enhancement or reduction. 

Explanation.—In  disposing  of  an  appeal,  the  1[***  Commissioner  (Appeals)]  may  consider  and 
decide  any  matter  arising  out  of  the  proceedings  in  which  the  order  appealed  against  was  passed, 
notwithstanding  that  such  matter  was  not  raised  before  the  1[***  Commissioner  (Appeals)]  by  the 
appellant. 

B.—Appeals to the Appellate Tribunal 

252.  Appellate  Tribunal.—(1)  The  Central  Government  shall  constitute  an  Appellate  Tribunal 
consisting  of  as  many  judicial  and  accountant  members  as  it  thinks  fit  to  exercise  the  powers  and 
discharge the functions conferred on the Appellate Tribunal by this Act. 

4[(2) A judicial member shall be a person who has for at least ten years held a judicial office in the 
territory  of  India  or  who  has  been  a  member  of  the  5[Indian  Legal  Service]  and  has  held  a  post  in  
6[Grade II] of that Service or any equivalent or higher post for at least three years or who has been an 
advocate for at least ten years. 

Explanation.—For the purposes of this sub-section,— 

(i) in computing the period during which a person has held judicial office in the territory of India, 
there shall be included any period, after he has held any judicial office, during which the person has 
been an advocate or has held the office of a member of a Tribunal or any post, under the Union or a 
State, requiring special knowledge of law; 

1. The words and brackets “Deputy Commissioner (Appeals) or, as the case may be, the” omitted by Act 21 of 1998, s. 65  
(w.e.f.  1-10-1998).  Earlier  “Deputy  Commissioner  (Appeals)”  was  substituted  for  “Appellate  Assistant  Commissioner”  
by Act 4 of 1988, s. 2 (w.e.f. 1-4-198) and the words and brackets “or, as the case may be, the Commissioner (Appeals)” 
were inserted by Act 29 of 1977, s. 39 and the Fifth Schedule (w.e.f. 10-7-1978).  

2. The certain words omitted by Act 14 of 2001, s. 83 (w.e.f. 1-6-2001). 

3. Ins. by Act 18 of 2008, s. 49 (w.e.f. 1-4-2008). 

4. Subs. by Act 16 of 1981, s. 18, for sub-section (2) (w.e.f. 1-4-1981). 

5. Subs. by Act 21 of 1998, s. 51, for “Central Legal Service” (w.e.f. 1-8-1998). 

6. Subs. by s. 51, ibid., for “Grade I” (w.e.f. 1-8-1998). 

732 

                                                           
(ii) in computing the period during which a person has been an advocate, there shall be included 
any period during which the person has held judicial office or the office of a member of a Tribunal or 
any post, under the Union or a State, requiring special knowledge of law after he became an advocate. 

(2A) An accountant member shall be a person who has for at least ten years been in the practice of 
accountancy as a chartered accountant under the Chartered Accountants Act, 1949 (38 of 1949), or as a 
registered accountant under any law formerly in force or partly as a registered accountant and partly as a 
chartered accountant, or who has been a member of the Indian Income-tax Service, Group A and has held 
the post of 1[Additional Commissioner of Income-tax] or any equivalent or higher post for at least three 
years.] 

2[(3) The Central Government shall appoint— 

(a) a person who is a sitting or retired Judge of a High Court and who has completed not less than 

seven years of service as a Judge in a High Court; or 

(b) 3*** one of the Vice-Presidents of the Appellate Tribunal, 

to be the President thereof.] 

4[(4) The Central Government may appoint one or more members of the Appellate Tribunal to be the 

Vice-President or, as the case may be, Vice-Presidents thereof. 

5* 

* 

* 

* 

* 

(5) 6[The 7*** Vice-President] shall exercise such of the powers and perform such of the functions of 

the President as may be delegated to him by the President by a general or special order in writing.] 

8[252A.  Qualifications,  terms  and  conditions  of  service  of  President,  Vice-President  and 
Member.—Notwithstanding  anything  contained  in  this  Act,  the  qualifications,  appointment,  term  of 
office, salaries and allowances, resignation, removal and the other terms and conditions of service of the 
President,  Vice-President  and  other  Members  of 
the  Appellate  Tribunal  appointed  after  the 
commencement of Part XIV of Chapter VI of the Finance Act, 2017, shall be governed by the provisions 
of section 184 of that Act: 

Provided that the President, Vice-President and Member appointed before the commencement of Part 
XIV of Chapter VI of the Finance Act, 2017, shall continue to be governed by the provisions of this Act, 
and the rules made thereunder as if the provisions of section 184 of the Finance Act, 2017 (7 of 2017) had 
not come into force.] 

1. Subs. by Act 21 of 1998, s. 51, for “Commissioner of Income-tax” (w.e.f. 1-8-1998). 

2. Subs. by Act 17 of 2013, s. 56, for sub-section (3) (w.e.f. 1-6-2013). 

3. The words “the Senior Vice-President or” omitted by Act 28 of 2016, s. 94 (w.e.f. 1-6-2016). 

4. Ins. by Act 16 of 1972, s. 40 (w.e.f. 1-4-1972). 

5.  Sub-section  (4A)  omitted  by  Act  28  of  2016,  s.  94  (w.e.f.  1-6-2016).  Which  was  inserted  by  Act  21  of  1984,  s.  24  

(w.e.f.1-4-1984). 

6. Subs. by Act 21 of 1984, s. 24, for “A Vice-President” (w.e.f. 1-4-1984). 

7. The words “Senior Vice-President or a” omitted by Act 28 of 2016, s. 94 (w.e.f. 1-6-2016). 

8. Section 252A shall stand inserted by Act 7 of 2017, s. 174. 

733 

 
 
 
 
 
 
 
 
                                                           
253. Appeals  to  the  Appellate  Tribunal.—(1)  Any  assessee  aggrieved  by  any  of  the  following 

orders may appeal to the Appellate Tribunal against such order— 

(a) an order passed by  1[an  2[Deputy Commissioner (Appeals)]  3[before the 1st day of October, 
1998]  or,  as  the  case  may  be,  a  Commissioner  (Appeals)]  under 4***  5[section  154], 6***  section 
250, 7[section 270A] 8[, section 271, section 271A 9[, section 271J] or section 272A]; or 

10[(b) an order passed by an Assessing Officer under  clause (c) of section 158BC, in respect of 
search  initiated under section  132 or books  of  account,  other  documents  or  any  assets requisitioned 
under section 132A, after the 30th day of June, 1995, but before the 1st day of January, 1997; or] 

11[(ba) an order passed by an Assessing Officer under sub-section (1) of section 115VZC; or] 

(c) 12[an order passed by a 13[Principal Commissioner or Commissioner] 14[under section 12AA or 
under  clause  (vi)  of  sub-section  (5)  of section  80G] or  under section  263] 7[or  under  section  
270A] 15[or  under section  271] 16[or  under section  272A] 5[17***  or  an  order  passed  by  him 
under section 154 amending his order under section 263] 18[or an order passed by a 19[Principal Chief 
Commissioner  or  Chief  Commissioner]  or  a 20[Principal  Director  General  or  Director  General]  or 
a 21[22[Principal Director or Director] under section 272A]; or] 

23[(d) an order passed by an Assessing Officer under sub-section (3), of section 143 or 24[section 
147 or section 153A or section 153C] in pursuance of the directions of the Dispute Resolution Panel 
or an order passed under section 154 in respect of such order;] 

25[(e)  an  order  passed  by  an  Assessing  Officer  under  sub-section  (3)  of section  143 or                   

section  147 or section  153A or section  153C with  the  approval  of  the  13[Principal  Commissioner 
or Commissioner]  as  referred  to  in  sub-section  (12)  of section  144BA or  an  order  passed 
under section 154 or section 155 in respect of such order;] 

26[(f)  an  order  passed  by  the  prescribed  authority  under  27[sub-clause  (iv)  or  sub-clause  (v)  or]     

sub-clause (vi) or sub-clause (via) of clause (23C) of section 10.] 

1. Subs. by Act 29 of 1977, s. 39 and the Fifth Schedule, for “an Appellate Assistant Commissioner” (w.e.f.  10-7-1978). 
2. Subs. by Act 4 of 1988, s. 2, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988). 
3. Ins. by Act 21 of 1998, s. 52 (w.e.f. 1-10-1998). 
4. The words, brackets and figures “sub-section (2) of section 131” omitted by Act 3 of 1989, s. 46 (w.e.f. 1-4-1989). 
5. Ins. by Act 31 of 1964, s. 12 (w.e.f. 6-10-1964). 
6.  The  word,  figures  and  letters  “section  246A,”  omitted  by  Act  3  of  1989,  s.  95  (w.e.f.  1-4-1989).  Earlier  the  quoted 

expression portion inserted byAct 4 of 1988, s. 126 (w.e.f. 1-4-1989). 

7. Ins. by Act 28 of 2016, s. 95 (w.e.f. 1-4-2017). 
8. Subs. by Act 41 of 1975, s. 60, for “or section 271” (w.e.f. 1-4-1976). 
9. Ins. by Act 13 of 2018, s. 52 (w.e.f. 1-4-2018). 
10. Subs. by Act 14 of 1997, s. 9, for clause (b) (w.e.f. 1-1-1997). Earlier the clause (b) was inserted by Act 22 of 1995,         

s. 45 (w.e.f. 1-7-1995). 

11. Ins. by Act 23 of 2004, s. 54 (w.e.f. 1-10-2004).  
12. Subs. by Act 27 of 1999, s. 85, for “an order passed by a Commissioner under section 263” (w.e.f. 1-6-1999). 
13. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.r.e.f. 1-6-2013). 
14. Subs. by Act 22 of 2007, s. 74, for “under section 12AA” (w.e.f. 1-6-2007). 
15. Ins. by Act 20 of 2002, s. 98 (w.e.f. 1-6-2002). 
16. Ins. by Act 41 of 1975, s. 60 (w.e.f. 1-4-1976). 
17. The words “or under section 285A” omitted by Act 26 of 1988, s. 54 (w.e.f. 1-4-1988). 
18. Ins. by Act 3 of 1989, s. 46 (w.e.f. 1-4-1989). 
19. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.r.e.f. 1-6-2013). 
20. Subs. by s. 4, ibid.,for “Director General” (w.r.e.f. 1-6-2013). 
21. Subs. by Act 33 of 2009, s. 73, for “Director under section 272A.” (w.e.f. 1-10-2009). 
22. Subs. by Act 25 of 2014, s. 4, for “Director” (w.r.e.f. 1-6-2013). 
23. Ins. by Act 33 of 2009, s. 73 (w.e.f. 1-10-2009). 
24. Subs. by Act 23 of 2012, s. 95, for “section 147” (w.e.f. 1-10-2009). 
25. Ins. by Act 17 of 2013, s. 57 (w.e.f. 1-4-2016). Earlier clause (e) was omitted by Act 17 of 2013, s. 57 (w.e.f. 1-4-2016) 

which was inserted by Act 23 of 2012, s. 95 (w.e.f. 1-4-2013). 

26. Ins. by Act 20 of 2015, s. 65 (w.e.f. 1-6-2015). 
27. Ins. by Act 7 of 2017, s. 83 (w.e.f. 1-4-2017). 

734 

                                                           
(2) The  1[Principal Commissioner or Commissioner] may, if he objects to any order passed by  2[an 
3[Deputy  Commissioner  (Appeals)]  4[before  the  1st  day  of  October,  1998]  or,  as  the  case  may  be,  a 
Commissioner (Appeals)] under 5[section 154 or] section 250, direct the 6[Assessing Officer] to appeal to 
the Appellate Tribunal against the order. 

* 

7* 
(3) Every appeal under sub-section (1) or sub-section (2) shall be filed within sixty days of the date 
on  which the  order  sought  to  be appealed against  is communicated to the  assessee  or  to the 1[Principal 
Commissioner or Commissioner], as the case may be: 

* 

* 

* 

8[Provided that in respect of any appeal under clause (b) of sub-section (1), this sub-section shall have 

effect as if for the words “sixty days”, the words “thirty days” had been substituted.] 

* 

* 

9* 
10[(4) The Assessing Officer or the assessee, as the case may be, on receipt of  notice that an appeal 
against the order of the Commissioner (Appeals), has been preferred under sub-section (1) or sub-section 
(2) by the other party, may, notwithstanding that he may not have appealed against such order or any part 
thereof, within thirty days of the receipt of the notice, file a memorandum of cross-objections, verified in 
the  prescribed  manner,  against  any  part  of  the  order  of  the  Commissioner  (Appeals),  and  such 
memorandum shall be disposed of by the Appellate Tribunal as if it were an appeal presented within the 
time specified in sub-section (3).] 

* 

* 

(5)  The  Appellate  Tribunal  may  admit  an  appeal  or  permit  the  filing  of  a  memorandum  of                      

cross-objections after the expiry of the relevant period referred to in sub-section (3) or sub-section (4), if 
it is satisfied that there was sufficient cause for not presenting it within that period. 

11[(6) An appeal to the Appellate Tribunal shall be in the prescribed form and shall be verified in the 
prescribed  manner  and  shall,  in  the  case  of  an  appeal  made,  on  or  after  the  1st  day  of  October,  1998, 
irrespective of the date of initiation of the assessment proceedings relating thereto, be accompanied by a 
fee of,— 

(a) where the total income of the assessee as computed by the Assessing Officer, in the case to 

which the appeal relates, is one hundred thousand rupees or less, five hundred rupees, 

(b) where the total income of the assessee, computed as aforesaid, in the case to which the appeal 
relates is  more  than  one  hundred  thousand rupees  but  not  more than two  hundred  thousand rupees, 
one thousand five hundred rupees, 

(c) where the total income of the assessee, computed as aforesaid, in the case to which the appeal 
relates is more than two hundred thousand rupees, one per cent of the assessed income, subject to a 
maximum of ten thousand rupees, 

12[(d)  where  the subject  matter  of  an  appeal  relates  to any  matter,  other  than  those  specified in 

clauses (a), (b) and (c), five hundred rupees:] 

13[Provided that no fee shall be payable in the case of an appeal referred to in sub-section (2), or, 
sub-section (2A) as it stood before its amendment by the Finance Act, 2016, or, a memorandum of 
cross objections referred to in sub-section (4).] 

(7) An application for stay of demand shall be accompanied by a fee of five hundred rupees.] 

1. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.r.e.f. 1-6-2013). 
2. Subs. by Act 29 of 1977, s. 39 and the Fifth Schedule, for “an Appellate Assistant Commissioner” (w.e.f. 10-7-1978). 
3. Subs. by Act 4 of 1988, s. 2, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988). 
4. Ins. by Act 21 of 1998, s. 52 (w.e.f. 1-10-1998). 
5. Ins. by Act 31 of 1964, s. 12 (w.e.f. 6-10-1964). 
6. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
7. Sub-section (2A) omitted by Act 28 of 2016, s. 95 (w.e.f. 1-6-2016). 
8. Ins. by Act 22 of 1995, s. 45 (w.e.f. 1-7-1995). 
9. Sub-section (3A) omitted by Act 28 of 2016, s. 95 (w.e.f. 1-6-2016). 
10. Subs. by s. 95, ibid.,for sub-section (4) (w.e.f. 1-6-2016). 
11. Subs. by Act 21 of 1998, s. 52, for sub-section (6) (w.e.f. 1-10-1998). 
12. Ins. by Act 27 of 1999, s. 85 (w.e.f. 1-6-1999). 
13. Subs. by Act 28 of 2016, s. 95, for the proviso (w.r.e.f. 1-7-2012). 

735 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
254. Orders of Appellate Tribunal.—(1) The Appellate Tribunal may, after giving both the parties 

to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. 

1* 

* 

* 

* 

* 

(2) The Appellate Tribunal may, at any time within2[six months from the end of the month in which 
the order was passed], with a view to rectifying any mistake apparent from the record, amend any order 
passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice 
by the assessee or the 3[Assessing Officer]: 

Provided that an amendment which has the effect of enhancing an assessment or reducing a refund or 
otherwise  increasing  the  liability  of  the  assessee,  shall  not  be  made  under  this  sub-section  unless  the 
Appellate Tribunal has given notice to the assessee of its intention to do so and has allowed the assessee a 
reasonable opportunity of being heard: 

4[Provided further that any application filed by the assessee in this sub-section on or after the 1st day 

of October, 1998, shall be accompanied by a fee of fifty rupees.] 

5[(2A) In every appeal, the Appellate Tribunal, where it is possible, may hear and decide such appeal 
within  a  period  of  four  years  from  the  end  of  the  financial  year  in  which  such  appeal  is  filed  under  
sub-section (1) 6[or sub-section (2)] 7*** of section 253: 

8[Provided that the Appellate Tribunal may, after considering the merits  of the application made by 
the  assessee,  pass  an  order  of  stay  in  any  proceedings  relating  to  an  appeal  filed  under  sub-section  (1) 
of section 253, for a period not exceeding one hundred and eighty days from the date of such order and 
the Appellate Tribunal shall dispose of the appeal within the said period of stay specified in that order: 

Provided  further that  where  such  appeal  is  not  so  disposed  of  within  the  said  period  of  stay  as 
specified in the order of stay, the Appellate Tribunal may, on an application made in this behalf by the 
assessee and on being satisfied that the delay in disposing of the appeal is not attributable to the assessee, 
extend  the  period  of  stay,  or  pass  an  order  of  stay  for  a  further  period  or  periods  as  it  thinks  fit;  so, 
however,  that  the  aggregate  of  the  period  originally  allowed  and  the  period  or  periods  so  extended  or 
allowed shall not, in any case, exceed three hundred and sixty-five days and the Appellate Tribunal shall 
dispose of the appeal within the period or periods of stay so extended or allowed: 

9[Provided  also that  if  such  appeal  is  not  so  disposed  of  within  the  period  allowed  under  the  first 
proviso or the period or periods extended or allowed under the second proviso, which shall not, in any 
case, exceed three hundred and sixty-five days, the order of stay shall stand vacated after the expiry of 
such period or periods, even if the delay in disposing of the appeal is not attributable to the assessee.]] 

1. Sub-section (1A) omitted by Act 45 of 1972, s. 3 (w.e.f. 1-1-1973). 
2. Subs. by Act 28 of 2016, s. 96, for “four years from the date of the order” (w.e.f. 1-6-2016). 
3. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
4. Ins. by Act 21 of 1998, s. 53 (w.e.f. 1-10-1998). 
5. Ins. by Act 27 of 1999, s. 86 (w.e.f. 1-6-1999). 
6. Ins. by Act 10 of 2000, s. 68 (w.e.f. 1-6-2000). 
7. The words, brackets, figure and letter “or sub-section (2A)” omitted by Act 28 of 2016, s. 96 (w.e.f. 1-6-2016). 
8. Subs. by Act 22 of 2007, s. 75, for the provisos (w.e.f. 1-6-2007). 
9. Subs. by Act 18 of 2008, s. 50, for the third proviso (w.e.f. 1-10-2008). 

736 

 
 
 
 
 
 
 
 
                                                           
(2B) The cost of any appeal to the Appellate Tribunal shall be at the discretion of that Tribunal.] 

(3) The Appellate Tribunal shall send a copy of any orders passed under this section to the assessee 

and to the 1[2*** 3[Principal Commissioner or Commissioner]]. 

(4)  4[Save as provided in section 256 or section 260A], orders passed by the Appellate Tribunal on 

appeal shall be final. 

255.  Procedure  of  Appellate  Tribunal.—(1)  The  powers  and  functions  of  the  Appellate  Tribunal 
may be exercised and discharged by Benches constituted by the President of the Appellate Tribunal from 
among the members thereof. 

(2)  Subject  to  the  provisions  contained  in  sub-section  (3),  a  Bench  shall  consist  of  one  judicial 

member and one accountant member. 

(3)  The  President  or  any  other  member  of  the  Appellate  Tribunal  authorised  in  this  behalf  by  the 
Central  Government  may,  sitting  singly,  dispose  of  any  case  which  has  been  allotted  to  the  Bench  of 
which  he  is  a  member  and  which  pertains  to  an  assessee  whose  total  income  as  computed  by  the 
5[Assessing  Officer]  in  the  case  does  not  exceed  6[fifty  lakh  rupees],  and  the  President  may,  for  the 
disposal of any particular case, constitute a Special Bench consisting of three or more members, one of 
whom shall necessarily be a judicial member and one an accountant member. 

(4) If the members of a Bench differ in opinion on any point, the point shall be decided according to 
the opinion of the majority, if there is a majority, but if the members are equally divided, they shall state 
the point or points on which they differ, and the case shall be referred by the President of the Appellate 
Tribunal  for  hearing  on  such  point  or  points  by  one  or  more  of  the  other  members  of  the  Appellate 
Tribunal,  and  such  point  or  points  shall  be  decided  according  to  the  opinion  of  the  majority  of  the 
members of the Appellate Tribunal who have heard the case, including those who first heard it. 

(5) Subject to the provisions of this Act, the Appellate Tribunal shall have power to regulate its own 
procedure and the procedure of Benches thereof in all matters arising out of the exercise of its powers or 
of the discharge of its functions, including the places at which the Benches shall hold their sittings. 

(6)  The  Appellate  Tribunal  shall,  for  the  purpose  of  discharging  its  functions,  have  all  the  powers 
which are vested in the income-tax authorities referred to in section 131, and any proceeding before the 
Appellate  Tribunal  shall  be  deemed  to  be  a  judicial  proceeding  within  the  meaning  of sections 
193 and 228 and for the purpose of section 196 of the Indian Penal Code (45 of 1860), and the Appellate 
Tribunal shall be deemed to be a civil court for all the purposes of section 195 and Chapter XXXV of the 
Code of Criminal Procedure, 1898 (5 of 1898). 

1. Subs. by Act 4 of 1988, s. 2, for “Commissioner” (w.e.f. 1-4-1988). 

2. The words “Chief Commissioner or” omitted by Act 49 of 1991, s. 67 (w.e.f. 27-9-1991). 

3. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.e.f. 1-6-2013). 
4. The words, figures and letter shall stand substituted (date to be notified) by Act 49 of 2005, s. 30 and the Schedule to read 
as “Save as provided in the National Tax Tribunal Act, 2005” (This amendment has been struck down by the Supreme 
Court’s  Order  dated  25th  September,  2014  in  the  Madras  Bar  Association  Vs.  Union  of  India.)  Earlier  “section 
256 or section 260A” was substituted for “section 256” by Act 27 of 1999, s. 86 (w.e.f. 1-6-1999). 

5. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 

6. Subs. by Act 28 of 2016, s. 97, for “fifteen lakh rupees” (w.e.f. 1-6-2016). 

737 

 
                                                           
1[C. Reference to High Court 

256. Statement  of  case  to  the  High  Court.—(1)  The  assessee  or  the  2[Principal  Commissioner  or 
Commissioner]    may,  within  sixty  days  of  the  date  upon  which  he  is  served  with  notice  of  3[an  order 
passed  before  the  1st  day  of  October,  1998,  under section  254],  by  application  in  the  prescribed  form, 
accompanied where the application is made by the assessee by a fee of 4[two hundred rupees], require the 
Appellate Tribunal to refer to the High Court any question of law arising out of such order and, subject to 
the other provisions contained in this section, the Appellate Tribunal shall, within one hundred and twenty 
days of the receipt of such application, draw up a statement of the case and refer it to the High Court : 

Provided that  the  Appellate  Tribunal  may,  if  it  is  satisfied  that  the  applicant  was  prevented  by 
sufficient  cause from  presenting  the  application  within  the period  hereinbefore specified,  allow  it  to be 
presented within a further period not exceeding thirty days. 

(2) If, on an application made under sub-section (1), the Appellate Tribunal refuses to state the case 
on  the  ground  that  no  question  of  law  arises,  the  assessee  or  the  2[Principal  Commissioner  or 
Commissioner],  as the  case  may  be,  may,  within  six  months  from  the  date  on  which  he is  served  with 
notice  of  such  refusal,  apply  to  the  High  Court,  and  the  High  Court  may,  if  it  is  not  satisfied  with  the 
correctness of the decision of the Appellate Tribunal, require the Appellate Tribunal to state the case and 
to refer it, and on receipt of any such requisition, the Appellate Tribunal shall state the case and refer it 
accordingly. 

5[(2A) The High Court may admit an application after the expiry of the period of six months referred 
to  in sub-section  (2),  if  it  is  satisfied  that there  was sufficient cause  for  not  filing  the  same  within that 
period.] 

(3) Where in the exercise of its powers under sub-section (2), the Appellate Tribunal refuses to state a 
case which it has been required by the assessee to state, the assessee may, within thirty days from the date 
on which he receives notice of such refusal, withdraw his application, and, if he does so, the fee paid shall 
be refunded.] 

257. Statement of case to Supreme Court in certain cases.—If, on 6[an application made against an 
order  made  under section  254 before  the  1st  day  of  October,  1998,  under section  256] the  Appellate 
Tribunal is of the opinion that, on account of a conflict in the decisions of High Courts in respect of any 
particular question of law, it is expedient that a reference should be made direct to the Supreme Court, the 
Appellate Tribunal  may  draw  up  a  statement  of  the  case  and  refer it through  its  President  direct  to  the 
Supreme Court. 

7[258. Power of High Court or Supreme Court to require statement to be amended.—If the High 
Court  or  the  Supreme  Court  is  not  satisfied  that  the statements  in  a  case  referred  to  it  are  sufficient  to 
enable  it  to  determine  the questions  raised  thereby,  the  Court  may  refer  the  case  back  to  the  Appellate 
Tribunal for the purpose of making such additions thereto or alterations therein as it may direct in that 
behalf.] 

259. Case before High Court to be heard by not less than two judges.—(1) When any case has 
been  referred  to  the  High  Court  under section  256,  it  shall  be  heard  by  a  Bench  of  not  less  than  two 
Judges of the High Court, and shall be decided in accordance with the opinion of such judges or of the 
majority, if any, of such judges. 

(2) Where there is no such majority, the judges shall state the point of law upon which they differ, 
and  the  case  shall  then  be  heard  upon  that  point  only  by  one  or  more  of  the  other  judges  of  the  High 
Court, and such point shall be decided according to the opinion of the majority of the judges who have 
heard the case including those who first heard it.] 

1. Sub-heading “C. Reference to High Court” and section 256 shall stand omitted (date to be notified) by Act 49 of 2005, s. 

30 and the Schedule. 

2. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.e.f. 1-4-2013). 
3. Subs. by Act 21 of 1998, s. 55, for “and order under section 254” (w.e.f. 1-10-1998). 
4. Subs. by Act 16 of 1981, s. 20, for “one hundred and twenty-five rupees” (w.e.f. 1-6-1981). 
5. Ins. by Act 14 of 2010, s. 48 (w.e.f. 1-6-2010). 
6. Subs. by Act 21 of 1998, s. 56, for “an application made under Amendment section 256” (w.e.f. 1-10-1998). 
7. Section 258 shall stand omitted (date to be notified) by Act 49 of 2005, s. 30 and the Schedule. 

738 

                                                           
1[260. Decision of High Court or Supreme Court on the case stated.—(1) The High Court or the 
Supreme  Court  upon  hearing  any  such  case  shall  decide  the  questions  of  law  raised  therein,  and  shall 
deliver its judgment thereon containing the grounds on which such decision is founded, and a copy of the 
judgment  shall  be  sent  under  the  seal  of  the  Court  and  the  signature  of  the  Registrar  to  the  Appellate 
Tribunal  which  shall  pass  such  orders  as  are  necessary  to  dispose  of  the  case  conformably  to  such 
judgment. 

2[(1A)  Where  the  High  Court  delivers  a  judgment  in  an  appeal  filed  before  it  under  section  260A, 
effect shall be given to the order passed on the appeal by the Assessing Officer on the basis of a certified 
copy of the judgment.] 

(2) The costs of any reference to the High Court or the Supreme Court which shall not include the fee 

for making the reference shall be in the discretion of the Court.] 

3[CC. —Appeals to High Court 

260A. Appeal to High Court.—(1) An appeal shall lie to the High Court from every order passed in 
appeal by the Appellate Tribunal  4[before the date of establishment of the National Tax Tribunal], if the 
High Court is satisfied that the case involves a substantial question of law. 

(2) 5[The 6[Principal Chief Commissioner or Chief Commissioner] or the 7[Principal Commissioner or 
Commissioner]  or  an  assessee  aggrieved  by  any  order  passed  by  the  Appellate  Tribunal  may  file  an 
appeal to the High Court and such appeal under this sub-section shall be—] 

(a) filed within one hundred and twenty days from the date on which the order appealed against is 
8[received  by  the  assessee  or  the  6[Principal  Chief  Commissioner  or  Chief  Commissioner]  or 
7[Principal Commissioner or Commissioner]; 

9* 

* 

* 

* 

* 

(c) in the form of a memorandum of appeal precisely stating therein the substantial question of 

law involved. 
10[(2A) The High Court may admit an appeal after the expiry of the period of one hundred and twenty 
days  referred  to in  clause (a)  of  sub-section  (2), if it  is  satisfied that  there  was  sufficient  cause  for  not 
filing the same within that period.] 

(3) Where the High Court is satisfied that a substantial question of law is involved in any case, it shall 

formulate that question. 

(4) The  appeal  shall  be  heard  only  on  the  question  so  formulated,  and the  respondents  shall, at the 

hearing of the appeal, be allowed to argue that the case does not involve such question: 

Provided that nothing in this sub-section shall be deemed to take away or abridge the  power of the 
court  to  hear,  for  reasons  to  be  recorded,  the  appeal  on  any  other  substantial  question  of  law  not 
formulated by it, if it is satisfied that the case involves such question. 

1.The words in bracket shall stand inserted (date to be notified) by Act 49 of 2005, s. 30 and the Schedule (This Amendment 
has  been  struck  down  by  the  Supreme  Court’s  Order  dated  25th  September,  2014  in  the  Madras  Bar  Association  Vs. 
Union of India). 

2. Ins. by Act 21 of 1998, s. 57 (w.e.f. 1-10-1998). 
3. Ins. by s. 58, ibid. (w.e.f. 1-10-1998). 
4.  The  words  in  bracket  shall  stand  inserted  (date  to  be  notified)  by  Act  49  of  2005,  s.  30  and  the  Schedule  (This 
Amendment  has  been  struck  down  by  the  Supreme  Court’s  Order  dated  25th  September,  2014  in  the  Madras  Bar 
Association Vs. Union of India). 

5. Subs. by Act 27 of 1999, s. 87, for “An appeal under this sub-section shall be—” (w.e.f.1-6-1999). 
6. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.r.e.f. 1-6-2013). 
7. Subs. by s. 4, ibid., for “Commissioner” (w.r.e.f .1-6-2013).    
8. Subs. by Act 27 of 1999, s. 87, for “Communicated to the appellant” (w.e.f. 1-6-1999).  
9. Clause (b) omitted by s. 87, ibid. (w.e.f. 1-6-1999). 
10. Ins. by Act 14 of 2010, s. 49 (w.r.e.f. 1-10-1998). 

739 

 
 
 
 
 
 
 
                                                           
(5) The High Court shall decide the question of law so formulated and deliver such judgment thereon 

containing the grounds on which such decision is founded and may award such cost as it deems fit. 

(6) The High Court may determine any issue which— 

(a) has not been determined by the Appellate Tribunal; or 

(b)  has  been  wrongly  determined  by  the  Appellate  Tribunal,  by  reason  of  a  decision  on  such 

question of law as is referred to in sub-section (1). 

1[(7) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 
1908), relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this 
section.] 

260B. Case before High Court to be heard by not less than two Judges.—(1) When an appeal has 
been filed before  the High Court under section 260A, it shall be heard by a bench of not less than two 
Judges of the High Court, and shall be decided in accordance with the opinion of such Judges or of the 
majority, if any, of such Judges. 

(2) Where there is no such majority, the Judges shall state the point of law upon which they differ and 
the case shall then be heard upon that point only by one or more of the other Judges of the High Court and 
such  point  shall  be  decided  according  to the  opinion  of the  majority  of  the Judges  who  have  heard the 
case including those who first heard it.] 

D.—Appeals to the Supreme Court 

261. Appeal to Supreme Court.—An appeal shall lie to the Supreme Court from any judgment of 
the High Court 2[delivered 3[before the establishment of the National Tax Tribunal] on a reference made 
under section  256 against  an  order  made  under section  254 before  the  1st  day  of  October,  1998  or  an 
appeal made to High Court in respect of an order passed under section 254 on or after that date] in any 
case which the High Court certifies to be a fit one for appeal to the Supreme Court. 

262. Hearing before Supreme Court.—(1) The provisions of the Code of Civil Procedure, 1908 (5 
of 1908), relating to appeals to the Supreme Court shall, so far as may be, apply in the case of appeals 
under section 261 as they apply in the case of appeals from decrees of a High Court : 

Provided that  nothing  in  this  section  shall  be  deemed  to  affect  the  provisions  of  sub-section  (1) 

of section 260 or section 265. 

(2) The costs of the appeal shall be in the discretion of the Supreme Court. 

(3) Where the judgment of the High Court is varied or reversed in the appeal, effect shall be given to 
the order of the Supreme Court in the manner provided in section 260 in the case of a judgment of the 
High Court. 

1. Ins. by Act 27 of 1999, s. 87 (w.e.f. 1-6-1999). 
2.  Subs.  by  Act  21  of  1998,  s.  59,  for  the  words  and  figures  “delivered  on  a  reference  made  under  section  256”                      

(w.e.f. 1-10-1998). 

3. The words in bracket shall stand inserted (date to be notified) by Act 49 of 2005, s. 30 and the ScheduleThis amendment 
has  been  struck  down  by  the  Supreme  Court’s  Order  dated  25th  September,  2014  in  the  Madras  Bar  Association  Vs. 
Union of India.). 

740 

                                                           
E.—Revision by the 1[Principal Commissioner or Commissioner] 

263.  Revision  of  orders  prejudicial  to  revenue.—(1)  The  1[Principal  Commissioner  or 
Commissioner] may call for and examine the record of any proceeding under this Act, and if he considers 
that any order passed therein by the  2[Assessing Officer] is erroneous in so far as it is prejudicial to the 
interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making 
or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances 
of  the  case  justify,  including  an  order  enhancing  or  modifying  the  assessment,  or  cancelling  the 
assessment and directing a fresh assessment. 

3[4[Explanation  1.]—For  the  removal  of  doubts,  it  is  hereby  declared  that,  for  the  purposes  of  this  

sub-section,— 

(a)  an  order  passed  5[on  or  before  or after  the  1st day  of  June,  1988]  by  the  Assessing  Officer 

shall include— 

(i) an order of assessment made by the  6[Assistant Commissioner or Deputy Commissioner] 
or the Income-tax Officer on the basis of the directions issued by the 7[Joint Commissioner] under 
section 144A; 

(ii)  an  order  made  by  the  7[Joint  Commissioner]  in  exercise  of  the  powers  or  in  the 
performance of the functions of an Assessing Officer conferred on, or assigned to, him under the 
orders  or  directions  issued  by  the  Board  or  by  the  8[Principal  Chief  Commissioner  or  Chief 
Commissioner] or 9[Principal Director General or Director General] or 1[Principal Commissioner 
or Commissioner] authorised by the Board in this behalf under section 120; 

(b) “record”10[shall include and shall be deemed always to have included] all records relating to 
any proceeding under this Act available at the time of examination by the  1[Principal Commissioner 
or Commissioner]; 

(c) where any order referred to in this sub-section and passed by the Assessing Officer had been 
the subject matter of any appeal 5[filed on or before or after the 1st day of June, 1988], the powers of 
the  1[Principal  Commissioner  or  Commissioner]  under  this  sub-section  shall  extend  11[and  shall  be 
deemed  always  to  have  extended]  to  such  matters  as  had  not  been  considered  and  decided  in  such 
appeal.] 

1. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.e.f. 1-6-2013). 

2. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 

3. Subs. by Act 26 of 1988, s. 44, for the Explanation (w.e.f. 1-6-1988). 

4. The Explanation numbered as Explanation 1 thereof by Act 20 of 2015, s. 67 (w.e.f. 1-6-2015).  

5. Ins. by Act 13 of 1989, s. 23 (w.e.f. 1-6-1988). 

6. Subs. by Act 21 of 1998, s. 3, for “Assistant Commissioner” (w.e.f. 1-10-1998). 

7. Subs. by s. 3, ibid., for “Deputy Commissioner” (w.e.f. 1-10-1998). 

8. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). 

9. Subs. by s. 4, ibid., for “Director General” (w.e.f. 1-6-2013). 

10. Subs. by Act 13 of 1989, s. 23, for “includes” (1-6-1988). 

11. Ins. by s. 23, ibid. (w.e.f. 1-6-1988). 

741 

                                                           
1[Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the 
Assessing  Officer  shall  be  deemed  to  be  erroneous  in  so  far  as  it  is  prejudicial  to  the  interests  of  the 
revenue, if, in the opinion of the Principal Commissioner or Commissioner,— 

(a) the order is passed without making inquiries or verification which should have been made; 

(b) the order is passed allowing any relief without inquiring into the claim; 

(c) the order has not been made in accordance with any order, direction or instruction issued by 

the Board under section 119; or 

(d)  the  order  has  not  been  passed  in  accordance  with  any  decision  which  is  prejudicial  to  the 
assessee, rendered by the jurisdictional High Court or  Supreme Court in the case of the assessee or 
any other person.] 

2[(2) No order shall be made under sub-section (1) after the expiry of two years from the end of the 

financial year in which the order sought to be revised was passed.] 

(3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may 
be passed at any time in the case of an order which has been passed in consequence of, or to give effect 
to, any finding or direction contained in an order of the Appellate Tribunal, 3[National Tax Tribunal,] the 
High Court or the Supreme Court. 

Explanation.—In  computing  the  period  of  limitation  for  the  purposes  of  sub-section  (2),  the  time 
taken  in  giving  an  opportunity  to  the  assessee  to  be  reheard  under  the  proviso  to section  129 and  any 
period during which any proceeding under this section is stayed by an order or injunction of any court 
shall be excluded. 

264.Revision  of  other  orders.—(1)  In  the  case  of  any  order  other  than  an  order  to  which section 
263 applies passed by an  authority subordinate to him, the  4[Principal Commissioner or Commissioner] 
may, either of his own motion or on an application by the assessee for revision, call for the record of any 
proceeding under this Act in which any such order has been passed and may make such inquiry or cause 
such inquiry to be made and, subject to the provisions of this Act, may pass such order thereon, not being 
an order prejudicial to the assessee, as he thinks fit. 

(2)  The  4[Principal  Commissioner  or  Commissioner]  shall  not  of  his  own  motion  revise  any  order 

under this section if the order has been made more than one year previously. 

1. Ins. by Act 20 of 2015, s. 67 (w.e.f. 1-6-2015). 

2. Subs. by Act 67 of 1984, s. 47, for sub-section (2) (w.e.f. 1-10-1984). 

3. The words in bracket shall stand inserted (date to be notified) by Act 49 of 2005, s. 30 and the Schedule (This amendment 
has been struck down by the Supreme Court’s Order dated 25th September, 2014 in the Madras Bar Association Vs. 
Union of India.).  

4. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.e.f. 1-6-2013). 

742 

                                                           
(3) In the case of an application for revision under this section by the assessee, the application must 
be made within one year from the date on which the order in question was communicated to him or the 
date on which he otherwise came to know of it, whichever is earlier: 

Provided that the1[Principal Commissioner or Commissioner] may, if he is satisfied that the assessee 
was prevented by sufficient cause from  making the application within that period, admit an application 
made after the expiry of that period. 

(4) The  1[Principal Commissioner or Commissioner] shall not revise any order under this section in 

the following cases— 

(a)  where  an  appeal  against  the  order  lies  to  the  2[Deputy  Commissioner  (Appeals)]3[or  to  the 
Commissioner  (Appeals)]  or  to  the  Appellate  Tribunal  but  has  not  been  made  and  the  time  within 
which such appeal may be made has not expired, or, in the case of an appeal  4[to the Commissioner 
(Appeals) or] to the Appellate Tribunal, the assessee has not waived his right of appeal; or 

(b) where the order is pending on an appeal before the 2[Deputy Commissioner(Appeals)]; or 

(c) where the order has been made the subject of an appeal  4[to the Commissioner (Appeals) or] 

to the Appellate Tribunal. 

(5) Every application by an assessee for revision under this section shall be accompanied by 5[a fee of 

five hundred rupees]. 

6[(6) On every application by an assessee for revision under this sub-section, made on or after the 1st 
day of October, 1998, an order shall be passed within one year from the end of the financial year in which 
such application is made by the assessee for revision. 

Explanation.—In  computing  the  period  of  limitation  for  the  purposes  of  this  sub-section,  the  time 
taken  in  giving  an  opportunity  to  the  assessee  to  be  re-heard  under  the  proviso  to section  129 and  any 
period during which any proceeding under this section is stayed by an order or injunction of any court 
shall be excluded. 

(7) Notwithstanding anything contained in sub-section (6), an order in revision under sub-section (6) 
may be passed at any time in consequence of or to give effect to any finding or direction contained in an 
order of the Appellate Tribunal, 7[National Tax Tribunal,] the High Court or the Supreme Court.] 

1. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.e.f. 1-6-2013). 
2. Subs. by Act 4 of 1988, s. 2, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).  
3. Ins. by Act 29 of 1977, s. 39 and the Fifth Schedule (w.e.f. 10-7-1978). 
4. Ins. by s. 39 and the Fifth Schedule, ibid (w.e.f. 10-7-1978). 
5. Subs. by Act 14 of 2001, s. 85, for “a fee of twenty-five rupees” (w.e.f. 1-6-2001). 
6. Ins. by Act 21 of 1998, s. 60 (w.e.f. 1-10-1998). 
7. The words in bracket shall stand inserted (date to be notified) by Act 49 of 2005, s. 30 and the Schedule (This amendment 
has been struck down by the Supreme Court’s Order dated 25th September, 2014 in the Madras Bar Association Vs. 
Union of India.). 

743 

                                                           
Explanation 1.—An order by the  1[Principal Commissioner or Commissioner] declining to interfere 

shall, for the purposes of this section, be deemed not to be an order prejudicial to the assessee. 

Explanation  2.—For  the  purposes  of  this  section,  the  2[Deputy  Commissioner  (Appeals)]  shall  be 

deemed to be an authority subordinate to the 1[Principal Commissioner or Commissioner]. 

F.—General 

265.  Tax  tobe  paid  notwithstanding  reference,  etc.—Notwithstanding  that  a  reference  has  been 
made to the High Court or the Supreme Court or an appeal has been preferred to the Supreme Court, tax 
shall be payable in accordance with the assessment made in the case. 

266. Execution for costs awarded by Supreme Court.—The High Court may, on petition made for 
the  execution  of  the  order  of  the  Supreme  Court  in  respect  of  any  costs  awarded  thereby,  transmit  the 
order for execution to any court subordinate to the High Court. 

3[267. Amendment  of  assessment  on  appeal.—Where  as  a  result  of  an  appeal  under section 
246 4[or section 246A] or section 253, any change is made in the assessment of a body of individuals or 
an  association  of  persons  or  a  new  assessment  of  a body  of  individuals  or  an  association  of  persons  is 
ordered to be made, the 5*** Commissioner (Appeals) or the Appellate Tribunal, as the case may be, shall 
pass an order authorising the Assessing Officer either to amend the assessment made on any member of 
the body or association or make a fresh assessment on any member of the body or association.] 

268. Exclusion  of  time  taken  for  copy.—In  computing  the  period  of  limitation  prescribed  for  an 
appeal  6[or an application] under this Act, the day on which the order complained of was served and, if 
the assessee was not furnished with a copy of the order when the notice of the order was served upon him, 
the time requisite for obtaining a copy of such order, shall be excluded. 

7[268A.Filing  of  appeal  or  application  for  reference  by  income-tax  authority.—(1)  The  Board 
may, from time to time, issue orders, instructions or directions to other income-tax authorities, fixing such 
monetary  limits  as  it  may  deem  fit,  for  the  purpose  of  regulating  filing  of  appeal  or  application  for 
reference by any income-tax authority under the provisions of this Chapter. 

(2)  Where,  in  pursuance  of  the  orders,  instructions  or  directions  issued  under  sub-section  (1),  an 
income-tax authority has not filed any appeal or application for reference on any issue in the case of an 
assessee for any assessment year, it shall not preclude such authority from filing an appeal or application 
for reference on the same issue in the case of— 

 (a) the same assessee for any other assessment year; or 

1. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.e.f. 1-6-2013). 

2. Subs. by Act 4 of 1988, s. 2, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988). 

3. Ins. by Act 18 of 1992, s. 87 (w.e.f. 1-4-1993). 

4. Ins. by Act 10 of 2000, s. 69 (w.e.f. 1-6-2000). 

5. The words “Deputy Commissioner (Appeals) or the” omitted by Act 21 of 1998, s. 65 (w.e.f. 1-10-1998). 

6. Ins. by Act 12 of 1990, s. 42 (w.e.f. 1-4-1990). 

7. Ins. by Act 18 of 2008, s. 51 (w.r.e.f. 1-4-1999). 

744 

                                                           
 (b) any other assessee for the same or any other assessment year. 

(3)  Notwithstanding  that  no  appeal  or  application  for  reference  has  been  filed  by  an  income-tax 
authority pursuant to the orders or instructions or directions issued under sub-section (1), it shall not be 
lawful for an assessee, being a party in any appeal or reference, to contend that the income-tax authority 
has acquiesced in the decision on the disputed issue by not filing an appeal or application for reference in 
any case. 

(4) The Appellate Tribunal or Court, hearing such appeal or reference, shall have regard to the orders, 
instructions or directions issued under sub-section (1) and the circumstances under which such appeal or 
application for reference was filed or not filed in respect of any case. 

(5) Every order, instruction or direction which has been issued by the Board fixing monetary limits 
for filing an appeal or application for reference shall be deemed to have been issued under sub-section (1) 
and the provisions of sub-sections (2), (3) and (4) shall apply accordingly.] 

269. Definition of "High Court".—In this Chapter,— 

“High Court” means— 

(i) in relation to any State, the High Court for that State; 

1[(ii) in relation to the Union territory of Delhi, the High Court of Delhi; 

2* 

3* 

* 

* 

* 

* 

* 

* 

*] 

* 

(iv) in relation to the Union territory of the Andaman and Nicobar Islands, the High Court at 

Calcutta ; 

(v) in relation to the Union territory of 4[Lakshadweep], the High Court of Kerala;] 

5[(va) in relation to the Union territory of Chandigarh, the High Court of Punjab and Haryana; 

6[(vi) in relation to the Union territories of Dadra and Nagar Haveli and 7*** Daman and Diu, 

the High Court at Bombay; and 

(vii) in relation to the Union territory of Pondicherry, the High Court at Madras.] 

1. Subs. by the Punjab Reorganisation and Delhi High Court (Adaptation of Laws on Union Subjects) order, 1968, for clause 

(ii) (w.r.e.f. 1-11-1966). 

2. Clause (iia) omitted by State of Himachal Pradesh (Adaptation of Laws on Union Subjects) Order, 1973 (w.r.e.f. 25-1-

1971). 

3.  Clause (iii) omitted by Act 32 of 1994, s. 47 (w.e.f. 1-4-1995). 
4. Subs. by  the Laccadive, Minicoy and Amindivi Islands (Alteration of Name) Adaptation of Laws  Order, 1974, s. 3 and 

the Schedule, for “the Laccadive, Minicoy and Amindivi Islands” (w.r.e.f. 1-11-1973). 

5.  Ins.  by  the  Punjab  Reorganisation  and  Delhi  High  Court  (Adaptation  of  Laws  on  Union  Subjects)  Order,  1968                      

(w.r.e.f. 1-11-1966). 

6.  Ins. by Act 3 of 1963, s. 3(2) the Schedule (w.e.f. 1-4-1963). 
7. The word “Goa,” omitted by Act 32 of 994, s. 47 (w.e.f. 1-4-1995). 

745 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
1[CHAPTER XXA 

ACQUISITION OF IMMOVABLE PROPERTIES IN CERTAIN CASES OF TRANSFER TO COUNTERACT EVASION OF 
TAX 

269A. Definitions.—In this Chapter, unless the context otherwise requires,— 

(a) 2[“apparent consideration”,— 

 (1)  in  relation  to  any  immovable  property  transferred,  being  immovable  property  of  the 

nature referred to in sub-clause (i) of clause (e), means,—] 

(i) if the transfer is by way of sale, the consideration for such transfer as specified in the 

instrument of transfer; 

(ii) if the transfer is by way of exchange,— 

(A)  in  a  case  where  the  consideration  for  the  transfer  consists  of  a  thing  or  things 
only, the price that such thing or things would ordinarily fetch on sale in the open market 
on the date of execution of the instrument of transfer; 

(B) in a case where the consideration for the transfer consists of a thing or things and 
a  sum  of  money,  the  aggregate  of  the  price  that  such  thing  or  things  would  ordinarily 
fetch on sale in the open market on the date of execution of the instrument of transfer and 
such sum; 

3[(iii) if the transfer is by way of lease,— 

(A) in a case where the consideration for the transfer consists of premium only, the 

amount of premium as specified in the instrument of transfer; 

(B)  in  a  case  where  the  consideration  for  the  transfer  consists  of  rent  only,  the 
aggregate of the moneys (if any) payable by way of rent and the amounts for the service 
or  things  forming  part  of  or  constituting  the  rent,  as  specified  in  the  instrument  of 
transfer; 

(C) in a case where the consideration for the transfer consists of premium and rent, 
the aggregate of the amount of the premium, the moneys (if any) payable by way of rent 
and  the  amounts  for  the  service  or  things  forming  part  of  or  constituting  the  rent,  as 
specified in the instrument of transfer, 

and where the whole or any part of the consideration for such transfer is payable on any date or dates 
falling after the date of such transfer, the value of the consideration payable after such date shall be 
deemed to be the discounted value of such consideration, as on the date of such transfer, determined 
by adopting the rate of interest at eight per cent per annum; 

1. Chapter XXA, consisting of sections 269A to 269S, ins. by Act 45 of 1972, s. 4, (w.e.f. 15-11-1972).  
2. Subs, by Act 22 of 1981, s. 2, for “certain words” (w.e.f. 1-7-1982).    
3. Ins. by s. 2, ibid, (w.e.f. 1-7-1982). 

746 

                                                           
(2) in relation to any immovable property transferred, being immovable property of the nature 

referred to in sub-clause (ii) of clause (e), means,— 

(i)  in  a  case  where  the  consideration  for  the  transfer  consists  of  a  sum  of  money  only, 

such sum; 

(ii) in a case where the consideration for the transfer consists of a thing or things only, the 
price that such thing or things would ordinarily fetch on sale in the open market on the date of 
the transfer; 

(iii) in a case where the consideration for the transfer consists of a thing or things and a 
sum of money, the aggregate of the price that such thing or things would ordinarily fetch on 
sale in the open market on the date of the transfer and such sum, 

and where the whole or any part of the consideration for such transfer is payable on any date or dates 
falling after the date of such transfer, the value of the consideration payable after such date shall be 
deemed to be the discounted value of such consideration, as on the date of such transfer, determined 
by adopting the rate of interest at eight per cent per annum.;] 

(b)  “competent  authority”  means  1[a  2[Joint]  Commissioner]  authorised  by  the  Central 
Government  under section  269B to  perform  the  functions  of  a  competent  authority  under  this 
Chapter; 

(c) “court”  means  a  principal  civil court  of  original jurisdiction  unless  the  Central  Government 
has appointed (as it is hereby authorised to do) any special judicial officer within any specified local 
limits to perform the functions of the court under this Chapter; 

3[(d) “fair market value”,— 

 (i)  in  relation  to  any  immovable  property  transferred  by  way  of  sale  or  exchange,  being 
immovable property of the nature referred to in sub-clause (i) of clause (e), means the price that 
the  immovable  property  would  ordinarily  fetch  on  sale  in  the  open  market  on  the  date  of 
execution of the instrument of transfer of such property; 

 (ii)  in  relation  to  any  immovable  property  transferred  by  way  of  lease,  being  immovable 
property  of  the  nature  referred  to  in  sub-clause  (i)  of  clause  (e),  means  the  premium  that  such 
transfer would ordinarily fetch in the open market on the date of execution of the instrument of 
transfer of such property, if the consideration for such transfer had been by way of premium only; 

 (iii)  in  relation  to  any  immovable  property  transferred,  being  immovable  property  of  the 
nature referred to in sub-clause (ii) of clause (e), means the consideration in the form of money 
that such transfer would  ordinarily fetch in the open market on the date of the transfer, if such 
transfer had been made only for consideration in money;] 

 (e) 4[“immovable property” means,— 

(i)  any  land  or  any  building]  or  part  of  a  building,  and  includes,  where  any  land  or  any 
building or part of a building is transferred together with any machinery, plant, furniture, fittings 
or other things, such machinery, plant, furniture, fittings or other things also. 

1. Subs. by Act 3 of 1989, s. 48, for “an Assistant Commissioner of Income-tax” (w.e.f. 1-4-1988). 
2. Subs. by Act 21 of 1998, s. 3, for “Deputy Commissioner” (w.e.f. 1-10-1998).  
3. Subs. by Act 22 of 1981, s. 2, for clause (d)  (w.e.f. 1-7-1982). 
4. Subs. by s. 2, ibid., for “Immovable property means any land or any building” (w.e.f. 1-7-1982). 

747 

                                                           
Explanation.—For  the  purposes  of  this  1[sub-clause],  land,  building,  part  of  a  building,  machinery, 

plant, furniture, fittings and other things include any rights therein; 

2[(ii) any rights of the nature referred to in clause (b) of sub-section (1) of section 269AB;] 

 3[(f) “instrument of transfer” means the instrument of transfer registered under the Registration 
Act, 1908 (16 of 1908), or, as the case may be, the statement registered under section 269AB with the 
competent authority;] 

 (g) “person interested”, in relation to any immovable property, includes all persons claiming, or 
entitled  to  claim,  an  interest  in  the  compensation  payable  on  account  of  the  acquisition  of  that 
property under this Chapter ; 

4[(h) “transfer”,— 

 (i)  in  relation  to  any  immovable  property  referred  to  in  sub-clause (i)  of  clause  (e),  means 
transfer of such property by way of sale or exchange or lease for a term of not less than twelve 
years,  and  includes  allowing  the  possession  of  such  property  to  be  taken  or  retained  in  part 
performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 
1882 (4 of 1882). 

Explanation.—For  the  purposes  of  this  sub-clause,  a  lease  which  provides  for  the  extension  of  the 
term thereof by a further term or terms shall be deemed to be a lease for a term of not less than twelve 
years if the aggregate of the term for which such lease has been granted and the further term or terms for 
which it can be so extended is not less than twelve years ; 

 (ii) in relation to any immovable property of the nature referred to in sub-clause (ii) of clause 
(e), means the doing of anything (whether by way of transfer of shares in a co-operative society 
or  company  or  by  way  of  any  agreement  or  arrangement  or  in  any  other  manner  whatsoever) 
which has the effect of transferring, or enabling the enjoyment of, such property.] 

5[269AB. Registration of certain transactions.—(1) The following transactions, that is to say,— 

(a) every transaction involving the allowing of the possession of any immovable property to be 
taken  or  retained  in  part  performance  of  a  contract  of  the  nature  referred  to  in  section  53A  of  the 
Transfer of Property Act, 1882 (4 of 1882), and 

(b)  every  transaction (whether  by  way  of  becoming  a  member  of,  or  acquiring  shares  in,  a  co-
operative  society,  company  or  other  association  of  persons  or  by  way  of  any  agreement  or  any 
arrangement  of  whatever  nature)  whereby  a  person  acquires  any  rights  in  or  with  respect  to  any 
building  or  part  of  a  building  (whether  or  not  including  any  machinery,  plant,  furniture,  fittings  or 
other things therein) which has been constructed or which is to be constructed (not being a transaction 
by  way  of  sale,  exchange  or  lease  of  such  building  or  part  of  a  building  which  is  required  to  be 
registered under the Registration Act, 1908 (16 of 1908)), 

shall be reduced to writing in the form of a statement by each of the parties to such transaction or by any 
of the parties to such transaction acting on behalf of himself and on behalf of the other parties. 

(2) Every statement in respect of a transaction referred to in sub-section (1) shall— 

(a) be in the prescribed form; 

1. Subs. by Act 22 of 1981, s. 2, for “this clause” (w.e.f. 1-7-1982). 
2. Ins. by s. 2, ibid. (w.e.f. 1-7-1982). 
3. Subs. by s. 2, ibid., for clause (f) (w.e.f. 1-7-1982). 
4. Subs. by s. 2, ibid, for clause (h)  (w.e.f. 1-7-1982). 
5. Ins. by s. 3,ibid. (w.e.f. 1-7-1982). 

748 

                                                           
(b) set forth such particulars as may be prescribed ; and 

(c) be verified in the prescribed manner, 

and registered with the competent authority, in such manner and within such time as may be prescribed, 
by each of the parties to such transaction or by any of the parties to such transaction acting on behalf of 
himself and on behalf of the other parties.] 

269B.Competent  authority.—(1)  The  Central  Government  may,  by  general  or  special  order 

published in the Official Gazette, 

(a)  authorise  as  many  1[  2[Joint  Commissioners],  as  it  thinks  fit,  to  perform  the  functions  of  a 

competent authority under this Chapter ; and 

(b)  define  the  local  limits  within  which  the  competent  authorities  shall  perform  their  functions 

under this Chapter. 

(2) In respect of any function to be performed by a competent authority under any provision of this 
Chapter  in  relation  to  any  immovable  property  referred  to  in section  269C,  the  competent  authority 
referred to therein shall,— 

(a) in a case where such property is situate within the local limits of the jurisdiction of only one 

competent authority, be such competent authority ; 

(b) in a  case  where such  property  is  situate  within the  local  limits  of  the jurisdiction  of  two or 
more  competent  authorities,  be  the  competent  authority  empowered  to  perform  such  functions  in 
relation to such property in accordance with rules made in this behalf by the Board under section 295. 

3[Explanation.—For the purposes of this sub-section, immovable property, being rights of the nature 
referred to in clause (b) of sub-section (1) of section 269AB in, or with respect to, any building or part of 
a building which has been constructed or which is to be constructed shall be deemed to be situate at the 
place where the building has been constructed or is to be constructed.] 

(3) No person shall be entitled to call in question the jurisdiction of a competent authority in respect 
of  any  immovable  property  after  the  expiry  of  thirty  days  from  the  date  on  which  such  competent 
authority initiates proceedings under section 269D for the acquisition of such property. 

(4)  Subject  to  the  provisions  of  sub-section  (3),  where  the  jurisdiction  of  a  competent  authority  is 
questioned,  the  competent  authority  shall,  if  satisfied  with  the  correctness  of  the  claim,  by  order  in 
writing, determine the question accordingly and if he is not so satisfied, he shall refer the question to the 
Board and the Board shall, by order in writing, determine the question. 

269C. Immovable property in respect of which proceedings for acquisition may be taken.—(1) 
Where the competent authority has reason to believe that any immovable property of a fair market value 
exceeding  4[one  hundred  thousand  rupees]  has  been  transferred  by  a  person  (hereafter  in  this  Chapter 
referred to as the transferor) to another person (hereafter in this Chapter referred to as the transferee) for 
an  apparent  consideration  which  is  less  than  the  fair  market  value  of  the  property  and  that  the 
consideration for such transfer as agreed to between the parties has not been truly stated in the instrument 
of transfer with the object of— 

(a) facilitating the reduction or evasion of the liability of the transferor to pay tax under this Act 

in respect of any income arising from the transfer ; or 

1. Subs. by Act 3 of 1989, s. 49, for “Assistant Commissioners of Income-tax” (w.r.e.f. 1-4-1988). 
2. Subs. by Act 21 of 1998, s. 3, for “Deputy Commissioners” (w.e.f. 1-10-1998). 
3. Ins. by Act 22 of 1981, s. 4 (w.e.f. 1-7-1982). 
4. Subs. by Act 21 of 1984, s. 25, for “twenty-five thousand rupees” (w.e.f. 1-6-1984). 

749 

                                                           
(b) facilitating the concealment of any income or any moneys or other assets which have not been 
or which ought to be disclosed by the transferee for the purposes of the Indian Income-tax Act, 1922 
(11 of 1922), or this Act or the Wealth-tax Act, 1957 (27 of 1957), 

the  competent  authority  may,  subject  to  the  provisions  of  this  Chapter,  initiate  proceedings  for  the 
acquisition of such property under this Chapter: 

Provided that before initiating such proceedings, the competent authority shall record his reasons for 

doing so: 

Provided further that no such proceedings shall be initiated unless the competent authority has reason 
to believe that the fair market value of the property exceeds the apparent consideration therefor by more 
than fifteen per cent of such apparent consideration. 

(2) In any proceedings under this Chapter in respect of any immovable property,— 

(a) where the fair market value of such property exceeds the apparent consideration therefor by 
more than twenty-five per cent of such apparent consideration, it shall be conclusive proof that the 
consideration  for  such  transfer  as  agreed  to  between  the  parties  has  not  been  truly  stated  in  the 
instrument of transfer ; 

(b) where the property has been transferred for an apparent consideration which is less than its 
fair market value, it shall be presumed, unless the contrary is proved, that the consideration for such 
transfer as agreed to between the parties has not been truly stated in the instrument of transfer with 
such object as is referred to in clause (a) or clause (b) of sub-section (1). 

269D. Preliminary  notice.—(1)  The  competent  authority  shall  initiate  proceedings  for  the 
acquisition, under this Chapter, of any immovable property referred to in section 269C by notice to that 
effect published in the Official Gazette: 

Provided that no such proceedings shall be initiated in respect of any immovable property after the 
expiration of a period of 1[nine months] from the end of the month in which the instrument of transfer in 
respect of such property is registered under the Registration Act, 1908 (16 of 1908), 2[or, as the case may 
be, section 269AB]: 

Provided further that— 

(a)  in  a  case  where  it  is  determined  under  sub-section  (4)  of section  269B by  the  competent 
authority  who  has  initiated  proceedings  for  the  acquisition  of  any  immovable  property  under  this 
Chapter or by the Board that such competent authority has no jurisdiction to initiate such proceedings, 
the competent authority having jurisdiction may initiate such proceedings within— 

(i) the period of 1[nine months] specified in the foregoing proviso; or 

(ii) a period of thirty days from the date of such determination, 

whichever period expires later; 

1. Subs. by Act 66 of 1973, s. 2, for “six month” (w.r.e.f. 15-11-1972). 
2. Ins. by Act 22 of 1981, s. 5 (w.e.f. 1-7-1982). 

750 

                                                           
 (b) in a case where proceedings for the acquisition of any immovable property under this Chapter 
could  not  be  initiated  during  any  period  of  time  by  reason  of  any  injunction  or  order  of  any  court 
prohibiting  the  initiation  of  such  proceedings  or  preventing  the  examination  of  documents  or  other 
materials required to be examined for the purpose of determining whether such proceedings should be 
initiated,  the  time  of  the  continuance  of  the  injunction  or  order,  the  day  on  which  it  was  issued  or 
made and the day on which it was withdrawn shall be excluded in computing the period during which 
such proceedings may be initiated under this sub-section. 

(2) The competent authority shall— 

 (a) cause a notice under sub-section (1) in respect of any immovable property to be served on the 
transferor,  the  transferee,  the  person  in  occupation  of  the  property,  if  the  transferee  is  not  in 
occupation thereof, and on every person whom the competent authority knows to be interested in the 
property ; 

(b) cause such notice to be published— 

(i) in his office by affixing a copy thereof to a conspicuous place; 

(ii) in the locality in which the immovable property to which it relates is situate, by affixing a 
copy thereof to a conspicuous part of the property and also by making known in such manner as 
may be prescribed the substance of such notice at convenient places in the said locality. 

1[Explanation.—The provisions of the Explanation to sub-section (2) of section 269B shall apply for 

the purposes of this sub-section as they apply for the purposes of that sub-section.] 

269E. Objections.—(1)  Objections  against  the  acquisition  of  the  immovable  property  in  respect  of 
which a notice has been published in the Official Gazette under sub-section (1) of section 269D may be 
made— 

(a) by the transferor or the transferee or any other person referred to in clause (a) of sub-section 
(2) of that section, within a period of forty-five days from the date of such publication or a period of 
thirty days from the date of service of notice on such person under the said clause, whichever period 
expires later; 

(b) by any other person interested in such immovable property, within forty-five days from the 

date of such publication. 

(2) Every objection under sub-section (1) shall be made to the competent authority in writing. 

(3) For the removal of doubts, it is hereby declared that objection may be made under sub-section (1) 
that  the  provisions  of  clause  (a)  of  sub-section  (2)  of section  269C do  not  apply  in  relation  to  any 
immovable  property  on  the  ground  that  the  fair  market  value  of  such  property  does  not  exceed  the 
apparent consideration therefor by more than twenty-five per cent of such apparent consideration. 

1. Ins. by Act 22 of 1981, s. 5 (w.e.f. 1-7-1982). 

751 

                                                           
269F. Hearing of objections.—(1) The competent authority shall fix a day and place for the hearing 
of the objections made under section 269E against the acquisition under this Chapter of any immovable 
property, and shall give notice of the same to every person who has made such objection : 

Provided that  such  notice  shall  also  be  given  to  the  transferee  of  such  property  even  if  he  has  not 

made any such objection. 

(2) Every person to whom a notice is given under sub-section (1) shall have the right to be heard at 

the hearing of the objections. 

(3) The competent authority shall have the power to adjourn the hearing of the objections from time 

to time. 

(4) The competent authority may, before disposing of the objections, make such further inquiry as he 

thinks fit. 

(5) The decision of the competent authority in respect of the objections heard shall be in writing and 

shall state the reasons for the decision with respect to each objection. 

(6)  If  after  hearing  the  objections, if  any,  and  after  taking  into  account  all  the relevant  material  on 

record, the competent authority is satisfied that,— 

(a) the immovable property to which the proceedings relate is of a fair market value exceeding 

1[one hundred thousand rupees]; 

(b) the  fair  market  value  of  such  property  exceeds the  apparent  consideration  therefor  by  more 

than fifteen per cent of such apparent consideration ; and 

(c) the consideration for such transfer as agreed to between the parties has not been truly stated in 
the instrument of transfer with such object as is referred to in clause (a) or clause (b) of sub-section 
(1) of section 269C, 

he may, after obtaining the approval of the  2[Principal Commissioner or Commissioner], make an order 
for the acquisition of the property under this Chapter. 

Explanation.—In  this  sub-section,  2[Principal  Commissioner  or  Commissioner],  in  relation  to  a 
competent  authority,  means  such  2[Principal  Commissioner  or  Commissioner]  as  the  Board  may,  by 
general or special order in writing, specify in this behalf. 

(7)  If  the  competent  authority  is  not  satisfied  as  provided  in  sub-section  (6),  he  shall,  by  order  in 

writing, declare that the property will not be acquired under this Chapter. 

(8) The competent authority shall serve a copy of his order under sub-section (6) or sub-section (7), as 
the case may be, on the transferor, the transferee and on every person who has made objections against 
such acquisition under section 269E. 

1. Subs. by Act 21 of 1984, s. 26, for “twenty-five thousand rupees” (w.e.f. 1-6-1984). 
2. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.r.e.f. 1-6-2013). 

752 

                                                           
(9) In any proceedings under this Chapter in respect of any immovable property, no objection shall be 
entertained  on  the  ground that  although  the apparent consideration for  the  property  is  less than  the  fair 
market  value of the property on the  1[date of the execution of the instrument of transfer or where such 
property  is  of  the  nature  referred  to  in  sub-clause  (ii)  of  clause  (e)  of section  269A on  the  date  of  the 
transfer],  the  consideration  as  agreed  to  between  the  parties  has  been  truly  stated  in  the  instrument  of 
transfer  because  such  consideration  was  agreed  to  having  regard  to  the  price  that  such  property  would 
have  ordinarily  fetched  2[on  such  transfer  in  the  open  market  on  the  date  of  the  conclusion  of  the 
agreement  to  transfer  the  property],  except  where  such  agreement  has  been  registered  under  the 
Registration Act, 1908 (16 of 1908). 

269G. Appeal  against  order  for  acquisition.—(1)  An  appeal  may  be  preferred  to  the  Appellate 
Tribunal against the order for the acquisition of any immovable property made by the competent authority 
under section 269F,— 

(a)  by  the  transferor  or  the  transferee  or  any  other  person  referred  to  in  sub-section  (8)  of  that 
section, within a period of forty-five days from the date of such order or a period of thirty days from 
the date of service of a copy of the order on such person under the said sub-section, whichever period 
expires later; 

(b) by any other person interested in such immovable property, within forty-five days from the 

date of such order: 

Provided that the Appellate Tribunal may, on an application made in this behalf before the expiry of 
the said period of forty-five days or, as the case may be, thirty days, permit, by order, the appeal to be 
presented  within such  further period  as  may  be  specified  therein  if the  applicant  satisfies the  Appellate 
Tribunal  that  he  has  sufficient  cause  for  not  being  able  to  present  the  appeal  within  the  said  period  of 
forty-five days or, as the case may be, thirty days. 

(2)  Every  appeal  under  this  section  shall  be  in  the  prescribed  form  and  shall  be  verified  in  the 

prescribed manner and shall be accompanied by a fee of 3[two hundred rupees]. 

(3) The Appellate Tribunal shall fix a day and place for the hearing of the appeal and shall give notice 

of the same to the appellant and to the competent authority. 

(4) The Appellate Tribunal may, after giving the appellant and the competent authority an opportunity 

of being heard, pass such orders thereon as it thinks fit. 

(5) The Appellate Tribunal may, at any time within thirty days from the date of the order, with a view 
to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (4) 
and shall make such amendment if the mistake is brought to its notice by the appellant or the competent 
authority: 

Provided that if any such amendment is likely to affect any person prejudicially, it shall not be made 

without giving to such person a reasonable opportunity of being heard. 

(6) The Appellate Tribunal shall send a copy of any orders passed under this section to the appellant 

and to the 4[Principal Commissioner or Commissioner]. 

(7)  Save  as  provided  in section  269H,  orders  passed  by  the  Appellate  Tribunal  on  appeal  shall  be 

final. 

1. Subs. by Act 22 of 1981, s. 6, for “date of execution of the instrument of transfer” (w.e.f. 1-7-1982). 
2. Subs. by s. 6, ibid., for “on sale in the open market on the date of the conclusion of the agreement to sell the property” 

(w.e.f. 1-7-1982). 

3. Subs. by Act 16 of 1981, s. 21, for “one hundred and twenty-five rupees” (w.e.f. 1-6-1981). 
4. Subs. by Act 25 of 2014, s. 4, for “commissioner” (w.r.e.f. 1-6-2013). 

753 

                                                           
(8) Every appeal under this section shall be disposed of as expeditiously as possible and endeavour 

shall be made to dispose of every such appeal within ninety days from the date on which it is presented. 

(9)  The  provisions  of section  255 (except  sub-section  (3)  thereof)  shall,  so  far  as  may  be,  apply  in 
relation  to  the  powers,  functions  and  proceedings  of  the  Appellate  Tribunal  under  this  section  as  they 
apply in relation to the powers, functions and proceedings of the Appellate Tribunal under Chapter XX. 

269H. Appeal to High Court.—(1) The  1[Principal Commissioner or Commissioner] or any person 
aggrieved by any order of the Appellate Tribunal under section 269G may, within sixty days of the date 
on which he is served with notice of such order under that section, prefer an appeal against such order to 
the High Court on any question of law : 

Provided that the High Court may, on an application made in this behalf before the expiry of the said 
period of sixty days, permit, by order, the appeal to be presented within such further period as may be 
specified therein, if the applicant satisfies the High Court that he has sufficient cause for not being able to 
present the appeal within the said period of sixty days. 

(2) An appeal under sub-section (1) shall be heard by a Bench of not less than two Judges of the High 
Court and the provisions of section 259 shall apply in relation to any such appeal as they apply in relation 
to a case referred to the High Court under section 256. 

(3) The costs of the appeal shall be in the discretion of the High Court. 

269-I. Vesting  of  property  in  Central  Government.—(1)  As  soon  as  may  be  after  the  order  for 
acquisition  of  any  immovable  property  made  undersub-section  (6)  of section  269F becomes  final,  the 
competent  authority  may,  by  notice  in  writing,  order  any  person  who  may  be  in  possession  of  the 
immovable  property  to  surrender  or  deliver  possession  thereof  to  the  competent  authority  or  any  other 
person duly authorised in writing by the competent authority in this behalf, within thirty days of the date 
of the service of the notice. 

Explanation.—For  the  purposes  of  this  sub-section,  an  order  for  the  acquisition  of  any  immovable 
property (hereafter in this Explanation referred to as the order for acquisition) made under sub-section (6) 
of section 269F becomes final,— 

(a) in a case where the order for acquisition is not made the subject of an appeal to the Appellate 
Tribunal  under section  269G,  upon  the  expiry  of  the  period  during  which  such  appeal  may  be 
presented under that section; 

(b)  in  a  case  where  the  order  for  acquisition  is  made  the  subject  of  an  appeal  to  the  Appellate 

Tribunal under section 269G,— 

(i)  if  the  order  for  acquisition  is  confirmed  by  the  Appellate  Tribunal  and  the  order  of  the 
Appellate Tribunal is not made the subject of an appeal to the High Court under section 269H, 
upon the expiry of the period during which such appeal may be presented under that section to the 
High Court; 

(ii) if the order of the Appellate Tribunal is made the subject of an appeal to the High Court 

under section 269H, upon the confirmation of the order for acquisition by the High Court. 

(2)  If  any  person  refuses  or  fails  to  comply  with  the  notice  under  sub-section  (1),  the  competent 
authority  or  other  person  duly  authorised  by  the  competent  authority  under  that  sub-section  may  take 
possession of the immovable property and may, for that purpose, use such force as may be necessary. 

1. Subs. by Act 25 of 2014, s. 4, for “commissioner” (w.r.e.f. 1-6-2013). 

754 

                                                           
(3)  Notwithstanding  anything  contained  in  sub-section  (2),  the  competent  authority  may,  for  the 
purpose of taking possession of any property referred to in sub-section (1), requisition the services of any 
police officer to assist him and it shall be the duty of such officer to comply with such requisition. 

(4) When the possession of the immovable property is surrendered or delivered under sub-section (1) 
to the competent authority or a person duly authorised by him in that behalf or, as the case may be, when 
the possession thereof is taken under sub-section (2) or sub-section (3) by such authority or person, the 
property shall vest absolutely in the Central Government free from all encumbrances: 

Provided that nothing in this sub-section shall operate to discharge the transferee or any other person 
(not being the Central Government) from liability in respect of such encumbrances and, notwithstanding 
anything contained in any other law, such liability may be enforced against the transferee or such other 
person by a suit for damages. 

1[(5) Notwithstanding anything contained in sub-section (4) or any other law or any instrument or any 
agreement for the time being in force, where an order for acquisition of any immovable property, being 
rights of the nature referred to in clause (b) of sub-section (1) of section 269AB, in or with respect to any 
building or part of a building which has been constructed or which is to be constructed, has become final, 
then, such order shall, by its own force, have the effect of— 

(a) vesting such rights in the Central Government, and 

(b) placing the Central Government in the same position in relation to such rights as the person in 

whom such rights would have continued to vest if such order had not become final, 

and the competent authority  may issue such directions as he may deem fit to any person concerned for 
taking the necessary steps for compliance with the provisions of clauses (a) and (b).] 

(6)  In  the  case  of  any  immovable  property,  being  rights  of  the  nature  referred  to  in  clause  (b)  of         

sub-section (1) of section 269AB, in or with respect to any building or part of a building, the provisions of 
sub-sections (1), (2) and (3) shall have effect as if the references to immovable property therein were a 
reference to such building or, as the case may be, part of such building.] 

269J. Compensation.—(1)  Where  any  immovable  property  is  acquired  under  this  Chapter,  the 
Central  Government  shall  pay  for  such  acquisition  compensation  which  shall  be  a  sum  equal  to  the 
aggregate  of  the  amount  of  the  apparent  consideration  for  its  transfer  and  fifteen  per  cent  of  the  said 
amount: 

2[Provided that in a case where, under the agreement between the parties concerned, the whole or any 
part  of  the  consideration  for  the  transfer  of  such  immovable  property  is  payable  on  any  date  or  dates 
falling  after  the  date  on  which  such  property  is  acquired,  the  compensation  payable  by  the  Central 
Government shall be the aggregate of the following amounts, namely:— 

(i) an amount equal to fifteen per cent of the apparent consideration; 

(ii) the amount, if any, that has become payable in accordance with such agreement on or before 

the date on which such property is acquired under this Chapter ; and 

(iii) the amount payable after the date on which such property is acquired under this Chapter.] 

1. Ins. by Act 22 of 1981, s. 7 (w.e.f. 1-7-1982). 
2. Ins. by s. 8 ibid. (w.e.f. 1-7-1982). 

755 

                                                           
(2) Notwithstanding anything contained in sub-section (1),— 

(a)  where,  after  the  transfer  to  the  transferee  of  the  property  referred  to  in  that  sub-section  but 
before  the  vesting  of  the  property  in  the  Central  Government,  the  property  has  been  damaged 
(otherwise than as a result of normal wear and tear), the compensation payable under that sub-section 
shall  be  reduced  by  such  amount  as  the  competent  authority  and  the  persons  entitled  to  the 
compensation may agree within fifteen days of the vesting of the property in the Central Government 
or  in  default  of  such  agreement  as  the  court  may,  on  a  reference  made  to  it  in  this  behalf  by  the 
competent  authority  or  by  any  person  duly  authorised  for  the  purpose  by  the  competent  authority, 
determine to be the amount that may have to be expended for restoring the property to the condition 
in which it was at the time of such transfer ; 

 (b) where, after the transfer of such property to the transferee but before the date of publication 
in the Official Gazette of the notice in respect of such property under sub-section (1) of section 269D, 
any improvements have been made to the property, whether by way of addition or alteration or in any 
other  manner,  the  compensation  payable  in  respect  of  such  property  under  sub-section  (1)  shall  be 
increased  by  such  amount  as  the  competent  authority  and  the  persons  entitled  to  the  compensation 
may agree within fifteen days of the vesting of the property in the Central Government or in default 
of  such  agreement  as  the  court  may,  on  a  reference  made  to  it  in  this  behalf  by  the  competent 
authority or by any person duly authorised for the purpose by the competent authority, determine to 
be the amount spent for making such improvements. 

(3) Every reference under clause (a) or clause (b) of sub-section (2) shall be made within thirty days 
of  the  date  on  which  the  immovable  property  to  which  it  relates  becomes  vested  in  the  Central 
Government or within such further period as the court may, on an application made in this behalf before 
the expiry of the said period and on being satisfied that there is sufficient cause for doing so, allow and 
such  reference  shall  state  clearly  the  compensation  payable  under  sub-section  (1)  in  respect  of  the 
immovable property and the amount by which, according to the estimate of the competent authority, such 
compensation  shall  be  reduced  under  clause  (a)  or,  as  the  case  may  be,  increased  under  clause  (b),  of      
sub-section (2). 

(4)  The  amount  by  which  the  compensation  payable  under  sub-section  (1)  in  respect  of  any 
immovable  property  acquired  under  this  Chapter  falls  short  of  the  amount  which  would  have  been 
payable as compensation if that property had been acquired under the Land Acquisition Act, 1894 (1 of 
1894), after the issue of a preliminary notice under section 4 of that Act on the date of publication in the 
Official Gazette of the notice in respect of the property under sub-section (1) of section 269D, shall be 
deemed  to  have  been  realised  by  the  Central  Government  as  a  penalty  from  the  transferee  for  being  a 
party  to  a  transfer  with  such  object  as  is  referred  to  in  clause  (a)  or  clause  (b)  of  sub-section  (1)  of              
 section 269C, and no penalty shall be levied for any assessment year on the transferee— 

(a) under clause (iii) of sub-section (1) of section 271, for concealing the particulars or furnishing 
inaccurate particulars of so much of his income as is utilised by him for paying to the transferor, by 
way  of  consideration  for  the  property,  any  amount  in  excess  of  the  apparent  consideration  for  the 
property, notwithstanding that such amount is included in the income of the transferee; 

(b) under clause (iii) of sub-section (1) of section 18 of the Wealth-tax Act, 1957 (27 of 1957), 
for  concealing  the  particulars  or  furnishing  inaccurate  particulars  of  so  much  of  his  assets  as  are 
utilised by him for paying to the transferor, by way of consideration for the property, any amount in 
excess of the apparent consideration for the property, notwithstanding that such assets are included in 
the net wealth of the transferee. 

269K. Payment  or  deposit  of  compensation.—(1)  The  amount  of  compensation  payable  in 
accordance  with  the  provisions  of section  269J for  the  acquisition  of  any  immovable  property  shall  be 
tendered to the person or persons entitled thereto, as soon as may be, after the property becomes vested in 
the Central Government under sub-section (4) of section 269-I: 

756 

1[Provided that  in  a  case  falling  under  the  proviso  to  sub-section  (1)  of section  269J,  the  amounts 
referred to in clause (i) and clause (ii) of that proviso shall be tendered to the person or persons entitled 
thereto, as soon as may be, after the property becomes vested in the Central Government under section 
269-I, and the amount referred to in clause (iii) of the said proviso shall be tendered on the date on which 
it  would  be  payable  in  accordance  with  the  agreement  between  the  parties  concerned,  and  where  such 
amount is payable in instalments on different dates, then in such instalments on those dates: 

Provided  further that]  in  any  case  where a  reference is  or  has to  be  made  under  sub-section (2)  of             

section 269J to the court for the determination of the amount by which the compensation payable under 
sub-section (1) of that section shall be reduced or increased, the amount of such compensation as reduced 
or increased by the amount estimated in that behalf by the competent authority for the purposes of such 
reference shall be tendered as aforesaid. 

(2)  Notwithstanding  anything  contained  in  sub-section  (1),  if  any  dispute  arises  as  to  the 
apportionment  of  the  compensation  amongst  persons  claiming  to  be  entitled  thereto,  the  Central 
Government shall deposit in the court the compensation required to be tendered under sub-section (1) and 
refer such dispute for the decision of the court and the decision of the court thereon shall be final. 

(3) Notwithstanding anything contained in sub-section (1), if the persons entitled to compensation do 
not consent to receive it, or if there is no person competent to alienate the immovable property, or if there 
is  any  dispute  as  to  the  title  to  receive  the  compensation,  the  Central  Government  shall  deposit  in  the 
court the compensation required to be tendered under sub-section (1) and refer the matter for the decision 
of the court: 

Provided that  nothing  herein  contained  shall  affect  the  liability  of  any  person  who  may  receive  the 
whole or any part of the compensation for any immovable property acquired under this Chapter to pay the 
same to the person lawfully entitled thereto. 

(4) If the Central Government fails to tender under sub-section (1) or deposit under sub-section (2) or 
sub-section (3) the whole or any part of the compensation required to be tendered or deposited thereunder 
within  thirty  days  of  the  date  on  which  the  immovable  property  to  which  the  compensation  relates 
becomes  vested  in  the  Central  Government  under  sub-section  (4)  of section  269-I,  the  Central 
Government shall be liable to pay simple interest at the rate of  2[fifteen per cent per.] annum reckoned 
from the day immediately following the date of expiry of the said period up to the date on which it so 
tenders or deposits such compensation or, as the case may be, such part of the compensation. 

(5) Where any amount of compensation (including interest, if any, thereon) has been deposited in the 
court under this section, the court may, either of its own motion or on an application made by or on behalf 
of any party interested or claiming to be interested in such amount, order the same to be invested in such 
Government or other securities as it may think proper, and may direct the interest or other proceeds of any 
such  investment  to  be  accumulated  and  paid  in  such  manner  as  will,  in  its  opinion,  give  the  parties 
interested  therein  the  same  benefit  therefrom  as  they  might  have  had  from  the  immovable  property  in 
respect whereof such amount has been deposited or as near thereto as may be. 

269L. Assistance by Valuation Officers.—(1) The competent authority may,— 

(a)  for  the  purpose  of  initiating  proceedings  for  the  acquisition  of  any  immovable  property 
under section  269C or  for  the  purpose  of  making  an  order  under section  269F in  respect  of  any 
immovable property, require a Valuation Officer to determine the fair market value of such property 
and report the same to him; 

1. Subs. by Act 22 of 1981, s. 9, for “Provided that” (w.e.f. 1-7-1982). 
2. Subs. by Act 67 of 1984, s. 24, for “twelve per cent.” (w.e.f. 1-10-1984). 

757 

                                                           
(b)  for  the  purpose  of  estimating  the  amount  by  which  the  compensation  payable  under  sub-
section (1) of section 269J in respect of any immovable property may be reduced or, as the case may 
be, increased under clause (a) or clause (b) of sub-section (2) of that section, require the Valuation 
Officer to make such estimate and report the same to him. 

(2) The Valuation Officer to whom a reference is made under clause (a) or clause (b) of sub-section 
(1) shall, for  the  purpose  of  dealing  with such reference,  have  all  the  powers that  he has under  section 
38A of the Wealth-tax Act, 1957 (27 of 1957). 

(3) If in an appeal under section 269G against the order for acquisition of any immovable property, 
the fair market value of such property is in dispute, the Appellate Tribunal shall, on a request being made 
in  this  behalf  by  the  competent  authority,  give  an  opportunity  of  being  heard  to  any  Valuation  Officer 
nominated for the purpose by the competent authority. 

Explanation.—In this section, “Valuation Officer” has the same meaning as in clause (r) of section 2 

of the Wealth-tax Act, 1957 (27 of 1957). 

269M. Powers  of  competent  authority.—The  competent  authority  shall  have,  for  the  purposes  of 
this Chapter, all the powers that a  1[Principal Commissioner or Commissioner] has, for the purposes of 
this Act, under section 131. 

269N. Rectification of mistakes.—With a view to rectifying any mistake apparent from the record, 
the  competent  authority  may  amend  any  order  made  by  him  under  this  Chapter  at  any  time  before  the 
time for presenting an appeal against such order has expired, either on his own motion or on the mistake 
being brought to his notice by any person affected by the order: 

Provided that if any such amendment is likely to affect any person prejudicially, it shall not be made 

without giving to such person a reasonable opportunity of being heard. 

269-O. Appearance  by  authorised  representative  or  registered  valuer.—Any  person  who  is 
entitled or  required  to  attend  before  a  competent authority  or  the  Appellate Tribunal  in  any  proceeding 
under  this  Chapter,  otherwise  than  when  required  to  attend  personally  for  examination  on  oath  or 
affirmation, may attend— 

(a) by an authorised representative in connection with any matter; 

(b)  by  a  registered  valuer  in  connection  with  any  matter  relating  to  the  valuation  of  any 
immovable  property  for the  purposes  of this  Chapter  or the  estimation of the  amount  by  which the 
compensation  payable  under  sub-section  (1)  of section  269J for  the  acquisition  of  any  immovable 
property may be reduced or, as the case may be, increased in accordance with the provisions of clause 
(a) or clause (b) of sub-section (2) of that section. 

Explanation.—In this section,— 

(i) “authorised representative” has the(b) by a registered valuer in connection with any matter 
relating to the valuation of any immovable property for the purposes of this Chapter or the estimation 
of  the  amount  by  which  the  compensation  payable  under  sub-section  (1)  of section  269J for  the 
acquisition  of  any  immovable  property  may  be  reduced  or,  as  the  case  may  be,  increased  in 
accordance with the provisions of clause (a) or clause (b) of sub-section (2) of that section. 

Explanation.—In this section,— 

(i) “authorised representative” has the same meaning as in section 288; 

(ii) “registered  valuer”  has  the same  meaning  as  in  clause  (oaa) of section  2  of  the Wealth-tax 

Act, 1957 (27 of 1957). 

1. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.r.e.f. 1-6-2013). 

758 

                                                           
269P. Statement  to  be  furnished  in  respect  of  transfers  of  immovable  property.—(1) 
Notwithstanding  anything contained  in  any  other  law  for  the  time  being  in  force,  no registering  officer 
appointed under the Registration Act, 1908 (16 of 1908), shall register any document which purports to 
transfer  any  immovable  property  belonging  to  any  person  unless  a  statement  in  duplicate  in  respect  of 
such  transfer,  in  the  prescribed  form  and  verified  in  the  prescribed  manner  and  setting  forth  such 
particulars as may be prescribed, is furnished to him along with the instrument of transfer : 

1[Provided that the provisions of this sub-section shall not apply in relation to any document which 
purports to transfer any immovable property for an apparent consideration not exceeding  2[fifty thousand 
rupees]. 

Explanation.—For  the  purposes  of  this  proviso,  “apparent  consideration”  shall  have  the  meaning 
assigned  to  it  in  clause  (a)  of section  269A subject  to  the  modifications  that  for  the  expressions 
“immovable property transferred” and “instrument of transfer” occurring in that clause, the expressions 
“immovable property purported to be transferred” and “document purporting to transfer such immovable 
property” shall, respectively, be substituted.] 

(2) The registering officer shall, at the end of every fortnight, forward to the competent authority,— 

(a) one set of the statements received by him under sub-section (1) during the fortnight ; and 

(b) a return in the prescribed form and verified in the prescribed manner and setting forth such 
particulars as may be prescribed in respect of documents of the nature referred to in sub-section (1) 
which have been registered by him during the fortnight. 

269Q. Chapter  not  to  apply  to  transfers  to  relatives.—The  provisions  of  this  Chapter  shall  not 
apply to or in relation to any transfer of immovable property made by a person to his relative on account 
of natural love and affection for a consideration which is less than its fair market value if a recital to that 
effect is made in the instrument of transfer. 

269R. Properties  liable  for  acquisition  under  this  Chapter  not  to  be  acquired  under  other 
laws.—Notwithstanding  anything  contained  in  the  Land  Acquisition  Act,  1894  (1  of  1894),  or  any 
corresponding law for the time being in force, no immovable property referred to in section 269C shall be 
acquired  for  any  purpose  of  the  Union  under  that  Act  or  such  law  unless  the  time  for  initiation  of 
proceedings for the acquisition of such property under this Chapter has expired without such proceedings 
having  been  initiated  or  unless  the  competent  authority  has  declared  that  such  property  will  not  be 
acquired under this Chapter. 

3[269RR. Chapter  not  to  apply  where  transfer  of  immovable  property  made  after  a  certain 
date.—The provisions of this Chapter shall not apply to or in relation to the transfer of any immovable 
property made after the 30th day of September, 1986.] 

269S. Chapter  not  to  extend  to  State  of  Jammu  and  Kashmir.—The  provisions  of  this  Chapter 

shall not extend to the State of Jammu and Kashmir. 

1. Ins. by Act 66 of 1973, s. 2 (w.e.f. 1-1-1974). 
2. Subs. by Act 21 of 1984, s. 27, for “ten thousand rupees” (w.e.f. 1-6-1984). 
3. Ins. by Act 23 of 1986, s. 33 (w.e.f. 1-10-1986). 

759 

                                                           
1[CHAPTER XXB 

REQUIREMENT AS TO 2[MODE OF ACCEPTANCE, PAYMENT OR REPAYMENT]  
IN CERTAIN CASES TO COUNTERACT EVASION OF TAX 

3[269SS.Mode of taking or accepting certain loans, deposits and specified sum.—No person shall 
take  or  accept  from  any  other  person  (herein  referred  to  as  the  depositor),  any  loan  or  deposit  or  any 
specified  sum,  otherwise  than  by  an  account  payee  cheque  or  account  payee  bank  draft  or  use  of 
electronic clearing system through a bank account, if,— 

(a) the  amount  of  such  loan  or  deposit  or specified  sum  or  the  aggregate  amount  of  such  loan, 

deposit and specified sum; or 

(b) on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or 
specified  sum  taken  or  accepted  earlier  by  such  person  from  the  depositor  is  remaining  unpaid 
(whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or 

(c) the amount or the aggregate amount referred to in clause (a) together with the amount or the 

aggregate amount referred to in clause (b), 

is twenty thousand rupees or more: 

Provided that  the  provisions  of  this  section  shall  not  apply  to  any  loan  or  deposit  or  specified  sum 

taken or accepted from, or any loan or deposit or specified sum taken or accepted by,— 

(a) the Government; 

(b) any banking company, post office savings bank or co-operative bank; 

(c) any corporation established by a Central, State or Provincial Act; 

(d) any Government company as defined in clause (45) of section 2 of the Companies Act, 2013 

(18 of 2013); 

(e) such other institution, association or body or class of institutions, associations or bodies which 
the  Central  Government  may,  for  reasons  to  be  recorded  in  writing,  notify  in  this  behalf  in  the 
Official Gazette: 

Provided  further that  the  provisions  of  this  section  shall  not  apply  to  any  loan  or  deposit  or 
specified sum, where the person from whom the loan or deposit or specified sum is taken or accepted 
and the person by whom the loan or deposit or specified sum is taken or accepted, are both having 
agricultural income and neither of them has any income chargeable to tax under this Act. 

Explanation.—For the purposes of this section,— 

(i) “banking company” means a company to which the provisions of the Banking Regulation Act, 
1949 (10 of 1949) applies and includes any bank or banking institution referred to in section 51 of 
that Act; 

(ii) “co-operative bank” shall have the same meaning as assigned to it in Part V of the Banking 

Regulation Act, 1949 (10 of 1949); 

(iii) “loan or deposit” means loan or deposit of money; 

(iv)  “specified  sum”  means  any  sum  of  money  receivable,  whether  as  advance  or  otherwise, in 

relation to transfer of an immovable property, whether or not the transfer takes place.] 

1. Ins. by Act 38 of 1981, s. 2 (w.e.f. 11-7-1981). 
2. Subs. by Act 21 of 1984, s. 28, for “MODE OF REPAYMENT” (w.e.f. 1-4-1984). 
3. Subs. by Act 20 of 2015, s. 68, for section 269SS (w.e.f. 1-6-2015). 

760 

 
                                                           
1[269ST.  Mode  of  undertaking  transactions.—No  person  shall  receive  an  amount  of  two  lakh 

rupees or more— 

(a) in aggregate from a person in a day; or 

(b) in respect of a single transaction; or 

(c) in respect of transactions relating to one event or occasion from a person,  

otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing 
system through a bank account: 

Provided that the provisions of this section shall not apply to— 

(i) any receipt by— 

(a) Government; 

(b) any banking company, post office savings bank or co-operative bank; 

(ii) transactions of the nature referred to in section 269SS; 

(iii)  such  other persons or class  of  persons  or receipts,  which  the  Central  Government  may,  by 

notification in the Official Gazette, specify. 

Explanation.—For the purposes of this section,— 

(a)  “banking  company”  shall  have  the  same  meaning  as  assigned  to  it  in  clause  (i)  of  the 

Explanation to section 269SS; 

(b)  “co-operative  bank”  shall  have  the  same  meaning  as  assigned  to  it  in  clause  (ii)  of  the 

Explanation to section 269SS.] 

2[269T.Mode of repayment of certain loans or deposits.—No branch of a banking company or a  
co-operative bank and no other company or co-operative society and no firm or other person shall repay 
any loan or deposit made with it 3[or any specified advance received by it] otherwise than by an account 
payee  cheque  or  account  payee  bank  draft  drawn  in  the  name  of  the  person  who  has  made  the  loan  or 
deposit 3[or paid the specified advance,] 4[or by use of electronic clearing system through a bank account] 
if— 

(a)  the  amount  of  the  loan  or  deposit  3[or  specified  advance]  together  with  the  interest,  if  any, 

payable thereon, or 

(b)  the  aggregate  amount  of  the  loans  or  deposits  held  by  such  person  with  the  branch  of  the 
banking  company  or  co-operative  bank  or,  as  the  case  may  be,  the  other  company  or  co-operative 
society or the firm, or other person either in his own name or jointly with any other person on the date 
of such repayment together with the interest, if any, payable on such loans or deposits, 3[or] 

3[(c) the aggregate amount of the specified advances received by such person either in his own 
name or jointly with any other person on the date of such repayment together with the interest, if any, 
payable on such specified advances,] 

1. Ins. by Act 7 of 2017, s. 84 (w.e.f. 1-4-2017). 

2. Subs. by Act 20 of 2002, s. 99, for section 269T (w.e.f. 1-6-2002). 

3. Ins. by Act 20 of 2015, s. 69 (w.e.f. 1-6-2015). 

4. Ins. by Act 25 of 2014, s. 69 (w.e.f. 1-4-2015). 

761 

                                                           
is twenty thousand rupees or more: 

Provided that where the repayment is by a branch of a banking company or co-operative bank, such 
repayment may also be made by crediting the amount of such loan or deposit to the savings bank account 
or  the  current  account  (if any)  with such  branch of the  person to  whom  such loan  or  deposit  has to  be 
repaid: 

1[Provided  further that  nothing  contained  in  this  section  shall  apply  to  repayment  of  any  loan  or 

deposit 2[or specified advance] taken or accepted from— 

(i) Government; 

(ii) any banking company, post office savings bank or co-operative bank; 

(iii) any corporation established by a Central, State or Provincial Act; 

(iv)  any  Government  companyas  defined  in  section  617  of  the  Companies  Act,  1956  

(1 of 1956); 

(v) such other institution, association or body or class of institutions, associations or bodies which 
the  Central  Government  may,  for  reasons  to  be  recorded  in  writing,  notify  in  this  behalf  in  the 
Official Gazette.] 

Explanation.—For the purposes of this section,— 

(i)  “banking  company”  shall  have 

the  meaning  assigned 

to 

it 

in  clause 

(i)  of 

the Explanation to section 269SS; 

(ii) “co-operative bank” shall have the meaning assigned to it in Part V of the Banking Regulation 

Act, 1949 (10 of 1949); 

(iii)  “loan  or  deposit”  means  any  loan  or  deposit  of  money  which  is  repayable  after  notice  or 
repayable after a period and, in the case of a person other than a company, includes loan or deposit of 
any nature;]] 

2[(iv) “specified advance” means any sum of money in the nature of advance, by whatever name 

called, in relation to transfer of an immovable property, whether or not the transfer takes place.] 

3[269TT.Mode  of  repayment  of  Special  Bearer  Bonds,  1991.—Notwithstanding  anything 
contained  in  any  other  law  for  the  time  being  in  force,  the  amount  payable  on  redemption  of  Special 
Bearer Bonds, 1991, shall be paid only by an account payee cheque or account payee bank draft drawn in 
the name of the person to whom such payment is to be made.] 

1. Ins. by Act 32 of 2003, s. 94 (w.e.f. 1-6-2002). 

2. Ins. by Act 20 of 2015, s. 69 (w.e.f. 1-6-2015). 

3. Ins. by Act 38 of 1981, s. 3 (w.e.f. 19-9-1981). 

762 

                                                           
1[CHAPTER XXC 

PURCHASE BY CENTRAL GOVERNMENT OF IMMOVABLE PROPERTIES IN CERTAIN CASES OF TRANSFER 

269U. Commencement of Chapter.—The provisions of this Chapter shall come into force on such 
date as the Central Government may, by notification in the Official Gazette, appoint, and different dates 
may be appointed for different areas. 

269UA. Definitions.—In this Chapter, unless the context otherwise requires,— 

(a) “agreement for transfer” means an agreement, whether registered under the Registration Act, 

1908 (16 of 1908) or not, for the transfer of any immovable property ; 

(b) “apparent consideration”,— 

(1)  in  relation  to  any  immovable  property  in  respect  of  which  an  agreement  for  transfer  is 
made, being immovable property of the nature referred to in sub-clause (i) of clause (d), means,— 

(i)  if  the  immovable  property  is  to  be  transferred  by  way  of  sale,  the  consideration  for 

such transfer as specified in the agreement for transfer; 

(ii) if the immovable property is to be transferred by way of exchange,— 

(A)  in  a  case  where  the  consideration  for  the  transfer  consists  of  a  thing  or  things 
only, the price that such thing or things would ordinarily fetch on sale in the open market 
on the date on which the agreement for transfer is made; 

(B) in a case where the consideration for the transfer consists of a thing or things and 
a  sum  of  money,  the  aggregate  of  the  price  that  such  thing  or  things  would  ordinarily 
fetch on sale in the open market on the date on which the agreement for transfer is made, 
and such sum; 

(iii) if the immovable property is to be transferred by way of lease,— 

(A) in a case where the consideration for the transfer consists of premium only, the 

amount of premium as specified in the agreement for transfer; 

(B)  in  a  case  where  the  consideration  for  the  transfer  consists  of  rent  only,  the 
aggregate of the moneys (if any) payable by way of rent and the amounts for the service 
or  things  forming  part  of  or  constituting  the  rent,  as  specified  in  the  agreement  for 
transfer; 

(C) in a case where the consideration for the transfer consists of premium and rent, 
the aggregate of the amount of the premium, the moneys (if any) payable by way of rent 
and  the  amounts  for  the  service  or  things  forming  part  of  or  constituting  the  rent,  as 
specified in the agreement for transfer, 

and where the whole or any part of the consideration for such transfer is payable on any date or 
dates falling after the date of such agreement for transfer, the value of the consideration payable 
after such date shall be deemed to be the discounted value of such consideration, as on the date of 
such agreement for transfer, determined by adopting such rate of interest as may be prescribed in 
this behalf; 

(2)  in  relation  to  any  immovable  property  in  respect  of  which  an  agreement  for  transfer  is 
made,  being  immovable  property  of  the  nature  referred  to  in  sub-clause  (ii)  of  clause  (d), 
means,— 

(i)  in  a  case  where  the  consideration  for  the  transfer  consists  of  a  sum  of  money  only, 

such sum; 

1. Ins. by Act 23 of 1986, s. 34 (w.e.f. 13-5-1986). 

763 

                                                           
(ii) in a case where the consideration for the transfer consists of a thing or things only, the 
price that such thing or things would ordinarily fetch on sale in the open market on the date 
on which the agreement for transfer is made; 

(iii) in a case where the consideration for the transfer consists of a thing or things and a 
sum of money, the aggregate of the price that such thing or things would ordinarily fetch on 
sale  in  the  open  market  on  the  date  on  which the  agreement  for transfer is  made,  and  such 
sum, 

and where the whole or any part of the consideration for such transfer is payable on any date or 
dates falling after the date of such agreement for transfer, the value of the consideration payable 
after such date shall be deemed to be the discounted value of such consideration, as on the date of 
such agreement for transfer, determined by adopting such rate of interest as may be prescribed in 
this behalf; 

(c)  “appropriate  authority”  means  an  authority  constituted  under section  269UB to  perform  the 

functions of an appropriate authority under this Chapter; 

(d) “immovable property” means— 

(i)  any  land  or  any  building  or  part  of  a  building,  and  includes,  where  any  land  or  any 
building or part of a building is to be transferred together with any machinery, plant, furniture, 
fittings or other things, such machinery, plant, furniture, fittings or other things also. 

Explanation.—For  the  purposes  of  this  sub-clause,  “land,  building,  part  of  a  building,  machinery, 

plant, furniture, fittings and other things” include any rights therein; 

(ii) any rights in or with respect to any land or any building or a part of a building (whether or 
not  including  any  machinery,  plant,  furniture,  fittings  or  other  things  therein)  which  has  been 
constructed or which is to be constructed, accruing or  arising from any transaction (whether by 
way of becoming a member of, or acquiring shares in, a co-operative society, company or other 
association of persons or by way of any agreement or any arrangement of whatever nature), not 
being a transaction by way of sale, exchange or lease of such land, building or part of a building; 

(e) “person interested”, in relation to any immovable property, includes all persons claiming, or 
entitled to claim, an interest in the consideration payable on account of the vesting of that property in 
the Central Government under this Chapter; 

(f) “transfer”,— 

(i)  in  relation  to  any  immovable  property  referred  to  in  sub-clause  (i)  of  clause  (d),  means 
transfer of such property by way of sale or exchange or lease for a term of not less than twelve 
years,  and  includes  allowing  the  possession  of  such  property  to  be  taken  or  retained  in  part 
performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 
1882 (4 of 1882). 

Explanation.—For  the  purposes  of  this  sub-clause,  a  lease  which  provides  for  the  extension  of  the 
term thereof by a further term or terms shall be deemed to be a lease for a term of not less than twelve 
years, if the aggregate of the term for which such lease is to be granted and the further term or terms for 
which it can be so extended is not less than twelve years; 

(ii)  in  relation  to  any  immovable  property  of  the  nature  referred  to  in  sub-clause  (ii)  of    

clause (d), means the doing of anything (whether by way of admitting as a member of or by way 
of transfer of shares in a co-operative society or company or other association of persons or by 
way of any agreement or arrangement or in any other manner whatsoever) which has the effect of 
transferring, or enabling the enjoyment of, such property. 

269UB. Appropriate authority.—(1) The Central Government may, by order, publish in the Official 

Gazette,— 

(a)  constitute  as  many  appropriate  authorities,  as  it  thinks  fit,  to  perform  the  functions  of  an 

appropriate authority under this Chapter; and 

764 

(b) define the local limits within which the appropriate authorities shall perform their functions 

under this Chapter. 

(2)  An  appropriate  authority  shall  consist  of  three  persons,  two  of  whom  shall  be  members  of  the 
Indian Income-tax Service, Group A, holding the post of Commissioner of Income-tax or any equivalent 
or higher post, and one shall be a member of the Central Engineering Service, Group A, holding the post 
of Chief Engineer or any equivalent or higher post. 

(3) In respect of any function to be performed by an appropriate authority under any provision of this 
Chapter  in  relation  to  any  immovable  property  referred  to  in section  269UC,  the  appropriate  authority 
referred to therein shall,— 

(a) in a case where such property is situate within the local limits of the jurisdiction of only one 

appropriate authority, be such appropriate authority; 

(b) in a  case  where such  property  is  situate  within the  local  limits  of  the jurisdiction  of  two or 
more  appropriate  authorities,  be  the  appropriate  authority  empowered  to  perform  such  functions  in 
relation  to  such  property  in  accordance  with  the  rules made  in  this  behalf  by  the  Board  under         
section 295. 

Explanation.—For  the  purposes  of  this  sub-section,  immovable  property  being  rights  of  the  nature 
referred  to  in  sub-clause  (ii)  of  clause  (d)  of  section  269UA in,  or  with  respect  to,  any  land  or  any 
building or part of a building which has been constructed or which is to be constructed shall be deemed to 
be  situate  at  the  place  where  the  land  is  situate  or,  as  the  case  may  be,  where  the  building  has  been 
constructed or is to be constructed. 

269UC.Restrictions on transfer of immovable property.—(1) Notwithstanding anything contained 
in the Transfer of Property Act, 1882 (4 of 1882), or in any other law  for the time being in force,  1[no 
transfer of any immovable property in such area and of such value exceeding five lakh rupees, as may be 
prescribed],  shall  be  effected  except  after  an  agreement  for  transfer  is  entered  into  between  the  person 
who intends transferring the immovable property (hereinafter referred to as the transferor) and the person 
to whom it is proposed to be transferred (hereinafter referred to as the transferee) in accordance with the 
provisions of sub-section (2) at least 2[four months] before the intended date of transfer. 

(2) The agreement referred to in sub-section (1) shall be reduced to writing in the form of a statement 
by each of the parties to such transfer or by any of the parties to such transfer acting on behalf of himself 
and on behalf of the other parties. 

(3) Every statement referred to in sub-section (2) shall,— 

(i) be in the prescribed form; 

(ii) set forth such particulars as may be prescribed; and 

(iii) be verified in the prescribed manner, 

and  shall  be  furnished  to  the  appropriate  authority  in  such  manner  and  within  such  time  as  may  be 
prescribed, by each of the parties to such transaction or by any of the parties to such transaction acting on 
behalf of himself and on behalf of the other parties. 

3[(4) Where it is found that the statement referred to in sub-section (2) is defective, the appropriate 
authority  may  intimate  the  defect  to  the  parties  concerned  and  give  them  an  opportunity  to  rectify  the 

1. Subs. by Act 22 of 1995, s. 46, for “ no transfer of any immovable property of such value exceeding five lakh rupees as 

may be prescribed” (w.e.f. 1-7-1995). 

2. Subs. by Act 38 of 1993, s. 33, for “three months” (w.e.f. 1-6-1993). 
3. Ins. by Act 22 of 1995, s. 46 (w.e.f. 1-7-1995). 

765 

                                                           
defect  within  a  period  of  fifteen  days  from  the  date  of  such  intimation  or  within  such  further  period 
which, on an application made in this behalf, the appropriate authority may, in its discretion, allow and if 
the defect is not rectified within the said period of fifteen days, or as the case may be, the further period 
so allowed, then, notwithstanding anything contained in any other provision of this Chapter, the statement 
shall be deemed never to have been furnished.] 

269UD. Order  by  appropriate  authority  for  purchase  by  Central  Government  of  immovable 
property.—(1) 1[Subject to the provisions of sub-sections (1A) and (1B), the appropriate authority], after 
the receipt of the statement under sub-section (3) of section 269UC in respect of any immovable property, 
may,  notwithstanding  anything  contained  in  any  other  law  or  any  instrument  or  any  agreement  for  the 
time being in force, 2*** make an order for the purchase by the Central Government of such immovable 
property at an amount equal to the amount of apparent consideration: 

Provided that no such order shall be made in respect of any immovable property after the expiration 
of  a  period  of  two  months  from  the  end  of  the  month  in  which  the  statement  referred  to  in section 
269UC in respect of such property is received by the appropriate authority: 

3[Provided further that where the statement referred to in section 269UC in respect of any immovable 
property is received by the appropriate authority on or after the 1st day of June, 1993, the provisions of 
the first proviso shall have effect as if for the words  “two months”, the words “three months” had been 
substituted:] 

4[Provided also that the period of limitation referred to in the second proviso shall be reckoned, where 
any  defect  as  referred  to  in  sub-section  (4)  of section  269UC has  been  intimated,  with  reference  to  the 
date of receipt of the rectified statement by the appropriate authority:] 

5[Provided  also] that  in  a  case  where  the  statement  referred  to  in section  269UC in  respect  of  the 
immovable property concerned is given to an appropriate authority, other than the appropriate authority 
having jurisdiction in accordance with the provisions of section 269UB to make the order referred to in 
this  sub-section  in  relation  to  the  immovable  property  concerned,  the  period  of  limitation  referred  to 
in6[the first and second provisos] shall be reckoned with reference to the date of receipt of the statement 
by the appropriate authority having jurisdiction to make the order under this sub-section: 

7[Provided also that the period of limitation referred to in the second proviso shall be reckoned, where 
any stay has been granted by any court against the passing of an order for the purchase of the immovable 
property under this Chapter, with reference to the date of vacation of the said stay.] 

8[(1A) Before making an order under sub-section (1), the appropriate authority shall give a reasonable 
opportunity of being heard to the transferor, the person in occupation of the immovable property if the 
transferor  is  not  in  occupation  of  the  property,  the  transferee  and  to  every  other  person  whom  the 
appropriate authority knows to be interested in the property. 

(1B) Every order made by the appropriate authority under sub-section (1) shall specify the grounds on 

which it is made.] 

(2) The appropriate authority shall cause a copy of its order under sub-section (1) in respect of any 
immovable property to be served on the transferor, the person in occupation of the immovable property if 
the transferor is not in occupation thereof, the transferee, and on every other person whom the appropriate 
authority knows to be interested in the property. 

1. Subs. by Act 38 of 1993, s. 34, for “The appropriate authority” (w.e.f. 17-11-1992). 
2. The words “and for reasons to be recorded in writing” omitted by s. 34, ibid. (w.e.f. 17-11-1992). 
3. Ins. by s. 34, ibid. (w.e.f. 1-6-1993). 
4. Ins. by Act 22 of 1995, s. 47 (w.e.f. 1-7-1995). 
5. Subs. by Act 38 of 1993, s. 34, for “Provided further” (w.e.f. 1-6-1993). 
6. Subs. by s. 34, ibid., for “the preceding proviso” (w.e.f. 1-6-1993). 
7. Ins. by s. 34, ibid. (w.e.f. 1-6-1993). 
8. Ins. by s. 34, ibid. (w.r.e.f. 17-11-1992). 

766 

                                                           
269UE. Vesting  of  property  in  Central  Government.—(1)  Where  an  order  under  sub-section  (1) 
of section 269UD is made by the appropriate authority in respect of an immovable property referred to in 
sub-clause (i) of clause (d) of section 269UA, such property shall, on the date of such order, vest in the 
Central  Government  1[in  terms  of  the  agreement  for  transfer  referred  to  in  sub-section  (1)  of section 
269UC]: 

2[Provided that  where  the  appropriate  authority,  after  giving  an  opportunity  of  being  heard  to  the 
transferor, the transferee or other persons interested in the said property, under sub-section (1A) of section 
269UD,  is  of  the  opinion  that  any  encumbrance  on  the  property  or  leasehold  interest  specified  in  the 
aforesaid  agreement  for  transfer  is  so  specified  with  a  view  to  defeat  the  provisions  of  this  Chapter,  it 
may,  by  order,  declare  such  encumbrance  or  leasehold  interest  to  be  void  and  thereupon  the  aforesaid 
property shall vest in the Central Government free from such encumbrance or leasehold interest.] 

(2) The transferor or any other person who may be in possession of the immovable property in respect 
of which an order under sub-section (1) of section 269UD is made, shall surrender or deliver possession 
thereof to  the  appropriate authority  or  any  other  person  duly  authorised  by  the appropriate  authority  in 
this behalf within fifteen days of the service of such order on him: 

2[Provided that the provisions of this sub-section and sub-sections (3) and (4) shall not apply where 
the person in possession of the immovable property, in respect of which an order under sub-section (1) 
of section  269UD is  made,  is  a bona  fide holder  of  any  encumbrance  on  such  property  or  a bona 
fide lessee of such property, if the said encumbrance or lease has not been declared void under the proviso 
to  sub-section  (1)  and  such  person  is  eligible  to  continue  in  possession  of  such  property  even  after  the 
transfer in terms of the aforesaid agreement for transfer.] 

(3)  If  any  person  refuses  or  fails  to  comply  with  the  provisions  of  sub-section  (2),  the  appropriate 
authority  or  other  person  duly  authorised  by  it  under  that  sub-section  may  take  possession  of  the 
immovable property and may, for that purpose, use such force as may be necessary. 

(4)  Notwithstanding  anything  contained  in  sub-section  (2),  the  appropriate  authority  may,  for  the 
purpose of taking possession of any property referred to in sub-section (1), requisition the services of any 
police officer to assist him and it shall be the duty of such officer to comply with such requisition. 

(5)  For  the  removal  of  doubts,  it  is  hereby  declared  that  nothing  in  this  section  shall  operate  to 
discharge the transferor or any other person (not being the Central Government) from liability in respect 
of any encumbrances on the property and, notwithstanding anything contained in any other law for the 
time being in force, such liability may be enforced against the transferor or such other person. 

(6)  Where  an  order  under  sub-section  (1)  of section  269UD is  made  in  respect  of  an  immovable 
property,  being  rights  of  the  nature  referred  to  in  sub-clause  (ii)  of  clause  (d)  of  section  269UA,  such 
order shall have the effect of— 

(a) vesting such right in the Central Government ; and 

(b) placing the Central Government in the same position in relation to such rights as the person in 

whom such a right would have continued to vest if such order had not been made. 

(7) Where any rights in respect of any immovable property, being rights in, or with respect to, any 
land or any building or part of a building which has been constructed or which is to be constructed, have 
been vested in the Central Government under sub-section (6), the provisions of sub-sections (1), (2), (3) 
and  (4)  shall,  so  far  as  may  be,  have  effect  as  if  the  references  to  immovable  property  therein  were 
references to such land or building or part thereof, as the case may be. 

1. Subs. by Act 38 of 1993, s. 35, for “free from all encumbrances” (w.e.f. 17-11-1992). 
2. Ins. by s. 35, ibid. (w.e.f. 17-11-1992). 

767 

                                                           
269UF. Consideration  for  purchase  of  immovable  property  by  Central  Government.—(1) 
Where an order for the purchase of any immovable  property by the Central Government is made under 
sub-section (1)  of section 269UD,  the  Central  Government  shall  pay,  by  way  of  consideration for  such 
purchase, an amount equal to the amount of the apparent consideration. 

(2) Notwithstanding anything contained in sub-section (1), where, after the agreement for the transfer 
of the immovable property referred to in that sub-section has been made but before the property vests in 
the Central Government under section 269UE, the property has been damaged (otherwise than as a result 
of normal wear and tear), the amount of the consideration payable under that sub-section shall be reduced 
by such sum as the appropriate authority, for reasons to be recorded in writing, may by order determine. 

269UG. Payment  or  deposit  of  consideration.—(1)  The  amount  of  consideration  payable  in 
accordance  with  the  provisions  of section  269UF shall  be  tendered  to  the  person  or  persons  entitled 
thereto,  within  a  period  of  one  month  from  the  end  of  the  month  in  which  the  immovable  property 
concerned becomes vested in the Central Government under sub-section (1), or, as the case may be, sub-
section (6), of section 269UE: 

Provided that  if  any  liability  for  any  tax  or  any  other  sum  remaining  payable  under  this  Act,  the 

Wealth-tax  Act,  1957  (27  of  1957),  the  Gift-tax  Act,  1958  (18  of  1958),  the  Estate  Duty  Act,               
1953 (34 of 1953), or the Companies (Profits) Surtax Act, 1964 (7 of 1964), by any person entitled to the 
consideration payable under section 269UF, the appropriate authority may, in lieu of the payment of the 
amount of consideration, set off the amount of consideration or any part thereof against such liability or 
sum, after giving an intimation in this behalf to the person entitled to the consideration. 

(2)  Notwithstanding  anything  contained  in  sub-section  (1),  if  any  dispute  arises  as  to  the 
apportionment of the amount of consideration amongst persons claiming to be entitled thereto, the Central 
Government  shall  deposit  with  the  appropriate  authority  the  amount  of  consideration  required  to  be 
tendered under sub-section (1) within the period specified therein. 

(3)  Notwithstanding  anything  contained  in  sub-section  (1),  if  the  person  entitled  to  the  amount  of 
consideration does not consent to receive it, or if there is any dispute as to the title to receive the amount 
of  consideration,  the  Central  Government  shall  deposit  with  the  appropriate  authority  the  amount  of 
consideration required to be tendered under sub-section (1) within the period specified therein: 

Provided that  nothing  herein  contained  shall  affect  the  liability  of  any  person  who  may  receive  the 
whole  or  any  part  of  the  amount  of  consideration  for  any  immovable  property  vested  in  the  Central 
Government under this Chapter to pay the same to the person lawfully entitled thereto. 

(4) Where any amount of consideration has been deposited with the appropriate authority under this 
section, the appropriate authority may, either of its own motion or on an application made by or on behalf 
of any person interested or claiming to be interested in such amount, order the same to be invested in such 
Government or other securities as it may think proper, and may direct the interest or other proceeds of any 
such  investment  to  be  accumulated  and  paid  in  such  manner  as  will,  in  its  opinion,  give  the  parties 
interested  therein  the  same  benefits  therefrom  as  they  might  have  had  from  the  immovable  property  in 
respect whereof such amount has been deposited or as near thereto as may be. 

269UH.  Re-vesting  of  property  in  the  transferor  on  failure  of  payment  or  deposit  of 
consideration.—(1) If the Central Government fails to tender under sub-section (1) of section 269UG or 
deposit under sub-section (2) or sub-section (3) of the said section, the whole or any part of the amount of 
consideration  required  to  be  tendered  or  deposited  thereunder  within  the  period  specified  therein  in 
respect of any immovable property which has vested in the Central Government under sub-section (1) or, 

768 

as the case may be, sub-section (6) of section 269UE, the order to purchase the immovable property by 
the  Central  Government  made  under  sub-section  (1)  of section  269UD shall  stand  abrogated  and  the 
immovable property shall stand re-vested in the transferor after the expiry of the aforesaid period: 

Provided that where any dispute referred to in sub-section (2) or sub-section (3) of section 269UG is 
pending  in  any  court  for  decision,  the  time  taken  by  the  court  to  pass  a  final  order  under  the  said           
sub-sections shall be excluded in computing the said period. 

(2)  Where  an  order  made  under  sub-section  (1)  of section  269UD is  abrogated  and  the  immovable 
property re-vested in the transferor under sub-section (1), the appropriate authority shall make, as soon as 
may be, a declaration in writing to this effect and shall— 

(a)  deliver  a  copy  of  the  declaration  to  the  persons  mentioned  in  sub-section  (2)  of section 

269UD; and 

(b) deliver or cause to be delivered possession of the immovable property back to the transferor, 
or, as the case may be, to such other person as was  in possession of the property at the time of its 
vesting in the Central Government under section 269UE. 

269UI. Powers  of  the  appropriate  authority.—The  appropriate  authority  shall  have,  for  the 
purposes of this Chapter, all the powers that a 1[2[Principal Chief Commissioner or Chief Commissioner] 
or  3[Principal  Commissioner  or  Commissioner]]  of  Income-tax  has  for  the  purposes  of  this  Act  under            
section 131. 

269UJ. Rectification of mistakes.—With a view to rectifying any mistake apparent from the record, 
the appropriate authority may amend any order made by it under this Chapter, either on its own motion or 
on the mistake being brought to its notice by any person affected by the order: 

Provided that if any such amendment is likely to affect any person prejudicially, it shall not be made 

without giving to such person a reasonable opportunity of being heard: 

Provided further that no amendment shall be made under this section after the expiry of six months 

from the end of the month in which the order sought to be amended was made. 

269UK. Restrictions  on  revocation  or  alteration  of  certain  agreements  for  the  transfer  of 
immovable  property  or  on  transfer  of  certain  immovable  property.—(1)  Notwithstanding  anything 
contained in any other law for the time being in force, no person shall revoke or alter an agreement for the 
transfer  of  an  immovable  property  or  transfer  such  property  in  respect  of  which  a  statement  has  been 
furnished under section 269UC unless,— 

(a) the appropriate authority has not made an order for the purchase of the immovable property 
by  the  Central  Government  under section  269UD and  the  period  specified  for  the  making  of  such 
order has expired; or 

(b)  in  a  case  where  an  order  for  the  purchase  of  the  immovable  property  by  the  Central 
Government has been made under sub-section (1) of section 269UD, the order stands abrogated under 
sub-section (1) of section 269UH. 

1. Subs. by Act 4 of 1988, s. 2 for “Commissioner” (w.e.f. 1-4-1988). 
2. Subs. by Act 25 of 2014, s. 4 for “Chief Commissioner” (w.e.f. 1-6-2013). 
3. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 

769 

                                                           
(2)  Any  transfer  of  any  immovable  property  made  in  contravention  of  the  provisions  of                         

sub-section (1) shall be void. 

269UL. Restrictions  on  registration,  etc.,  of  documents  in  respect  of  transfer  of  immovable 
property.—(1)  Notwithstanding  anything  contained  in  any  other  law  for  the  time  being  in  force,  no 
registering officer appointed under the Registration Act, 1908 (16 of 1908), shall register any document 
which  purports 
immovable  property  exceeding 
 section 269UC unless a certificate from the appropriate authority that it has no objection to the transfer of 
such property for an amount equal to the apparent consideration therefor as stated in the agreement for 
transfer of the immovable property in respect of which it has received a statement under sub-section (3) 
of  section 269UC, is furnished along with such document. 

transfer 

to 

the  value  prescribed  under                       

(2) Notwithstanding anything contained in any other law for the time being in force, no person shall 
do  anything  or  omit  to  do  anything  which  will  have  the  effect  of  transfer  of  any  immovable  property 
unless  the  appropriate  authority  certifies  that it  has no  objection to  the transfer of  such  property  for an 
amount  equal  to  the  apparent  consideration  therefor  as  stated  in  the  agreement  for  transfer  of  the 
immovable  property  in  respect  of  which  it  has  received  a  statement  under  sub-section  (3)  of                   
 section 269UC. 

(3)  In  a  case  where  the  appropriate  authority  does  not  make  an  order  under  sub-section  (1)  of    

section 269UD for the purchase by the Central Government of an immovable property, or where the order 
made under sub-section (1) of section 269UD stands abrogated under sub-section (1) of section 269UH, 
the appropriate authority shall issue a certificate of no objection referred to in sub-section (1) or, as the 
case may be, sub-section (2) and deliver copies thereof to the transferor and the transferee. 

269UM. Immunity  to  transferor  against  claims  of  transferee  for  transfer.—Notwithstanding 
anything contained in any other law or in any instrument or any agreement for the time being in force, 
when an order for the purchase of any immovable property by the Central Government is made under this 
Chapter, no claim by the transferee shall lie against the transferor by reason of such transfer being not in 
accordance  with  the  agreement  for  the  transfer  of  the  immovable  property  entered  into  between  the 
transferor and transferee: 

Provided that  nothing  contained  in  this  section  shall  apply  if  the  order  for  the  purchase  of  the 

immovable property by the Central Government is abrogated under sub-section (1) of section 269UH. 

269UN. Order of appropriate authority to be final and conclusive.—Save as otherwise provided 
in  this  Chapter,  any  order  made  under  sub-section  (1)  of section  269UD or  any  order  made  under         
sub-section (2) of section 269UF shall be final and conclusive and shall not be called in question in any 
proceeding under this Act or under any other law for the time being in force. 

269UO. Chapter not to apply to certain transfers.—The provisions of this Chapter shall not apply 
to or in relation to any immovable property where the agreement for transfer of such property is made by 
a person to his relative on account of natural love and affection, if a recital to that effect is made in the 
agreement for transfer. 

1[269UP.  Chapter  not  to  apply  where  transfer  of  immovable  property  effected  after  certain 
date.—The provisions of this Chapter shall not apply to, or in relation to, the transfer of any immovable 
property effected on or after the 1st day of July, 2002.] 

1. Ins. by Act 20 of 2002, s. 100 (w.e.f. 1-7-2002). 

770 

                                                           
CHAPTER XXI 

PENALTIES IMPOSABLE 

270. [Failure to furnish information regarding securities, etc.].—Omitted by the Direct Tax Laws 

(Amendment) Act 1987 (4 of 1988), s. 105 (w.e.f. 1-4-1989). 

1[270A. Penalty for under-reporting and misreporting of income.—(1) The Assessing Officer or 
the Commissioner (Appeals) or the Principal Commissioner or Commissioner may, during the course of 
any proceedings under this Act, direct that any person who has under-reported his income shall be liable 
to pay a penalty in addition to tax, if any, on the under-reported income. 

(2) A person shall be considered to have under-reported his income, if— 

(a)  the  income  assessed  is  greater  than  the  income  determined  in  the  return  processed  under 

clause (a) of sub-section (1) of section 143; 

(b)  the  income  assessed  is  greater  than  the  maximum  amount  not  chargeable  to  tax,  where  no 

return of income has been furnished; 

(c) the income reassessed is greater than the income assessed or reassessed immediately before 

such reassessment; 

(d)  the  amount  of  deemed  total  income  assessed  or  reassessed  as  per  the  provisions  of  
section  115JB or section  115JC,  as  the  case  may  be,  is  greater  than  the  deemed  total  income 
determined in the return processed under clause (a) of sub-section (1) of section 143; 

(e)  the  amount  of  deemed  total  income  assessed  as  per  the  provisions  of section  115JB or  
section 115JC is greater than the maximum amount not chargeable to tax, where no return of income 
has been filed; 

(f) 

the  amount  of  deemed 

the  provisions  of  
income 
section 115JB or section 115JC, as the case may be, is greater than the deemed total income assessed 
or reassessed immediately before such reassessment; 

reassessed  as  per 

total 

(g) the income assessed or reassessed has the effect of reducing the loss or converting such loss 

into income. 

(3) The amount of under-reported income shall be,— 

(i) in a case where income has been assessed for the first time,— 

(a) if return has been furnished, the difference between the amount of income assessed and 

the amount of income determined under clause (a) of sub-section (1) of section 143; 

(b) in a case where no return has been furnished,— 

(A) the amount of income assessed, in the case of a company, firm or local authority; and 

(B) the difference between the amount of income assessed and the maximum amount not 

chargeable to tax, in a case not covered in item (A); 

1. Ins. by Act 28 of 2016, s. 98 (w.e.f. 1-4-2017). 

771 

                                                           
(ii) in any other case, the difference between the amount of income reassessed or recomputed and 

the amount of income assessed, reassessed or recomputed in a preceding order: 

Provided that where under-reported income arises out of determination of deemed total income in 
accordance with the provisions of section 115JB or section 115JC, the amount of total under-reported 
income shall be determined in accordance with the following formula— 

(A — B) + (C — D) 

where, 

A =  the  total  income  assessed  as  per  the  provisions  other  than  the  provisions  contained 

in section 115JB or section 115JC (herein called general provisions); 

B = the total income that would have been chargeable had the total income assessed as per 

the general provisions been reduced by the amount of under-reported income; 

C =  the  total  income  assessed  as  per  the  provisions  contained  in section  115JB or section 

115JC; 

D = the total income that would have been chargeable had the total income assessed as per 
the provisions contained in section 115JB or section 115JC been reduced by the amount of under-
reported income: 

Provided further that where the amount of under-reported income on any issue is considered 
both  under  the  provisions  contained  in section  115JB or section  115JC and  under  general 
provisions, such amount shall not be reduced from total income assessed while determining the 
amount under item D. 

Explanation.—For the purposes of this section,— 

(a) “preceding order” means an order immediately preceding the order during the course of which 

the penalty under sub-section (1) has been initiated; 

(b) in a case where an assessment or reassessment has the effect of reducing the loss declared in 
the  return  or  converting  that  loss  into  income,  the  amount  of  under-reported  income  shall  be  the 
difference  between  the  loss  claimed  and  the  income  or  loss,  as  the  case  may  be,  assessed  or 
reassessed. 

(4) Subject to the provisions of sub-section (6), where the source of any receipt, deposit or investment 
in any assessment year is claimed to be an amount added to income or deducted while computing loss, as 
the case may be, in the assessment of such person in any year prior to the assessment year in which such 
receipt,  deposit  or  investment  appears  (hereinafter  referred  to  as  “preceding  year”)  and  no  penalty  was 
levied for such preceding year, then, the under-reported income shall include such amount as is sufficient 
to cover such receipt, deposit or investment. 

(5) The amount referred to in sub-section (4) shall be deemed to be amount of income under-reported 

for the preceding year in the following order— 

(a)  the  preceding  year  immediately  before  the  year  in  which  the  receipt,  deposit  or  investment 

appears, being the first preceding year; and 

(b) where the amount added or deducted in the first preceding year is not sufficient to cover the 

receipt, deposit or investment, the year immediately preceding the first preceding year and so on. 

772 

(6)  The  under-reported  income,  for  the  purposes  of  this  section,  shall  not  include  the  following, 

namely:— 

(a) the amount of income in respect of which the assessee offers an explanation and the Assessing 
Officer or the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the 
case  may  be,  is  satisfied  that  the  explanation  is bona  fide and  the  assessee  has  disclosed  all  the 
material facts to substantiate the explanation offered; 

(b) the amount of under-reported income determined on the basis of an estimate, if the accounts 
are correct and complete to the satisfaction of the Assessing Officer or the Commissioner (Appeals) 
or the Commissioner or the Principal Commissioner, as the case may be, but the method employed is 
such that the income cannot properly be deduced therefrom; 

(c) the amount of under-reported income determined on the basis of an estimate, if the assessee 
has,  on  his  own,  estimated  a  lower  amount  of  addition  or  disallowance  on  the  same  issue,  has 
included such amount in the computation of his income and has disclosed all the facts material to the 
addition or disallowance; 

(d) the amount  of  under-reported  income  represented  by  any  addition  made  in conformity  with 
the arm’s length price determined by the Transfer Pricing Officer, where the assessee had maintained 
information  and  documents  as  prescribed  under section  92D,  declared  the  international  transaction 
under Chapter X, and, disclosed all the material facts relating to the transaction; and 

(e) the amount of undisclosed income referred to in section 271AAB. 

(7) The penalty referred to in sub-section (1) shall be a sum equal to fifty per cent of the amount of 

tax payable on under-reported income. 

(8)  Notwithstanding  anything  contained  in  sub-section  (6)  or  sub-section (7),  where  under-reported 
income  is  in  consequence  of  any  misreporting  thereof  by  any  person,  the  penalty  referred  to  in  
sub-section (1)  shall  be  equal  to two  hundred  per  cent  of  the  amount  of  tax  payable  on  under-reported 
income. 

(9)  The  cases  of  misreporting  of  income  referred  to  in  sub-section  (8)  shall  be  the  following, 

namely:— 

(a) misrepresentation or suppression of facts; 

(b) failure to record investments in the books of account; 

(c) claim of expenditure not substantiated by any evidence; 

(d) recording of any false entry in the books of account; 

(e) failure to record any receipt in books of account having a bearing on total income; and 

(f) failure to report any international transaction or any transaction deemed to be an international 

transaction or any specified domestic transaction, to which the provisions of Chapter X apply. 

(10) The tax payable in respect of the under-reported income shall be— 

(a) where no return of income has been furnished and the income has been assessed for the first 
time,  the  amount  of  tax  calculated  on  the  under-reported  income  as  increased  by  the  maximum 
amount not chargeable to tax as if it were the total income; 

773 

(b)  where  the  total  income  determined  under  clause  (a)  of  sub-section  (1)  of section  143 or 
assessed, reassessed or recomputed in a preceding order is a loss, the amount of tax calculated on the 
under-reported income as if it were the total income; 

(c) in any other case, determined in accordance with the formula— 

(X-Y) 

where, 

X  =  the  amount  of  tax  calculated  on  the  under-reported  income  as  increased  by  the  total 
income  determined  under  clause  (a)  of  sub-section  (1)  of section  143 or  total  income  assessed, 
reassessed or recomputed in a preceding order as if it were the total income; and 

Y  =  the  amount  of  tax  calculated  on  the  total  income  determined  under  clause  (a)  of  
sub-section (1) of section 143 or total income assessed, reassessed or recomputed in a preceding 
order. 

(11) No addition or disallowance of an amount shall form the basis for imposition of penalty, if such 
addition or disallowance has formed the basis of imposition of penalty in the case of the person for the 
same or any other assessment year. 

(12)  The  penalty  referred  to  in  sub-section  (1)  shall  be  imposed,  by  an  order  in  writing,  by  the 
Assessing Officer, the Commissioner (Appeals), the Commissioner or the Principal Commissioner, as the 
case may be.] 

1[270AA. Immunity from imposition of penalty, etc.—(1) An assessee may make an application to 
the Assessing Officer to grant immunity from imposition of penalty under section 270A and initiation of 
proceedings under section 276C or section 276CC, if he fulfils the following conditions, namely:— 

(a)  the  tax  and  interest  payable  as  per  the  order  of  assessment  or  reassessment  under  
sub-section  (3)  of section  143 or section  147,  as  the  case  may  be,  has  been  paid  within  the  period 
specified in such notice of demand; and 

(b) no appeal against the order referred to in clause (a) has been filed. 

(2) An application referred to in sub-section (1) shall be made within one month from the end of the 
month in which the order referred to in clause (a) of sub-section (1) has been received and shall be made 
in such form and verified in such manner as may be prescribed. 

(3) The Assessing Officer shall, subject to fulfilment of the conditions specified in sub-section (1) and 
after  the  expiry  of  the  period  of  filing  the  appeal  as  specified  in  clause  (b)  of  sub-section  (2)  of  
section 249, grant immunity from imposition of penalty under section 270A and initiation of proceedings 
under section 276C or section 276CC, where the proceedings for penalty under section 270A has not been 
initiated under the circumstances referred to in sub-section (9) of the said section 270A. 

(4) The Assessing Officer shall, within a period of one month from the end of the month in which the 

application under sub-section (1) is received, pass an order accepting or rejecting such application: 

Provided that no order rejecting the application shall be passed unless the assessee has been given an 

opportunity of being heard. 

(5) The order made under sub-section (4) shall be final. 

(6) No appeal under section 246A or an application for revision under section 264 shall be admissible 
against  the  order  of  assessment  or  reassessment,  referred  to  in  clause  (a)  of  sub-section  (1),  in  a  case 
where an order under sub-section (4) has been made accepting the application.] 

1. Ins. by Act 28 of 2016, s. 99 (w.e.f. 1-4-2017). 

774 

                                                           
1[271. Failure  to  furnish  returns,  comply  with  notices,  concealment  of  income,  etc.—(1)  If  the 
2[Assessing  Officer]  or  the  3***  4[Commissioner  (Appeals)]  5[or  the  6[Principal  Commissioner  or 
Commissioner]] in the course of any proceedings under this Act, is satisfied that any person— 

7* 

* 

* 

* 

*] 

(b)  has  8***  failed  to  comply  with  a  notice  9[under  sub-section  (2)  of section  115WD or  under 
sub-section  (2)  of section  115WE or  under  sub-section  (1)  of section  142] or  sub-section  (2)  of 
section 143 10[or fails to comply with a direction issued under sub-section (2A) of section 142], or 

(c) has concealed the particulars of his income or 11*** furnished inaccurate particulars of 12[such 

income, or] 

13[(d)  has  concealed  the  particulars  of  the  fringe  benefits  or  furnished  inaccurate  particulars  of 

such fringe benefits,] 

he may direct that such person shall pay by way of penalty,— 

14* 

* 

* 

* 

* 

15[(ii) in the cases referred to in clause (b), 16[in addition to tax, if any, payable] by him, 17[a sum 

of ten thousand rupees] for each such failure;] 

18[(iii) in the cases referred to in 19[clause (c) or clause (d)], 16[in addition to tax, if any, payable] 
by him, a sum which shall not be less than, but which shall not exceed  20[three times], the amount of 
tax  sought  to  be  evaded  by  reason  of  the  concealment  of  particulars  of  his  21[income  or  fringe 
benefits] or the furnishing of inaccurate particulars of such 21[income or fringe benefits]. 

22* 

* 

* 

*  

               *] 

Explanation 1.—Where in respect of any facts material to the computation of the total income of any 

person under this Act,— 

(A)  such  person  fails  to  offer  an  explanation  or  offers  an  explanation  which  is  found  by  the 
2[Assessing  Officer]  or  the  3***  4[Commissioner  (Appeals)]  5[or  the  6[Principal  Commissioner  or 
Commissioner]] to be false, or 

1. Restored by Act 3 of 1989, s. 95 (w.e.f. 1-4-1989). 
2. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
3. The words “Deputy Commissioner (Appeals) or the” omitted by Act 21 of 1998, s. 65 (w.e.f. 1-10-1998). 
4. Ins. by Act 29 of 1977, s. 39 and the Fifth Schedule (w.e.f. 10-7-1978). 
5. Ins. by Act 20 of 2002, s. 101 (w.e.f. 1-6-2002). 
6. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.r.e.f. 1-6-2013). 
7. Clause (a) omitted by Act 3 of 1989, s. 50 (w.e.f. 1-4-1989). 
8. The words “without reasonable cause” omitted by Act 46 of 1986, s. 19 (w.e.f. 10-9-1986). 
9. Subs. by Act 18 of 2005, s. 58, for “under sub-section (1) of section 142” (w.e.f. 1-4-2006). 
10. Ins. by Act 41 of 1975, s. 61 (w.e.f 1-4-1976). 
11. The word “deliberately” omitted by Act 5 of 1964, s. 40 (w.e.f. 1-4-1964).  
12. Subs. by Act 18 of 2005, s. 58, for “such income” (w.e.f. 1-4-2006). 
13. Ins. by s. 58, ibid. (w.e.f. 1-4-2006). 
14. Clause (i) omitted by Act 3 of 1989, s. 50 (w.e.f. 1-4-1989). 
15. Subs. by s. 50, ibid., for clause (ii) (w.e.f. 1-4-1989). 
16. Subs. by Act 20 of 2002, s. 101, for “in addition to any tax payable” (w.e.f. 1-4-2003). 
17. Subs. by Act 14 of 2001. s. 86, for “a sum which shall not be less than one thousand rupees but which may extend to 

twenty-five thousand rupee” (w.e.f 1-6-2001). 

18. Subs. by Act 41 of 1975, s. 61, for clause (iii) and the Explanation (w.e.f. 1-4-1976). 
19. Subs. by Act 18 of 2005, s. 58, for “clause (c)” (w.e.f. 1-4-2006). 
20. Subs. by Act 3 of 1989, s. 50, for “twice” (w.e.f. 1-4-1989). 
21. Subs. by Act 18 of 2005, s. 58, for “income’ (w.e.f. 1-4-2006). 
22. The proviso omitted by Act 3 of 1989, s. 50 (w.e.f. 1-4-1989). 

775 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
(B) such person offers an explanation which he is 1[not able to substantiate and fails to prove that 
such  explanation  is bona  fide and  that  all  the  facts  relating  to  the  same  and  material  to  the 
computation of his total income have been disclosed by him,] 

then, the  amount  added  or  disallowed  in computing  the  total income  of  such  person  as  a  result thereof 
shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of 
which particulars have been concealed. 

2* 

* 

* 

* 

* 

investment  appears  (such  earlier  assessment  year  hereafter 

Explanation 2.—Where the source of any receipt, deposit, outgoing or investment in any assessment 
year  is  claimed  by  any  person  to  be  an  amount  which  had  been  added  in  computing  the  income  or 
deducted in computing the loss in the assessment of such person for any earlier assessment year or years 
but in respect of which no penalty under clause (iii) of this sub-section had been levied, that part of the 
amount so added or deducted in such earlier assessment year immediately preceding the year in which the 
receipt,  deposit,  outgoing  or 
in 
this Explanation referred  to  as  the  first  preceding  year)  which  is  sufficient  to  cover  the  amount 
represented  by  such  receipt,  deposit  or  outgoing  or  value  of  such  investment  (such  amount  or  value 
hereafter  in  this Explanation referred  to  as  the  utilised  amount)  shall  be  treated  as  the  income  of  the 
assessee, particulars of which had been concealed or inaccurate particulars of which had been furnished 
for the first preceding year; and where the amount so added or deducted in the first preceding year is not 
sufficient  to  cover  the  utilised  amount,  that  part  of  the  amount  so  added  or  deducted  in  the  year 
immediately  preceding  the  first  preceding  year  which  is  sufficient  to  cover  such  part  of  the  utilised 
amount as is not so covered shall be treated to be the income of the assessee, particulars of which had 
been concealed or inaccurate particulars of which had been furnished for the year immediately preceding 
the first preceding year and so on, until the entire utilised amount is covered by the amounts so added or 
deducted in such earlier assessment years. 

3[Explanation 3.—Where any person 4*** fails, without reasonable cause, to furnish within the period 
specified  in  sub-section  (1)  of section  153 a  return  of  his  income  which  he  is  required  to  furnish 
under section 139 in respect of any assessment year commencing on or after the 1st day of April, 1989, 
and  until  the  expiry  of  the  period  aforesaid,  no  notice  has  been  issued  to  him  under  clause  (i)  of  sub-
section (1) of section 142 or section 148 and the Assessing Officer or the 5*** Commissioner (Appeals) is 
satisfied that in respect of such assessment year such person has taxable income, then, such person shall, 
for  the  purposes  of  clause  (c)  of  this  sub-section,  be  deemed  to  have  concealed  the  particulars  of  his 
income  in  respect  of  such  assessment  year,  notwithstanding  that  such  person  furnishes  a  return  of  his 
income at any time after the expiry of the period aforesaid in pursuance of a notice under section 148.] 

6[Explanation 4.—For the purposes of clause (iii) of this sub-section,— 

(a) the amount of tax sought to be evaded shall be determined in accordance with the following 

formula— 

(A - B) + (C - D) 

where, 

A =  amount  of  tax  on  the total  income  assessed  as  per  the  provisions  other  than  the  provisions 

contained in section 115Jb or section 115JC (herein called general provisions); 

1. Subs. by Act 46 of 1986, s. 19, for “not able to substantiate,” (w.e.f. 10-9-1986). 
2. The proviso omitted by s. 19, ibid. (w.e.f. 10-9-1986). 
3. Subs. by Act 3 of 1989, s.  50, for the Explanation (w.e.f. 1-4-1989). Earlier Explanation 3 amended by Act 29 of 1977,   

s. 39 and the Fifth Schedule (w.e.f. 10-7-1978). 

4. The words “who has not previously been assessed under this Act,’ omitted by Act 20 of 2002, s. 101 (w.e.f. 1-4-2003). 
5. The words “Deputy Commissioner (Appeals) or the” omitted by Act 21 of 1998, s. 65 (w.e.f. 1-10-1998). 
6. Subs. by Act 20 of 2015, s. 70, for Explanation 4 (w.e.f. 1-4-2016). 

776 

 
 
 
 
 
 
 
 
                                                           
B =  amount  of  tax  that  would  have  been  chargeable  had  the  total  income  assessed  as  per  the 
general provisions been reduced by the amount of income in respect of which particulars have been 
concealed or inaccurate particulars have been furnished; 

C =  amount  of  tax  on  the  total  income  assessed  as  per  the  provisions  contained  in section 

115JB or section 115JC; 

D =  amount  of  tax  that  would  have  been  chargeable  had  the  total  income  assessed  as  per  the 
provisions  contained  in section  115JB or section  115JC been  reduced  by  the  amount  of  income  in 
respect of which particulars have been concealed or inaccurate particulars have been furnished: 

Provided that where the amount of income in respect of which particulars have been concealed or 
inaccurate  particulars  have  been  furnished  on  any  issue  is  considered  both  under  the  provisions 
contained in section 115JB or section 115JC and under general provisions, such amount shall not be 
reduced from total income assessed while determining the amount under item D: 

Provided  further that  in  a  case  where  the  provisions  contained  in section  115JB or section 

115JC are not applicable, the item (C - D) in the formula shall be ignored; 

(b) where in any case the amount of income in respect of which particulars have been concealed 
or inaccurate particulars have been furnished has the effect of reducing the loss declared in the return 
or  converting  that  loss  into  income,  the  amount  of  tax  sought  to  be  evaded  shall  be  determined  in 
accordance  with  the  formula  specified  in  clause  (a)  with  the  modification  that  the  amount  to  be 
determined  for  item  (A - B)  in  that  formula  shall  be  the  amount  of  tax  that  would  have  been 
chargeable  on  the  income  in  respect  of  which  particulars  have  been  concealed  or  inaccurate 
particulars have been furnished had such income been the total income; 

(c) where in any case to which Explanation 3 applies, the amount of tax sought to be evaded shall 
be  the  tax  on  the  total  income  assessed  as  reduced  by  the  amount  of  advance  tax,  tax  deducted  at 
source, tax collected at source and self-assessment tax paid before the issue of notice under section 
148.]] 

1[Explanation 5.—Where in the course of a 2[search initiated under section 132 before the 1st day of 
June,  2007],  the  assessee  is  found  to  be  the  owner  of  any  money,  bullion,  jewellery  or  other  valuable 
article or thing (hereafter in this Explanation referred to as assets) and the assessee claims that such assets 
have been acquired by him by utilising (wholly or in part) his income,— 

(a) for any previous year which has ended before the date of the search, but the return of income 
for  such  year has not  been  furnished  before  the  said date or,  where such return  has  been  furnished 
before the said date, such income has not been declared therein ; or 

(b) for any previous year which is to end on or after the date of the search, 

then, notwithstanding that such income is declared by him in any return of income furnished on or after 
the date of the search, he shall, for the purposes of imposition of a penalty under clause (c) of sub-section 
(1)  of  this  section,  be  deemed  to  have  concealed  the  particulars  of  his  income  or  furnished  inaccurate 
particulars of such income, 3[unless,— 

(1) such income is, or the transactions resulting in such income are recorded,— 

(i) in a case falling under clause (a), before the date of the search; and 

(ii) in a case falling under clause (b), on or before such date, 

1. Ins. by Act 67 of 1984, s. 48 (w.e.f. 1-10-1984). 
2. Subs. by Act 22 of 2007, s.76, for “search under section 132” (w.e.f. 1-6-2007). 
3. Subs. by Act 46 of 1986, s. 19, for certain words (w.e.f. 10-9-1986). 

777 

                                                           
in  the  books  of  account,  if  any,  maintained  by  him  for  any  source  of  income  or  such  income  is 
otherwise disclosed to the 1[2[Principal Chief Commissioner or Chief Commissioner] or 3[Principal 
Commissioner or Commissioner] before the said date ; or] 

 (2) he, in the course of the search, makes a statement under sub-section (4) of section 132 that any 
money, bullion, jewellery or other valuable article or thing found in his possession or under his control, 
has  been  acquired  out  of  his income  which  has  not  been  disclosed  so  far in  his  return of income  to  be 
furnished before the expiry of time specified in  4*** sub-section (1) of section 139, and also specifies in 
the statement the manner in which such income has been derived and pays the tax, together with interest, 
if any, in respect of such income.] 

5[Explanation 5A.—Where, in the course of a search initiated under section 132 on or after the 1st day 

of June, 2007, the assessee is found to be the owner of— 

(i)  any  money,  bullion, 

in 
this Explanation referred to as assets) and the assessee claims that such assets have been acquired by 
him by utilising (wholly or in part) his income for any previous year; or 

jewellery  or  other  valuable  article  or 

thing  (hereafter 

(ii) any income based on any entry in any books of account or other documents or transactions 
and he claims that such entry in the books of account or other documents or transactions represents 
his income (wholly or in part) for any previous year, 

which has ended before the date of search and,— 

(a) where the return of income for such previous year has been furnished before the said date but 

such income has not been declared therein; or 

(b) the due date for filing the return of income for such previous year has expired but the assessee 

has not filed the return, 

then, notwithstanding that such income is declared by him in any return of income furnished on or after 
the date of search, he shall, for the purposes of imposition of a penalty under clause (c) of sub-section (1) 
of  this  section,  be  deemed  to  have  concealed  the  particulars  of  his  income  or  furnished  inaccurate 
particulars of such income.] 

6[Explanation 6.—Where any adjustment is made in the income or loss declared in the return under 
the proviso to clause (a) of sub-section (1) of section 143 and additional tax charged under that section, 
the provisions of this sub-section shall not apply in relation to the adjustment so made.] 

7[Explanation 7.—Where in the case of an assessee who has entered into an 8[international transaction 
or  specified  domestic  transaction]  defined  in section  92B,  any  amount  is  added  or  disallowed  in 
computing the total income under sub-section (4) of section 92C, then, the amount so added or disallowed 
shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of 
which particulars have been concealed or inaccurate particulars have been furnished, unless the assessee 
proves  to  the  satisfaction  of  the  Assessing  Officer  or  the  Commissioner  (Appeals)  9[or  the  3[Principal 
Commissioner  or  Commissioner]]  that  the  price  charged  or  paid  in  such  transaction  was  computed  in 
accordance with the provisions contained in section 92C and in the manner prescribed under that section, 
in good faith and with due diligence.] 

1. Subs. by Act 4 of 1988, s. 2, for “Commissioner” (w.e.f. 1-4-1988). 
2. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.r.e.f.  1-6-2013). 
3. Subs. by s. 4, ibid., for “Commissioner” (w.r.e.f. 1-6-2013). 
4. The words, brackets and letters “clause (a) or clause (b) of” omitted by Act 3 of 1989, s. 50 (w.e.f. 1-4-1989). 
5. Subs. by Act 33 of 2009, s. 74, for “Explanation 5A” (w.r.e.f. 1-6-2007). Earlier it was inserted by Act 22 of 2007, s. 76 

(w.e.f. 1-6-2007 ).  

6. Ins. by Act 3 of 1989, s. 50 (w.e.f. 1-4-1989). 
7. Ins. by Act 14 of 2001, s. 86 (w.e.f. 1-4-2002). 
8. Subs. by Act 23 of 2012, s. 97, for the words “International transaction” (w.e.f. 1-4-2013).   
9. Ins. by Act 20 of 2002, s. 101 (w.e.f. 1-6-2002). 

778 

                                                           
1[(1A) Where any penalty is imposable by virtue of Explanation 2 to sub-section (1), proceedings for 
the imposition of such penalty may be initiated notwithstanding that any proceedings under this Act in the 
course  of  which  such  penalty  proceedings  could  have  been  initiated  under  sub-section  (1)  have  been 
completed.] 

2[(1B) Where any amount is added or disallowed in computing the total income or loss of an assessee 
in any order of assessment or reassessment and the said order contains a direction for initiation of penalty 
proceedings  under  clause  (c)  of  sub-section  (1),  such  an  order  of  assessment  or  reassessment  shall  be 
deemed to constitute satisfaction of the Assessing Officer for initiation of the penalty proceedings under 
the said clause (c).] 

(2)  When  the  person  liable  to  penalty  is  a  registered  firm  or  an  unregistered  firm  which  has  been 
assessed  under  3[clause  (b)  of section  183,]  then  notwithstanding  anything  contained  in  the  other 
provisions of this Act, the penalty imposable under sub-section (1) shall be the same amount as would be 
imposable on that firm if that firm were an unregistered firm. 

4* 

* 

* 

* 

* 

(4) If the 5[Assessing Officer] or the 6[*** Commissioner (Appeals)] in the course of any proceedings 
under  this  Act,  is  satisfied  that  the  profits  of  a  registered  firm  have  been  distributed  otherwise  than  in 
accordance with the shares of the partners as shown in the instrument of partnership on the basis of which 
the firm has been registered under this Act, and that any partner has thereby returned his income below its 
real amount, he may direct that such partner shall, in addition to the tax, if any, payable by him, pay by 
way of penalty a sum not exceeding one and a half times the amount of tax which has been avoided, or 
would have been avoided if the income returned by such partner had been accepted as his correct income; 
and no refund or other adjustment shall be claimable by any other partner by reason of such direction. 

7* 

* 

* 

* 

* 

8[(5) The provisions of this section as they stood immediately before their amendment by the Direct 
Tax Laws (Amendment) Act, 1989 (3 of 1989) shall apply to and in relation to any assessment for the 
assessment year commencing on the 1st day of April, 1988, or any earlier assessment year and references 
in this section to the other provisions of this Act shall be construed as references to those provisions as for 
the time being in force and applicable to the relevant assessment year.] 

9[(6) Any reference in this section to the income shall be construed as a reference to the income or 
fringe  benefits,  as  the  case  may  be,  and  the  provisions  of  this  section  shall,  as far  as  may  be,  apply  in 
relation to any assessment in respect of fringe benefits also.] 

10[(7)  The  provisions  of  this  section  shall  not  apply  to  and  in  relation  to  any  assessment  for  the 

assessment year commencing on or after the 1st day of April, 2017.] 

1. Ins. by Act 41 of 1975, s. 61 (w.e.f. 1-4-1976). 
2. Ins. by Act 18 of 2008, s. 52 (w.e.f. 1-4-1989). 
3. Now Section 183 omitted by Act 18 of 1992, s. 65 (1-4-1993). 
4.  Sub-section  (3)  omitted  by  Act  3  of  1989,  s.  50  (w.e.f.  1-4-1989).  Earlier  it  was  amended  by  Act  41  of  1975,                                

s. 61 (w.e.f. 1-4-1976). 

5. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988).  
6. The words and brackets “Deputy Commissioner (Appeals) or, as the case may be, the” omitted by Act 21 of 1998, s. 65            

(w.e.f. 1-10-1998). Earlier  “Deputy Commissioner (Appeals)” was substituted for “Appellate Assistant Commissioner”  
by Act 4 of 1988, s. 2 (w.e.f. 1-4-1988) and the words and brackets “or, as the case may be, the Commissioner (Appeals)” 
were inserted by Act 29 of 1977, s. 39 and the Fifth Schedule (w.e.f. 10-7-1978).  

7.  Sub-sections  (4A)  and  (4B)  omitted  by  Act  41  of  1975,  s.  61  (w.e.f.  1-10-1975).  Earlier  the  said  sub-sections  was             

inserted by Act 1 of 1965, s. 3 (w.e.f. 12-3-1965) and later on sub-section (4A) was substituted by Act 42 of 1970, s. 48 
(w.e.f. 1-4-1971).] 

8. Ins. by Act 3 of 1989, s. 50 (w.e.f.1-4-1989). 
9. Ins. by Act 18 of 2005, s. 58 (w.e.f. 1-4-2006). 
10. Ins. by Act 28 of 2016, s. 100 (w.e.f. 1-4-2017). 

779 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
1[271A. Failure to keep, maintain or retain books of account, documents, etc.—Without prejudice 
to the provisions of 2[section 270A or] section 271, if any person 3*** fails to keep and maintain any such 
books  of  account  and  other  documents  as  required  by section  44AA or  the  rules  made  thereunder,  in 
respect  of  any  previous  year  or  to  retain  such  books  of  account  and  other  documents  for  the  period 
specified in the said rules, the 4[Assessing Officer] or the 5[*** Commissioner (Appeals)] may direct that 
such person shall pay, by way of penalty, 6[ a sum of twenty-five thousand rupees].] 

7[271AA. Penalty for failure to keep and maintain information and document, etc., in respect of 
certain  transactions.—8[(1)]  Without  prejudice  to  the  provisions  of 9[section  270A or] section 
271 or section  271BA,  if  any  person  in  respect  of  an  10[international  transaction  or  specified  domestic 
transaction],— 

(i) fails to keep and maintain any such information and document as required by sub-section (1) 

or sub-section (2) of section 92D; 

(ii) fails to report such transaction which he is required to do so; or 

(iii) maintains or furnishes an incorrect information or document, 

the  Assessing  Officer  or  Commissioner  (Appeals)  may  direct  that  such  person  shall  pay,  by  way  of 
penalty,  a  sum  equal  to  two  per  cent.  of  the  value  of  each  10[international  transaction  or  specified 
domestic transaction] entered into by such person.] 

9[(2)  If  any  person  fails  to  furnish  the  information  and  the  document  as  required  under  
sub-section (4) of section 92D, the prescribed income-tax authority referred to in the said sub-section may 
direct that such person shall pay, by way of penalty, a sum of five hundred thousand rupees.] 

11[271AAA.  Penalty  where  search  has  been  initiated.—(1)  The  Assessing  Officer  may, 
notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search 
has  been  initiated  under  section  132 on  or  after  the  1st  day  of  June,  2007  12[but  before  the  1st  day  of  
July, 2012], the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a sum 
computed at the rate of ten per cent. of the undisclosed income of the specified previous year. 

1. Ins. by Act 41 of 1975, s. 62 (w.e.f. 1-4-1976). 

2. Ins. by Act 28 of 2016, s. 101 (w.e.f. 1-4-2017). 

3. The words “, without reasonable cause,” omitted by Act 46 of 1986, s. 20 (w.e.f. 10-9-1986). 

4. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 

5. The words and brackets “Deputy Commissioner (Appeals) or the” omitted by Act 21 of 1998, s. 65 (w.e.f. 1-10-1998). 
which was substituted  as “Deputy Commissioner (Appeals)” for “Appellate Assistant Commissioner” by Act 4 of 1988, 
s.  2  (w.e.f.  1-4-1988)  and  the  words  and  brackets  “or  the  Commissioner  (Appeals)”  were  inserted  after  “Appellate 
Assistant Commissioner” by Act 29 of 1977, s. 39 and the Fifth Schedule (w.e.f. 1-4-1977). 

6. Subs. by Act 14 of 2001, s. 87, for “a sum which shall not be less than two thousand rupees but which may extend to one 

hundred thousand rupees” (w.e.f. 1-6-2001). 

7. Subs. by Act 23 of 2012, s. 98, for section 271AA (w.e.f. 1-7-2012). 

8. Section 271AA renumbered as sub-section (1) thereof by Act 28 of 2016, s. 102 (w.e.f. 1-4-2017). 

9. Ins. by s. 102, ibid. (w.e.f. 1-4-2017). 

10. Subs. by Act 23 of 2012, s. 99, for “international transaction” (w.e.f. 1-4-2013). 

11. Ins. by Act 22 of 2007, s. 77 (w.e.f. 1-4-2007). 

12. Ins. by Act 23 of 2012, s. 100 (w.e.f. 1-4-2012). 

780 

                                                           
(2) Nothing contained in sub-section (1) shall apply if the assessee,— 

(i)  in  the  course  of  the  search,  in  a  statement  under  sub-section  (4)  of section  132,  admits  the 

undisclosed income and specifies the manner in which such income has been derived; 

(ii) substantiates the manner in which the undisclosed income was derived; and 

(iii) pays the tax, together with interest, if any, in respect of the undisclosed income. 

(3) No penalty under the provisions of clause (c) of sub-section (1) of section 271 shall be imposed 

upon the assessee in respect of the undisclosed income referred to in sub-section (1). 

(4)  The  provisions  of sections  274 and 275 shall,  so  far  as  may  be,  apply  in  relation  to  the  penalty 

referred to in this section. 

Explanation.—For the purposes of this section,— 

(a) “undisclosed income” means— 

(i)  any  income  of  the  specified  previous  year  represented,  either  wholly  or  partly,  by  any 
money, bullion, jewellery or other valuable article or thing or any entry in the books of account or 
other documents or transactions found in the course of a search under section 132, which has— 

(A)  not  been  recorded  on or  before  the  date  of  search  in  the  books  of  account or  other 

documents maintained in the normal course relating to such previous year; or 

(B)  otherwise  not  been  disclosed  to  the  1[Principal  Chief  Commissioner  or  Chief 

Commissioner] or 2[Principal Commissioner or Commissioner] before the date of search; or 

(ii)  any  income  of  the  specified  previous  year  represented,  either  wholly  or  partly,  by  any 
entry in respect of an expense recorded in the books of account or other documents maintained in 
the normal course relating to the specified previous year which is found to be false and would not 
have been found to be so had the search not been conducted; 

 (b) “specified previous year” means the previous year— 

(i) which has ended before the date of search, but the date of filing the return of income under 
sub-section  (1)  of section  139 for  such  year  has  not  expired  before  the  date  of  search  and  the 
assessee has not furnished the return of income for the previous year before the said date; or 

(ii) in which search was conducted.] 

1. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). 

2. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 

781 

                                                           
1[271AAB. Penalty  where  search  has  been 

initiated.—(1)  The  Assessing  Officer  may, 
notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search 
has been initiated under section 132 on or after the 1st day of July, 2012 2[but before the date on which 
the  Taxation  Laws  (Second  Amendment)  Bill,  2016  receives  the  assent  of  the  President],  the  assessee 
shall pay by way of penalty, in addition to tax, if any, payable by him,— 

(a) a sum computed at the rate of ten per cent of the undisclosed income of the specified previous 

year, if such assessee— 

(i) in the course of the search, in a statement under sub-section (4) of section 132, admits the 

undisclosed income and specifies the manner in which such income has been derived; 

(ii) substantiates the manner in which the undisclosed income was derived; and 

(iii) on or before the specified date— 

(A) pays the tax, together with interest, if any, in respect of the undisclosed income; and 

(B) furnishes  the  return  of  income  for  the  specified  previous  year  declaring  such 

undisclosed income therein; 

(b) a  sum  computed  at  the  rate  of  twenty  per  cent  of  the  undisclosed  income  of  the  specified 

previous year, if such assessee— 

(i) in the course of the search, in a  statement under sub-section (4) of section 132, does not 

admit the undisclosed income; and 

(ii) on or before the specified date— 

(A) declares  such  income  in  the  return  of  income  furnished  for  the  specified  previous 

year; and 

(B) pays the tax, together with interest, if any, in respect of the undisclosed income; 

(c) a  sum 3[computed  at  the  rate  of  sixty  per  cent.] of  the  undisclosed  income  of  the  specified 

previous year, if it is not covered by the provisions of clauses (a) and (b). 

2[(1A) The Assessing Officer may, notwithstanding anything contained in any other provisions of this 
Act, direct that, in a case where search has been initiated under section 132 on or after the date on which 
the Taxation Laws (Second Amendment) Bill, 2016 receives the assent of the President, the assessee shall 
pay by way of penalty, in addition to tax, if any, payable by him,— 

 (a)  a  sum  computed  at  the  rate  of  thirty  per  cent  of  the  undisclosed  income  of  the  specified 

previous year, if the assessee— 

(i) in the course of the search, in a statement under sub-section (4) of section 132, admits the 

undisclosed income and specifies the manner in which such income has been derived; 

(ii) substantiates the manner in which the undisclosed income was derived; and 

1. Ins. by Act 23 of 2012, s. 101 (w.e.f. 1-7-2012). 
2. Ins. by Act 48 of 2016, s. 3 (w.e.f. 15-12-2016). 
3. Subs. by Act 28 of 2016, s. 103, for “which shall not be less than thirty per cent. but which shall not exceed ninety per 

cent.” (w.e.f. 1-4-2017). 

782 

                                                           
(iii) on or before the specified date— 

(A) pays the tax, together with interest, if any, in respect of the undisclosed income; and 

(B)  furnishes  the  return  of  income  for  the  specified  previous  year  declaring  such 

undisclosed income therein; 

 (b)  a  sum  computed  at  the  rate  of  sixty  per  cent  of  the  undisclosed  income  of  the  specified 

previous year, if it is not covered under the provisions of clause (a).] 

(2)  No  penalty  under  the  provisions  of 1[section  270A or] clause  (c)  of  sub-section  (1)  of section 
271 shall be  imposed  upon  the  assessee in  respect of the  undisclosed income  referred  to in  sub-section 
(1) 2[or sub-section (1A)]. 

(3)  The  provisions  of sections  274 and 275 shall,  as  far  as  may  be,  apply  in  relation  to  the  penalty 

referred to in this section. 

Explanation.—For the purposes of this section,— 

(a)  “specified date” means the due date of furnishing of return of income under sub-section (1) 
of section 139 or the date on which the period specified in the notice issued under section 153A for 
furnishing of return of income expires, as the case may be; 

(b) “specified previous year” means the previous year— 

(i) which has ended before the date of search, but the date of furnishing the return of income 
under sub-section (1) of section 139 for such year has not expired before the date of search and 
the assessee has not furnished the return of income for the previous year before the date of search; 
or 

(ii) in which search was conducted; 

(c) “undisclosed income” means— 

(i) any  income  of  the  specified  previous  year  represented,  either  wholly  or  partly,  by  any 
money, bullion, jewellery or other valuable article or thing or any entry in the books of account or 
other documents or transactions found in the course of a search under section 132, which has— 

(A)  not  been  recorded  on or  before  the  date  of  search  in  the  books  of  account or  other 

documents maintained in the normal course relating to such previous year; or 

(B)  otherwise  not  been  disclosed  to  the 3[Principal  Chief  Commissioner  or  Chief 

Commissioner] or 4[Principal Commissioner or Commissioner] before the date of search; or 

(ii) any  income  of  the  specified  previous  year  represented,  either  wholly  or  partly,  by  any 
entry in respect of an expense recorded in the books of account or other documents maintained in 
the normal course relating to the specified previous year which is found to be false and would not 
have been found to be so had the search not been conducted.] 

1. Ins. by Act 28 of 2016, s. 103 (w.e.f. 1-4-2017). 
2. Ins. by Act 48 of 2016, s. 3 (w.e.f. 15-12-2016). 
3. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.r.e.f. 1-6-2013). 
4. Subs. by s. 4, ibid., for “Commissioner” (w.r.e.f. 1-6-2013). 

783 

                                                           
1[271AAC. Penalty in respect of certain income.—(1) The Assessing Officer may, notwithstanding 
anything contained in this Act other than the provisions of section 271AAB, direct that, in a case where 
the  income  determined  includes  any  income  referred  to  in  section  68,  section  69,  section  69A,  section 
69B,  section  69C  or  section  69D  for  any  previous  year,  the  assessee  shall  pay  by  way  of  penalty,  in 
addition  to  tax  payable  under  section  115BBE,  a  sum  computed  at  the  rate  of  ten  per  cent  of  the  tax 
payable under clause (i) of sub-section (1) of section 115BBE: 

Provided that  no  penalty  shall  be  levied  in  respect  of  income  referred  to  in  section  68,  section  69, 
section 69A, section 69B, section 69C or section 69D to the extent such income has been included by the 
assessee in the return of income furnished under section 139 and the tax in accordance with the provisions 
of  clause  (i)  of  sub-section  (1)  of  section  115BBE  has  been  paid  on  or  before  the  end  of  the  relevant 
previous year. 

(2) No penalty under the provisions of section 270A shall be imposed upon the assessee in respect of 

the income referred to in sub-section (1). 

(3) The provisions of sections 274 and 275 shall, as far as may be, apply in relation to the penalty 

referred to in this section.] 

2[271B. Failure  to  get  accounts  audited.—If  any  person  fails  3***  to  get  his  accounts  audited  in 
respect of any previous year or years relevant to an assessment year or  4[furnish a report of such audit as 
required under section 44AB], the  5[Assessing Officer] may direct that such person shall pay, by way of 
penalty, a sum equal to one-half per cent of the total sales, turnover or gross receipts, as the case may be, 
in  business,  or  of  the  gross  receipts  in  profession,  in  such  previous  year  or  years  or  a  sum  of  6[one 
hundred fifty thousand rupees], whichever is less.] 

7[271BA. Penalty for failure to furnish report under section 92E.—If any person fails to furnish a 
report from an accountant as required by section 92E, the Assessing Officer may direct that such person 
shall pay, by way of penalty, a sum of one hundred thousand rupees.] 

8[271BB. Failure  to  subscribe  to  the  eligible  issue  of  capital.—Whoever  fails  to  subscribe  any 
amount  of  subscription  to  the  units  issued  under  any  scheme  referred  to  in  sub-section  (1)  of section 
88A* to  the  eligible  issue  of  capital  under  that  sub-section  within  the  period  of  six  months  specified 
therein, may be directed by the  9[Joint Commissioner] to pay, by way of penalty, a sum equal to twenty 
per cent of such amount.] 

1. Ins. by Act 48 of 2016, s. 4 (w.e.f. 1-4-2017). 
2. Ins. by Act 21 of 1984, s. 30 (w.e.f. 1-4-1985). 

3. The words “, without reasonable cause,” omitted by Act 46 of 1986, s. 21 (w.e.f. 10-9-1986). 

4. Subs. by Act 22 of 1995, s. 48, for “obtain a report of such audit as required under section 44AB or furnish the said report 
along  with  the  return  of  his  income  filed  under  sub-section  (1)  of  section  139,  or  along  with  the  return  of  income 
furnished  in  response  to  a  notice  under  clause  (i)  of  sub-section  (1)  of  section  142”  (w.e.f.  1-7-1995).  Earlier  certain 
words were inserted by Act 26 of 1988, s. 45 (w.e.f. 1-4-1989). 

5. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 

6. Subs. by Act 14 of 2010, s. 50, for “one hundred thousand rupees” (w.e.f. 1-4-2011). 

7. Ins. by Act 14 of 2001, s. 89 (w.e.f. 1-4-2002).  

8. Ins. by Act 12 of 1990, s. 43 (w.e.f. 1-4-1990). 

* Section 88A omitted by Act 33 of 1996, s. 35 (w.e.f. 1-4-1994). 

9. Subs. by Act 21 of 1998, s. 3, for “Deputy Commissioner” (w.e.f. 1-10-1998). 

784 

                                                           
1[271C. Penalty for failure to deduct tax at source.—2[3[(1)] If any person fails to— 

(a)  deduct  the  whole  or  any  part  of  the  tax  as  required  by  or  under  the  provisions  of  Chapter 

XVII-B; or 

(b) pay the whole or any part of the tax as required by or under— 

(i) sub-section (2) of section 115-O; or 

(ii) the second proviso to section 194B, 

then, such person shall be liable to pay, by way of penalty, a sum equal to the amount of tax which such 
person failed to deduct or pay as aforesaid.] 

4[(2) Any penalty imposable under sub-section (1) shall be imposed by the 5[Joint Commissioner].] 

6[271CA. Penalty for failure to collect tax at source.— (1) If any person fails to collect the whole 
or any part of the tax as required by or under the provisions of Chapter XVII-BB, then, such person shall 
be liable to pay, by way of penalty, a sum equal to the amount of tax which such person failed to collect 
as aforesaid. 

 (2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner.] 

271D. Penalty for failure to comply with the provisions of section 269SS.— 7[(1)] If a person takes 
or accepts any loan or deposit 8[or specified sum] in contravention of the provisions of section 269SS, he 
shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit 8[or specified 
sum] so taken or accepted. 

9[(2) Any penalty imposable under sub-section (1) shall be imposed by the 5[Joint Commissioner].] 

10[271DA.   Penalty  for  failure  to  comply  with  provisions  of section  269ST.—(1)  If  a  person 
receives any sum in contravention of the provisions of section 269ST, he shall be liable to pay, by way of 
penalty, a sum equal to the amount of such receipt: 

Provided that no penalty shall be imposable if such person proves that there were good and sufficient 

reasons for the contravention. 

(2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner.] 

271E. Penalty  for  failure  to  comply  with  the  provisions  of section  269T.—11[(1)]  If  a  person 
repays  any  12[loan  or  deposit] 13[or  specified  advance]  referred  to  in section  269T otherwise  than  in 
accordance with the provisions of that section, he shall be liable to pay, by way of penalty, a sum equal to 
the amount of the 12[loan or deposit] 13[or specified advance] so repaid.] 

14[(2) Any penalty imposable under sub-section (1) shall be imposed by the 5[Joint Commissioner].] 

1. Ins. by Act 4 of 1988, s. 108, (w.e.f. 1-4-1989). 
2. Subs. by Act 26 of 1997, s. 53, for sub-section (1), (w.e.f. 1-6-1997). Earlier it was amended by Act 12 of 1990, s. 44                      

(w.e.f. 1-4-1990). 

3. Section 271C renumbered as sub-section (1) thereof by Act 12 of 1990, s. 44 (w.e.f. 1-4-1990). 
4. Ins. by s. 44, ibid (w.e.f. 1-4-1990). 
5. Subs. by Act 21 of 1998, s. 3, for “Deputy Commissioner” (w.e.f. 1-10-1998).  
6. Ins. by Act 21 of 2006, s. 52 (w.e.f. 1-4-2007). 
7. Section 271D renumbered as sub-section (1) thereof by Act 12 of 1990, s. 45 (w.e.f. 1-4-1990). 
8. Ins. by Act 20 of 2015, s. 71 (w.e.f. 1-6-2015). 
9. Ins. by Act 12 of 1990, s. 45 (w.e.f. 1-4-1990). 
10. Ins. by Act 7 of 2017, s. 85 (w.e.f. 1-4-2017). 
11. Section 271E renumbered as sub-section (1) thereof by Act 12 of 1990, s. 46 (w.e.f. 1-4-1990). 
12. Subs. by Act 32 of 2003, s. 95, for “Deposit” (w.e.f. 1-6-2003). 
13. Ins. by Act 20 of 2015, s. 72 (w.e.f. 1-6-2015). 
14. Ins. by 12 of 1990, s. 46 (w.e.f. 1-4-1990). 

785 

                                                           
1[271F. Penalty for failure to furnish return of income.—If a person who is required to furnish a 
return  of  his  income,  as  required  under  sub-section  (1)  of section  139 or  by  the  provisos  to  that  
sub-section,  fails  to  furnish  such  return  before  the  end  of  the  relevant  assessment  year,  the  Assessing 
Officer may direct that such person shall pay, by way of penalty, a sum of five thousand rupees.] 

2[Provided that nothing contained in this section shall apply to and in relation to the return of income 

required to be furnished for any assessment year commencing on or after the 1st day of April, 2018.] 

3[271FA.  Penalty  for  failure  to  furnish  4[statement  of  financial  transaction  or  reportable 
account].—If  a  person  who  is  required  to  furnish  5[a  statement  of  financial  transaction  or  reportable 
account]  under  sub-section  (1)  of section  285BA,  fails  to  furnish  such  6[statement]  within  the  time 
prescribed under sub-section (2) thereof, the income-tax authority prescribed under said sub-section (1) 
may direct that such person shall pay, by way of penalty, a sum of  7[five hundred rupees] for every day 
during which such failure continues: 

Provided that  where  such  person  fails  to  furnish  the  6[statement]  within  the  period  specified  in  the 
notice  issued  under  sub-section  (5)  of section  285BA,  he  shall  pay,  by  way  of  penalty,  a  sum  of  8[one 
thousand rupees] for every day during which the failure continues, beginning from the day immediately 
following the day on which the time specified in such notice for furnishing the 6[statement] expires.] 

9[271FAA.  Penalty  for  furnishing  inaccurate  statement  of  financial  transaction  or  reportable 
account.—If  a  person  referred  to in  clause (k) of sub-section  (1)  of section  285BA,  who  is  required  to 
furnish a statement under that section, provides inaccurate information in the statement, and where— 

(a)  the  inaccuracy  is  due  to  a  failure  to  comply  with  the  due  diligence  requirement  prescribed 

under sub-section (7) of section 285BA or is deliberate on the part of that person; or 

(b)  the  person  knows  of  the  inaccuracy  at  the  time  of  furnishing  the  statement  of  financial 
transaction  or  reportable  account,  but  does  not  inform  the  prescribed  income-tax  authority  or  such 
other authority or agency; or 

(c) the person discovers the inaccuracy after the statement of financial transaction or reportable 
account  is  furnished  and  fails  to  inform  and  furnish  correct  information  within  the  time  specified 
under sub-section (6) of section 285BA, 

then, the prescribed income-tax authority may direct that such person shall pay, by way of penalty, a sum 
of fifty thousand rupees.] 

10[271FAB. Penalty for failure to furnish statement or information or document by an eligible 
investment  fund.—If  any  eligible  investment  fund  which  is  required  to  furnish  a  statement  or  any 
information or document, as required under sub-section (5) of section 9A fails to furnish such statement 
or information or document within the time prescribed under that sub-section, the income-tax authority 
prescribed under the said sub-section may direct that such fund shall pay, by way of penalty, a sum of five 
hundred thousand rupees.] 

11[271FB. Penalty for failure to furnish return of fringe benefits.—If an employer, who is required 
to furnish a return of fringe benefits, as required under sub-section (1) of section 115WD, fails to furnish 
such return within the time prescribed under that sub-section, the Assessing Officer may direct that such 
employer  shall  pay,  by  way  of  penalty,  a  sum  of  one  hundred  rupees  for  every  day  during  which  the 
failure continues.] 

1. Subs. by Act 20 of 2002, s. 102, for section 271F (w.e.f. 1-6-2002). 
2. Ins. by Act 7 of 2017, s. 86 (w.e.f. 1-4-2018). 
3. Subs. by Act 17 of 2013, s. 58, for section 271FA (w.e.f. 1-4-2014). 
4. Subs. by Act 25 of 2014, s. 70, for “annual information return” (w.e.f. 1-4-2015). 
5. Subs. by s. 70, ibid., for “an annual information return” (w.e.f. 1-4-2015). 
6. Subs. by s. 70, ibid., for “return” (w.e.f. 1-4-2015). 
7. Subs. by Act 13 of 2018, s. 53, for “one hundred rupees” (w.e.f. 1-4-2018). 
8. Subs. by s. 53, ibid., for “five hundred rupees” (w.e.f. 1-4-2018). 
9. Ins. by Act 25 of 2014, s. 71 (w.e.f. 1-4-2015). 
10. Ins. by Act 20 of 2015, s. 73 (w.e.f. 1-4-2016). 
11. Ins. by Act 18 of 2005, s. 59 (w.e.f. 1-4-2006). 

786 

                                                           
1[271G. Penalty  for  failure  to  furnish  information  or  document  under section  92D.—If  any 
person  who  has  entered  into  an  2[international  transaction  or  specified  domestic  transaction]  fails  to 
furnish any such information or document as required by sub-section (3) of section 92D, the Assessing 
Officer  3[or the Transfer Pricing Officer as referred to in section 92CA] or the Commissioner (Appeals) 
may direct that such person shall pay, by way of penalty, a sum equal to two per cent of the value of the 
2[international transaction or specified domestic transaction for each such failure.] 

4[271GA.  Penalty for failure  to furnish  information  or  document  under  section  285A.—If  any 
Indian concern, which is required to furnish any information or document under section 285A, fails to do 
so,  the  income-tax  authority,  as  may  be  prescribed  under  the  said  section,  may  direct  that  such  Indian 
concern shall pay, by way of penalty,— 

(i) a sum equal to two per cent of the value of the transaction in respect of which such failure has 
taken  place,  if  such  transaction  had  the  effect  of  directly  or  indirectly  transferring  the  right  of 
management or control in relation to the Indian concern; 

(ii) a sum of five hundred thousand rupees in any other case.] 

5[271GB. Penalty  for  failure  to  furnish  report  or  for  furnishing  inaccurate  report  under                 

section 286.—(1) If any reporting entity referred to in section 286, which is required to furnish the report 
referred to in sub-section (2) of the said section, in respect of a reporting accounting year, fails to do so, 
the authority prescribed under that section (herein referred to as prescribed authority) may direct that such 
entity shall pay, by way of penalty, a sum of,— 

(a) five thousand rupees for every day for which the failure continues, if the period of failure does 

not exceed one month; or 

(b) fifteen thousand rupees for every day for which the failure continues beyond the period of one 

month. 

(2)  Where  any  reporting  entity  referred  to  in section  286 fails  to  produce  the  information  and 
documents  within  the  period  allowed  under  sub-section  (6) of  the  said  section, the  prescribed authority 
may  direct  that  such  entity  shall  pay,  by  way  of  penalty,  a  sum  of  five  thousand  rupees  for  every  day 
during which the failure continues, beginning from the day immediately following the day on which the 
period for furnishing the information and document expires. 

(3)  If  the  failure  referred  to  in  sub-section  (1)  or  sub-section  (2)  continues  after  an  order  has  been 
served on the entity, directing it to pay the penalty under sub-section (1) or, as the case may be, under 
sub-section  (2),  then,  notwithstanding  anything  contained  in  sub-section  (1)  or  sub-section  (2),  the 
prescribed  authority  may  direct  that  such  entity  shall  pay,  by  way  of  penalty,  a  sum  of  fifty  thousand 
rupees for every day for which such failure continues beginning from the date of service of such order. 

(4) Where a reporting entity referred to in section 286 provides inaccurate information in the report 

furnished in accordance with sub-section (2) of the said section and where— 

(a)  the  entity  has  knowledge  of  the  inaccuracy  at  the  time  of  furnishing  the  report  but  fails  to 

inform the prescribed authority; or 

(b)  the  entity  discovers  the  inaccuracy  after  the  report  is  furnished  and  fails  to  inform  the 

prescribed authority and furnish correct report within a period of fifteen days of such discovery; or 

(c) the entity furnishes inaccurate information or document in response to the notice issued under 

sub-section (6) of section 286, 

then, the prescribed authority may direct that such person shall pay, by way of penalty, a sum of five lakh 
rupees.] 

1. Ins. by Act 14 of 2001, s. 91 (w.e.f. 1-4-2002). 
2. Subs. by Act 23 of 2012, s. 102, for “international transaction” (w.e.f. 1-4-2013).  
3. Ins. by Act 25 of 2014, s. 72 (w.e.f. 1-10-2014).  
4. Ins. by Act 20 of 2015, s. 74 (w.e.f. 1-4-2016). 
5. Ins. by Act 28 of 2016, s. 104 (w.e.f. 1-4-2017).  

787 

                                                           
1[271H. Penalty for failure to furnish statements, etc.—(1) Without prejudice to the provisions of 

the Act, the 2[Assessing Officer may direct that a person shall pay by way of] penalty, if, he— 

 (a) fails to deliver or cause to be delivered a statement within the time prescribed in sub-section 

(3) of section 200 or the proviso to sub-section (3) of section 206C; or 

(b) furnishes incorrect information in the statement which is required to be delivered or caused to 

be delivered under sub-section (3) of section 200 or the proviso to sub-section (3) ofsection 206C. 

(2) The penalty referred to in sub-section (1) shall be a sum which shall not be less than ten thousand 

rupees but which may extend to one lakh rupees. 

(3) Notwithstanding anything contained in the foregoing provisions of this section, no penalty shall 
be levied for the failure referred to in clause (a) of sub-section (1), if the person proves that after paying 
tax deducted or collected along with the fee and interest, if any, to the credit of the Central Government, 
he had delivered or cause to be delivered the statement referred to in sub-section (3) of section 200 or the 
proviso  to  sub-section  (3)  of section  206C before  the  expiry  of  a  period  of  one  year  from  the  time 
prescribed for delivering or causing to be delivered such statement. 

(4) The provisions of this section shall apply to a statement referred to in sub-section (3) of section 
200 or the proviso to sub-section (3) of section 206C which is to be delivered or caused to be delivered 
for tax deducted at source or tax collected at source, as the case may be, on or after the 1st day of July, 
2012. 

3[271-I. Penalty  for  failure  to  furnish  information  or  furnishing  inaccurate  information 
under section 195.—If a person, who is required to furnish information under sub-section (6) of section 
195,  fails  to  furnish  such  information,  or  furnishes  inaccurate  information,  the  Assessing  Officer  may 
direct that such person shall pay, by way of penalty, a sum of one lakh rupees.] 

4[271J.  Penalty  for  furnishing  incorrect  information  in  reports  or  certificates.—Without 
prejudice to the provisions of this Act, where the Assessing Officer or the Commissioner (Appeals), in the 
course  of  any  proceedings  under  this  Act,  finds  that  an  accountant  or  a  merchant  banker  or  a  registered 
valuer has furnished incorrect information in any report or certificate furnished under any provision of this 
Act or the rules made thereunder, the Assessing Officer or the Commissioner (Appeals) may direct that such 
accountant or merchant banker or registered valuer, as the case may be, shall pay, by way of penalty, a sum 
of ten thousand rupees for each such report or certificate. 

Explanation.––For the purposes of this section,— 

(a)  “accountant”  means  an  accountant  referred  to  in  the  Explanation  below  sub-section  (2)  of 

section 288; 

(b)  “merchant  banker”  means  Category  I  merchant  banker  registered  with  the  Securities  and 
Exchange Board of India established under section 3 of the Securities and Exchange Board of India 
Act, 1992. 

(c) “registered valuer” means a person defined in clause (oaa) of section 2 of the Wealth-tax Act, 

1957.] 

[272. Failure  to  give  notice  of  discontinuance.]—Omitted  by  the  Direct  Tax  Laws  (Amendment)           

Act, 1987, (4 of 1988), s. 109 (w.e.f. 1-4-1989). 

5[272A. Penalty for failure to answer questions, sign statements, furnish information, returns or 

statements, allow inspections, etc.—(1) If any person,— 

(a)  being  legally  bound  to  state  the  truth  of  any  matter  touching  the  subject  of  his  assessment, 
refuses to answer any question put to him by an income-tax authority in the exercise of its powers 
under this Act; or 

1. Ins. by Act 23 of 2012, s. 103 (w.e.f. 1-7-2012). 
2. Subs. by Act 25 of 2014, s. 73, for certain words (w.e.f. 1-10-2014). 
3. Ins. by Act 20 of 2015, s. 75 (w.e.f. 1-6-2015). 
4. Ins. by Act 7 of 2017, s. 87 (w.e.f. 1-4-2017). 
5. Subs. by Act 4 of 1988, s. 110 (w.e.f 1-4-1989). Prior to its inserted by Act 41 of 1975, s. 63 (w.e.f. 1-4-1976). 

788 

                                                           
(b) refuses to sign any statement made by him in the course of any proceedings under this Act, 

which an income-tax authority may legally require him to sign; or 

(c)  to  whom  a  summons  is  issued  under  sub-section  (1)  of section  131 either  to  attend  to  give 
evidence or produce books of account or other documents at a certain place and time omits to attend 
or produce books of account or documents at the 1[place or time; or] 

2[(d)fails  to  comply  with  a  notice  under  sub-section  (1)  of section  142 or  sub-section  (2) 

of section 143 or fails to comply with a direction issued under sub-section (2A) of section 142,] 

he shall pay, by way of penalty, 3[a sum of ten thousand rupees] for each such default or failure. 

(2) If any person fails— 

 (a) to comply with a notice issued under sub-section (6) of section 94; or 

 (b) to give the notice of discontinuance of his business or profession as required by sub-section 

(3) of section 176; or 

 (c)  to  furnish  in  due  time  any  of  the  returns,  statements  or  particulars  mentioned  in section 

133 or section 206 4*** 5[or section 206C] or section 285B; or 

 (d) to allow inspection of any register referred to in section 134 or of any entry in such register or 

to allow copies of such register or of any entry therein to be taken; or 

6[(e) to furnish the return of income which he is required to furnish under sub-section (4A) or sub-
section (4C) of section 139 or to furnish it within the time allowed and in the manner required under 
those sub-sections; or] 

 (f) to deliver or cause to be delivered in due time a copy of the declaration mentioned in section 

197A; or 

 (g) to furnish a certificate as required by section 203 5[or section 206C]; or 

 (h) to deduct and pay tax as required by sub-section (2) of section 226; 

 7[(i) to furnish a statement as required by sub-section (2C) of section 192;] 

 8[(j) to deliver or cause to be delivered in due time a copy of the declaration referred to in sub-

section (1A) of section 206C;] 

9[(k) to deliver or cause to be delivered a copy of the statement within the time specified in sub-

section (3) of section 200 or the proviso to sub-section (3) of section 206C;] 

10[(l) to deliver or cause to be delivered the 11[statements] within the time specified in sub-section 

(1) of section 206A;] 

12[(m) to deliver or cause to be delivered a statement within the time as may be prescribed under 

sub-section (2A) of section 200 or sub-section (3A) of section 206C,] 

1. Subs. by Act 28 of 2016, s. 105, for “place or time, ” (w.e.f. 1-4-2017). 
2. Ins. by s. 105, ibid. (w.e.f. 1-4-2017). 
3. Subs. by Act 14 of 2001, s. 92, for “a sum which shall not be less than five hundred rupees but which niay extend to ten 

thousand rupees” (w.e.f. 1-6-2001). 

4. The words, figures and letters “or section 206A or section 206B” omitted by Act 33 of 1996, s. 55 (w.e.f. 1-10-1996). 
5. Ins. by Act 49 of 1991, s. 68 (w.e.f. 1-10-1991). 
6. Subs. by Act 20 of 2002, s. 103, for clause (e) (w.e.f. 1-4-2003). 
7. Ins. by Act 14 of 2001, s. 92 (w.e.f. 1-4-2002). 
8. Ins. by Act 54 of 2003, s. 17, for clause (j) (w.e.f. 8-9-2003). 
9. Ins. by Act 23 of 2004, s.  56 (w.e.f. 1-4-2005). 
10. Ins. by Act 18 of 2005, s. 60 (w.e.f. 1-6-2005). 
11. Subs. by Act 33 of 2009, s. 75, for “quarterly return” (w.e.f. 1-10-2009). 
12. Ins. by Act 20 of 2015, s. 76 (w.e.f. 1-6-2015). 

789 

                                                           
he shall pay, by way of penalty, a sum  1[of one hundred rupees] for every day during which the failure 
continues: 

2[Provided that the amount of penalty for failures in relation to  3[a declaration mentioned in section 
returns  under sections  206 and 206C 
197A,  a  certificate  as 
4[and 5[statements under sub-section (2A) or sub-section (3) of section 200 or the proviso to sub-section 
(3)  or  under  sub-section  (3A)  of section  206C]]  shall  not  exceed  the  amount  of  tax  deductible  or 
collectible, as the case may be:] 

required  by section  203 and] 

6[Provided further that no penalty shall be levied under this section for the failure referred to in clause 
(k), if such failure relates to a statement referred to in sub-section (3) of section 200 or the proviso to sub-
section (3) of section 206C which is to be delivered or caused to be delivered for tax deducted at source 
or tax collected at source, as the case may be, on or after the 1st day of July, 2012.] 

(3) Any penalty imposable under sub-section (1) or sub-section (2) shall be imposed— 

 (a)  in  a  case  where  the  contravention,  failure  or  default  in  respect  of  which  such  penalty  is 
imposable occurs in the course of any proceeding before an income-tax authority not lower in rank 
than a 7[Joint Director] or a 8[Joint Commissioner], by such income-tax authority; 

9[(aa)in a case falling under clause (d) of sub-section (1), by the income-tax authority who had 

issued the notice or direction referred to therein;] 

 (b) in a case falling under clause (f) of sub-section (2), by the 10[Principal Chief Commissioner or 

Chief Commissioner] or 11[Principal Commissioner or Commissioner]; and 

 (c) in any other case, by the 7[Joint Director] or the 8[Joint Commissioner]. 

(4) No order under this section shall be passed by any income-tax authority referred to in sub-section 
(3) unless the person on whom the penalty is proposed to be imposed is given an opportunity of being 
heard in the matter by such authority. 

Explanation.—In  this  section,  “income-tax  authority”  includes  a  12[Principal  Director  General  or 
Director  General],  13[Principal  Director  or  Director],  7[Joint  Director]  and  an  14[Assistant  Director  or 
Deputy Director] while exercising the powers vested in a court under the Code of Civil Procedure, 1908 
(5 of 1908), when trying a suit in respect of the matters specified in sub-section (1) of section 131.] 

15[272AA. Penalty  for  failure  to  comply  with  the  provisions  of section  133B.—(1)  If  a  person 
16***  fails  to  comply  with  the  provisions  of section  133B,  he  shall,  on  an  order  passed  by  the  8[Joint 
Commissioner], 14[Assistant Director or Deputy Director] or the 17[Assessing Officer], as the case may be, 
pay, by way of penalty, a sum which may extend to one thousand rupees. 

1. Subs. by Act 27 of 1999, s. 88, for “which shall not be less than hundred rupees, but which may extend to two hundred 

rupees,” (w.e.f. 1-6-1999). 

2. Ins. by Act 49 of 1991, s. 68 (w.e.f. 1-10-1991). 
3. Ins. by Act 21 of 1998, s. 62 (w.e.f. 1-4-1999). 
4. Ins. by Act 21 of 2006, s. 53 (w.e.f. 1-6-2006). 
5. Subs. by Act 20 of 2015, s. 76, for “statement under sub-section (3) of section 200 or the proviso to sub-section (3) of 

section 206C” (w.e.f. 1-6-2015). 

6. Ins. by Act 23 of 2012, s. 104 (w.e.f. 1-7-2012). 
7. Subs. by Act 21 of 1998, s. 3, for “Deputy Director” (w.e.f. 1-10-1998). 
8. Subs. by s. 3, for ibid., “Deputy Commissioner” (w.e.f. 1-10-1998). 
9. Ins. by Act 28 of 2016, s. 105 (w.e.f. 1-4-2017). 
10. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.r.e.f. 1-6-2013). 
11. Subs. by s. 4, ibid., for “Commissioner” (w.r.e.f. 1-6-2013). 
12. Subs. by s. 4, ibid., for “Director General” (w.r.e.f. 1-6-2013).  
13. Subs. by s. 4, ibid., for “Director”  (w.r.e.f. 1-6-2013). 
14. Subs. by Act 21 of 1998, s. 3, for “Assistant Director” (w.e.f. 1-10-1998). 
15. Ins. by Act 23 of 1986, s. 35 (w.e.f. 13-5-1986). 
16. The words “, without reasonable cause,” omitted by Act 46 of 1986, s. 20 (w.e.f. 10-9-1986). 
17. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f.1-4-1988). 

790 

                                                           
(2) No order under sub-section (1) shall be passed unless the person on whom the penalty is proposed 

to be imposed is given an opportunity of being heard in the matter.] 

1[272B.Penalty for failure to comply with the provisions of section 139A.—(1) If a person fails to 
comply with the provisions of section 139A, the Assessing Officer may direct that such person shall pay, 
by way of penalty, a sum of ten thousand rupees. 

(2) If a person who is required to quote his permanent account number in any document referred to in 
clause (c) of sub-section (5) of section 139A, or to intimate such number as required by sub-section (5A) 
2[or sub-section (5C)] of that section, quotes or intimates a number which is false, and which he either 
knows or believes to be false or does not believe to be true, the Assessing Officer may direct that such 
person shall pay, by way of penalty, a sum of ten thousand rupees. 

(3) No order under sub-section (1) or sub-section (2) shall be passed unless the person, on whom the 

penalty is proposed to be imposed, is given an opportunity of being heard in the matter.] 

3[272BB. Penalty for failure to comply with the provisions of section 203A.—(1) If a person fails 
to comply with the provisions of section 203A, he shall, on an order passed by the  4[Assessing Officer], 
pay, by way of penalty, 5[a sum of ten thousand rupees]. 

6[(1A) If a person who is required to quote his “tax deduction account number” or, as the case may be, 
“tax  collection  account  number”  or  “tax  deduction  and  collection  account  number”  in  the  challans  or 
certificates  or  statements  or  other  documents  referred  to  in  sub-section  (2)  of section  203A,  quotes  a 
number which is false, and which he either knows or believes to be false or does not believe to be true, 
the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of ten thousand 
rupees.] 

(2) No order under sub-section (1) 6[or sub-section (1A)] shall be passed unless the person on whom 

the penalty is proposed to be imposed is given an opportunity of being heard in the matter.] 

7[272BBB. Penalty for failure to comply with the provisions of section 206CA.—(1) If a person 
8[fails to comply before the 1st day of October, 2004] with the provisions of section 206CA, he shall, on 
an order passed by the Assessing Officer, pay, by way of penalty, a sum of ten thousand rupees. 

(2) No order under sub-section (1) shall be passed unless the person on whom the penalty is proposed 

to be imposed, is given an opportunity of being heard in the matter.] 

1. Ins. by Act 20 of 2002, s.  104  (w.e.f. 1-6-2002). 

2. Ins. by Act 23 of 2004, s. 57 (w.e.f 1-4-2005). 

3. Ins. by Act 11 of 1987, s. 68 (w.e.f. 1-6-1987). 

4. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988).  

5. Subs. by Act 14 of 2001, s. 93, for “a sum which may extend to five thousand rupees” (w.e.f.  1-6-2001). 

6. Ins. by Act 21 of 2006, s. 54 (w.e.f. 1-6-2006). 

7. Ins. by Act 20 of 2002, s. 105 (w.e.f. 1-6-2002). 

8. Subs. by Act 23 of 2004, s. 58, for “fails to comply” (w.e.f. 1-10-2004). 

791 

                                                           
1[273. False estimate of, or failure to pay, advance tax.—2[(1) If the  3[Assessing Officer], in  the 
course of any proceedings in connection with the regular assessment for any assessment year, is satisfied 
that any assessee— 

(a) has furnished under clause (a) of sub-section (1) of section 209A a statement of the advance 

tax payable by him which he knew or had reason to believe to be untrue, or 

(b) has  4*** failed to furnish a statement of the advance tax payable by him in accordance with 

the provisions of clause (a) of sub-section (1) of section 209A, 

he may direct that such person shall, in addition to the amount of tax, if any, payable by him, pay by way 
of penalty a sum— 

(i)  which,  in  the  case  referred  to  in  clause  (a),  shall  not  be  less  than  ten  per  cent  but  shall  not 
exceed  one  and  a  half  times  the  amount  by  which  the  tax  actually  paid  during  the  financial  year 
immediately preceding the assessment year under the provisions of Chapter XVIIC falls short of— 

(1) seventy-five per cent. of the assessed tax as defined in sub-section (5) of section 215, or 

(2)  the  amount  which  would  have  been  payable  by  way  of  advance  tax  if  the assessee  had 
furnished  a  correct  and  complete  statement  in  accordance  with  the  provisions  of  clause  (a)  of  
sub-section (1) of section 209A, 

whichever is less; 

(ii) which, in the case referred to in clause (b), shall not be less than ten per cent. but shall not 
exceed  one  and  a  half  times  of  seventy-five  per  cent.  of  the  assessed  tax  as  defined  in  
sub-section (5) of section 215]: 

5[Provided that in the case of an assessee, being a company, the provisions of this sub-section shall 
have effect as if for the words “seventy-five per cent.”, at both the places where they occur, the words 
“eighty-three and one-third per cent.” had been substituted.] 

6[(2)]  If  the  3[Assessing  Officer],  in  the  course  of  any  proceedings  in  connection  with  the  regular 
assessment  for  the  assessment  year  commencing  on  the  1st  day  of  April,  1970,  or  any  subsequent 
assessment year, is satisfied that any assessee— 

1. Subs. by Act 14 of 1969, s. 22, for section 273 (w.e.f. 1-4-1970). 

2. Ins. by Act 19 of 1978, s. 31 (w.e.f. 1-6-1978). 

3. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 

4. The words “, without reasonable cause,” omitted by Act 46 of 1986, s. 25 (w.e.f. 10-9-1986). 

5. Ins. by Act 44 of 1980, s. 33 (w.e.f. 1-9-1980). 

6. Section 273 renumbered as sub-section (2) thereof by Act 19 of 1978, s. 31 (w.e.f. 1-6-1978). 

792 

                                                           
1[(a) has furnished under sub-section (1) or sub-section (2) or sub-section (3) or sub-section (5) 
of section 209A, or under sub-section (1) or sub-section (2) of section 212, an estimate of the advance 
tax payable by him which he knew or had reason to believe to be untrue, or] 

2[(aa)  has  furnished  3[under  sub-section  (4)  of section  209A or]  under  sub-section  (3A)  of  
section 212 an estimate of the advance tax payable by him which he knew or had reason to believe to 
be untrue, or] 

(b) has  4*** failed to furnish an estimate of the advance tax payable by him in accordance with 

the provisions of 5[clause (b) of sub-section (1) of section 209A], or 

(c) has  4*** failed to furnish an estimate of the advance tax payable by him in accordance with 

the provisions of 6[sub-section (4) of section 209A or sub-section (3A) of section 212], 

he may direct that such person shall, in addition to the amount of tax, if any, payable by him, pay by way 
of penalty a sum— 

 (i) which, in the case referred to in clause (a), shall not be less than ten per cent. but shall not 
exceed  one  and  a  half  times  the  amount  by  which  the  tax  actually  paid  during  the  financial  year 
immediately preceding the assessment year under the provisions of Chapter XVII-C falls short of— 

(1) seventy-five per cent of the assessed tax as defined in sub-section (5) of section 215, or 

7[(2) where a statement under clause (a) of sub-section (1) of section 209A was furnished by 
the assessee or where a notice under section 210 was issued to the assessee, the amount payable 
under such statement or, as the case may be, such notice,] 

whichever is less; 

2[(ia) which, in the case referred to in clause (aa), shall not be less than ten per cent. but shall not 
exceed  one  and  a  half  times  the  amount  by  which  the  tax  actually  paid  during  the  financial  year 
immediately  preceding  the  assessment  year  under  the  provisions  of  Chapter  XVII-C  falls  short  of 
seventy-five per cent. of the assessed tax as defined in sub-section (5) of section 215;] 

(ii) which, in the case referred to in clause (b), shall not be less than ten per cent. but shall not 
exceed  one  and  a  half  times  of  seventy-five  per  cent  of  the  assessed  tax  as  defined  in  
sub-section (5) of section 215; and 

1. Subs. by Act 19 of 1978, s. 31, for clause (a) (w.e.f. 1-6-1978). 

2. Ins. by Act 29 of 1977, s. 27 (w.e.f. 1-9-1977). 

3. Ins. by Act 19 of 1978, s. 31 (w.e.f. 1-6-1978). 

4. The words “, without reasonable cause,” omitted by Act 46 of 1986, s. 25 (w.e.f. 10-9-1986). 

5. Subs. by Act 19 of 1978, s. 31, for “sub-section (3) of section 212” (w.e.f. 1-6-1978). 

6. Subs. by s. 31, ibid., for “sub-section (3A) of section 212” (w.e.f. 1-6-1978). 

7. Subs. by s. 31, ibid., for sub-clause (2) (w.e.f. 1-6-1978). 

793 

                                                           
1[(iii) which, in the case referred to in clause (c), shall not be less than ten per cent. but shall not 

exceed one and a half times the amount by which— 

(a) where the assessee has sent a statement under clause (a), or an estimate under clause (b) 
of sub-section (1) of section 209A, or an estimate in lieu of a statement under sub-section (2) of 
that section, the tax payable in accordance with such statement or estimate; or 

(b) where the assessee was required to pay advance tax in accordance with the notice issued 

to him under section 210, the tax payable under such notice, 

falls  short  of  seventy-five  per  cent.  of  the  assessed  tax  as  defined  in  sub-section  (5)  of  
section 215:]] 

2[Provided that in the case of an assessee, being a company, the provisions of this sub-section shall 
have effect as if for the words “seventy-five per cent.”, wherever they occur, the words “eighty-three and 
one-third per cent.” had been substituted.] 

3[Explanation 4[1].—For the purposes of clause (ia), the amount paid by the assessee on or before the 
date  extended  by  the  5[6[Principal  Chief  Commissioner  or  Chief  Commissioner]  or  7[Principal 
Commissioner or Commissioner]] under the 8[ 9[first proviso] to sub-section (4) of section 209A or, as the 
case  may  be,  9[first  proviso]  to sub-section  (3A)  of section  212]  shall,  where the  date  so  extended falls 
beyond  the  financial  year  immediately  preceding  the  assessment  year,  also  be  regarded  as  tax  actually 
paid during that financial year.] 

10[Explanation  2.—When  the  person  liable  to  penalty  is  a  registered  firm  or  an  unregistered  firm 
which has been assessed under clause (b) of section 183, then, notwithstanding anything contained in the 
other provisions of this Act, the penalty imposable under this section shall be the same amount as would 
be imposable on that firm if that firm were an unregistered firm.] 

11[(3) The provisions of this section shall apply to and in relation to any assessment for the assessment 
year  commencing  on  the  1st  day  of  April,  1988,  or  any  earlier  assessment  year,  and  references  in  this 
section to the other provisions of this Act shall be construed as references to those provisions as for the 
time being in force and applicable to the relevant assessment year.] 

1. Subs. by Act 19 of 1978, s. 31, for clause (iii) (w.e.f. 1-6-1978). 

2. Ins. by Act 44 of 1980, s. 33 (w.e.f. 1-9-1980). 

3. Ins. by Act 29 of 1977, s. 27 (w.e.f. 1-9-1977). 

4. The Explanation numbered as Explanation 1 by Act 67 of 1984, s. 49 (w.e.f. 1-4-1985). 

5. Subs. by Act 4 of 1988, s. 2, for “Commissioner” (w.e.f. 1-4-1988). 

6. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). 

7. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 

8. Subs. by Act 19 of 1978, s. 31, for “proviso to sub-section (3A) of section 212” (w.e.f. 1-6-1978). 

9. Subs. by Act 16 of 1981, s. 25, for “proviso” (w.e.f. 1-4-1981). 

10. Ins. by Act 67 of 1984, s. 49 (w.e.f. 1-4-1985). 

11. Ins. by Act 4 of 1988, s. 112 (w.e.f. 1-4-1989). 

794 

                                                           
1[273A. Power  to  reduce  or waive  penalty,  etc.,  in  certain  cases.—(1)  Notwithstanding  anything 
contained  in  this  Act,  the 2[3***  4[Principal  Commissioner  or  Commissioner]]  may,  in  his  discretion, 
whether on his own motion or otherwise,— 

5* 

* 

* 

* 

* 

(ii)   reduce  or  waive  the  amount  of  penalty  imposed  or  imposable  on  a  person  under  6[section 

270A or] clause (iii) of sub-section (1) of section 271; [or] 

7* 

* 

if he is satisfied that such person— 

8* 

* 

* 

* 

* 

* 

* 

* 

(b)  in the case referred to in clause (ii), has, prior to the detection by the 9[Assessing Officer], of 
the concealment of particulars of income or of the inaccuracy of particulars furnished in respect of 
such income, voluntarily and in good faith, made full and true disclosure of such particulars, 

10* 

* 

* 

* 

* 

and also has, 11[in the case referred to in clause (b)], co-operated in any enquiry relating to the assessment 
of his income and has either paid or made satisfactory arrangements for the payment of any tax or interest 
payable in consequence of an order passed under this Act in respect of the relevant assessment year. 

Explanation. 12***—For the purposes of this sub-section, a person shall be deemed to have made full 
and  true  disclosure  of  his  income  or  of  the  particulars  relating  thereto  in  any  case  where  the  excess  of 
income  assessed  over  the  income  returned  is  of  such  a  nature  as  not  to  attract  the  provisions  of          
6[section 270A or] clause (c) of sub-section (1) of section 271. 

12*   

* 

* 

* 

(2) Notwithstanding anything contained in sub-section (1),— 

13* 

* 

* 

* 

* 

* 

(b)  if in a case falling under 6[section 270A or] clause (c) of sub-section (1) of section 271, the 
amount of income in respect of which the penalty is imposed or imposable for the relevant assessment 
year,  or,  where  such  disclosure  relates  to  more  than  one  assessment  year,  the  aggregate  amount  of 
such income for those years, exceeds a sum of five hundred thousand rupees, 

1. Ins. by Act 41 of 1975, s. 64 (w.e.f. 1-10-1975). 
2. Subs. by Act 4 of 1988, s. 2, for “Commissioner” (w.e.f. 1-4-1988). 
3. The words “Chief Commissioner or” omitted by Act 38 of 1993, s. 36 (w.e.f. 1-6-1993). 
4. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.r.e.f. 1-6-2013).  
5. Clause (i) omitted by Act 3 of 1989, s. 51 (w.e.f. 1-4-1989). 
6. Ins. by Act 28 of 2016, s. 106 (w.e.f. 1-4-2017). 
7. Clause (iii) omitted by Act 3 of 1989, s. 51 (w.e.f. 1-4-1989). 
8. Clause (a) omitted by s. 51, ibid. (w.e.f. 1-4-1989). 
9. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. (1-4-1988). 
10. Clause (c) omitted by Act 3 of 1989, s. 51 (w.e.f. 1-4-1989). 
11. Subs. by s. 51, ibid., for “in all the cases referred to in clauses (a), (b) and (c)” (w.e.f. 1-4-1989). 
12.  Explanation  2  omitted  by  Act  32  of  1985,  s.  34  (w.e.f.  24-5-1985).  .  Earlier  “1”  and  Explanation  2  was  ins.  by                     

Act 67 of 1984, s. 50 (w.e.f. 1-10-1984). 

13.  Clause  (a)  omitted  by  Act  3  of  1989,  s.  51  (w.e.f.  1-4-1989).  Earlier  clause  (a)  was  amended  by  Act  67  of  1984,                        

s. 50 (w.e.f. 1-10-1984). 

795 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
no  order  reducing  or  waiving  the  penalty  under  sub-section  (1)  shall  be  made  by  1[the 2[Principal 
the 3[Principal  Chief 
Commissioner  or  Commissioner]  except  with 
Commissioner or Chief Commissioner] or 4[Principal Director General or Director General], as the case 
may be]. 

the  previous  approval  of 

(3) Where an order has been made under sub-section (1) in favour of any person, whether such order 
relates to one or more assessment years, he shall not be entitled to any relief under this section in relation 
to any other assessment year at any time after the making of such order: 

5[Provided that  where  an  order  has  been  made  in  favour  of  any  person  under  sub-section  (1)  on  or 
before the 24th day of July, 1991, such person shall be entitled to further relief only once in relation to 
other assessment year or years if he makes an application to the income-tax authority referred to in sub-
section (4) at any time before the 1st day of April, 1992.] 

(4)  Without  prejudice  to  the  powers  conferred  on  him  by  any  other  provision  of  this  Act,                 

the 6[7*** 2[Principal Commissioner or Commissioner]] may, on an application made in this behalf by an 
assessee, and after recording his reasons for so doing, reduce or waive the amount of any penalty payable 
by the assessee under this Act or stay or compound any proceeding for the recovery of any such amount, 
if he is satisfied that— 

(i) to  do  otherwise  would  cause  genuine  hardship  to  the  assessee,  having  regard  to  the 

circumstances of the case; and 

(ii) the assessee has co-operated in any inquiry relating to the  assessment or any proceeding for 

the recovery of any amount due from him: 

8[Provided that  where  the  amount  of  any  penalty  payable  under  this  Act  or,  where  such 
application  relates  to  more  than  one  penalty,  the  aggregate  amount  of  such  penalties  exceeds  one 
hundred thousand rupees, no order reducing or waiving the amount or compounding any proceeding 
for  its  recovery  under  this  sub-section  shall  be  made  by  1[the 2[Principal  Commissioner  or 
Commissioner]  except  with  the  previous  approval  of  the 3[Principal  Chief  Commissioner  or  Chief 
Commissioner] or  4[Principal Director General or Director General], as the case may be].] 

9[(4A) The order under sub-section (4), either accepting or rejecting the application in full or in part, 
shall  be  passed  within  a  period  of  twelve  months  from  the  end  of  the  month  in  which  the  application 
under the said sub-section is received by the Principal Commissioner or the Commissioner: 

Provided that  no  order  rejecting  the  application,  either  in  full  or  in  part,  shall  be  passed  unless  the 

assessee has been given an opportunity of being heard: 

Provided further that where any application is pending as on the 1st day of June, 2016, the order shall 

be passed on or before the 31st day of May, 2017.] 

(5)  Every  order  made  under  this  section  shall  be  final  and  shall  not  be  called  into  question  by  any 

court or any other authority.] 

1. Subs. by Act 38 of 1993, s. 36, for “the Chief Commissioner or Commissioner except with the previous approval of the          

Board” (w.e.f. 1-6-1993). Earlier the words “Chief Commissioner or Commissioner” were substituted by Act 4 of 1988, s. 
2, for “Commissioner” (w.e.f. 1-4-1988). 

2. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.r.e.f. 1-6-2013). 
3. Subs. by s. 4, ibid., for “Chief Commissioner” (w.r.e.f. 1-6-2013). 
4. Subs. by s. 4, ibid., for “Director General” (w.r.e.f. 1-6-2013). 
5. Ins. by Act 49 of 1991, s. 69 (w.e.f. 27-9-1991). 
6. Subs. by Act 4 of 1988, s. 2, for “Commissioner” (w.e.f. 1-4-1988). 
7. The words “Chief Commissioner or” omitted by Act 38 of 1993, s. 36 (w.e.f. 1-6-1993). 
8. The proviso added by Act 67 of 1984, s. 50 (w.e.f. 1-10-1984). 
9. Ins. by Act 28 of 2016, s. 106 (w.e.f. 1-6-2016). 

796 

                                                           
1[(6) The provisions of this section 2[as they stood immediately before their amendment by the Direct 
Tax Laws (Amendment) Act, 1989] shall apply to and in relation  to any assessment for the assessment 
year  commencing  on  the  1st  day  of  April,  1988,  or  any  earlier  assessment  year,  and  references  in  this 
section to the other provisions of this Act shall be construed as references to those provisions as for the 
time being in force and applicable to the relevant assessment year.] 

3[(7)  Notwithstanding  anything  contained  in  sub-section  (6),  the  provisions  of  sub-section  (1),  sub-
section (2), or, as the case may be, sub-section (4) [as they stood immediately before their amendment by 
the Direct Tax Laws (Amendment) Act, 1989 (3 of 1989)], shall apply in the case of reduction or waiver 
of penalty or interest in relation to any assessment for the assessment year commencing on the 1st day of 
April,  1988  or  any  earlier  assessment  year,  with  the  modifications  that  the  power  under  the  said  sub-
section (1) shall be exercisable only by the 4[Principal Commissioner or Commissioner] and instead of the 
previous approval of the Board, the 4[Principal Commissioner or Commissioner] shall obtain the previous 
approval of the 5[Principal Chief Commissioner or Chief Commissioner] or 6[Principal Director General 
or Director General], as the case may be, while dealing with such case.] 

7[273AA. Power  of  4[Principal  Commissioner  or  Commissioner]  to  grant  immunity  from                  

penalty.—(1) A person may make an application to the  4[Principal Commissioner or Commissioner] for 
granting immunity from penalty, if— 

(a)  he  has  made  an  application  for  settlement  under section  245C and  the  proceedings  for 

settlement have abated under section 245HA; and 

(b) the penalty proceedings have been initiated under this Act. 

(2) The application to the 4[Principal Commissioner or Commissioner] under sub-section (1) shall not 

be made after the imposition of penalty after abatement. 

(3) The 4[Principal Commissioner or Commissioner] may, subject to such conditions as he may think 
fit  to impose,  grant to the person  immunity  from  the  imposition  of  any  penalty under this  Act,  if  he is 
satisfied  that  the  person  has,  after  the  abatement,  co-operated  with  the  income-tax  authority  in  the 
proceedings before him and has made a full and true disclosure of his income and the manner in which 
such income has been derived. 

8[(3A) The order under sub-section (3), either accepting or rejecting the application in full or in part, 
shall  be  passed  within  a  period  of  twelve  months  from  the  end  of  the  month  in  which  the  application 
under the said sub-section is received by the Principal Commissioner or the Commissioner: 

Provided that  no  order  rejecting  the  application,  either  in  full  or  in  part,  shall  be  passed  unless  the 

assessee has been given an opportunity of being heard: 

Provided further that where any application is pending as on the 1st day of June, 2016, the order shall 

be passed on or before the 31st day of May, 2017.] 

(4) The immunity granted to a person under sub-section (3) shall stand withdrawn, if such person fails 
to comply with any condition subject to which the immunity was granted and thereupon the provisions of 
this Act shall apply as if such immunity had not been granted. 

(5) The immunity granted to a person under sub-section (3) may, at any time, be withdrawn by the 
4[Principal Commissioner or Commissioner], if he is satisfied that such person had, in the course of  any 

1. Ins. by Act 4 of 1988, s. 113 (w.e.f. 1-4-1989). 
2. Ins. by Act 3 of 1989, s. 51 (w.e.f. 1-4-1989). 
3. Ins. by Act 32 of 1994, s. 48 (w.e.f. -6-1994). 
4. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.r.e.f. 1-6-2013). 
5. Subs. by s. 4, ibid., for “Chief Commissioner” (w.r.e.f. 1-6-2013). 
6. Subs. by s. 4, ibid., for “Director General” (w.r.e.f. 1-6-2013). 
7. Ins. by Act 18 of 2008, s. 53, (w.e.f. 1-4-2008). 
8. Ins. by Act 28 of 2016, s. 107 (w.e.f. 1-6-2016). 

797 

                                                           
proceedings, after abatement, concealed any particulars material to the assessment from the income-tax 
authority or had given false evidence, and thereupon such person shall become liable to the imposition of 
any  penalty  under this  Act  to  which  such  person  would  have  been  liable,  had not  such immunity  been 
granted.] 

1[273B. Penalty  not  to  be  imposed  in  certain  cases.—Notwithstanding  anything  contained  in  the 
provisions  of  2[clause  (b)  of  sub-section  (1)  of] 3[section  271, section  271A 4[,  section  271AA], section 
271B, 4[section  271BA],   5[section  271BB,] 6[section  271C, section  271CA], section  271D, section 
271E, 7[section 271F, 8[section 271FA, 9[section 271FAB, section 271FB, section 271G, section 271GA], 
10[section  271GB,] 11[section  271H,] 12[section  271-I,]  13[section  271J,] clause  (c)  or  clause  (d)  of  sub-
section (1) or sub-section (2) of section 272A, sub-section (1) of section 272AA] or 14[15[section 272B or] 
16[sub-section  (1)  or  sub-section  (1A)  of 17[section  272BB]  or]  sub-section  (1)  of  section  272BBB or] 
clause (b) of sub-section (1) or clause (b) or clause (c) of sub-section (2) of section 273, no penalty shall 
be  imposable  on  the  person  or  the  assessee,  as  the  case  may  be,  for  any  failure  referred  to  in  the  said 
provisions if he proves that there was reasonable cause for the said failure.] 

274. Procedure.—(1)  No  order  imposing  a  penalty  under  this  Chapter  shall  be  made  unless  the 

assessee has been heard, or has been given a reasonable opportunity of being heard. 

18[(2) No order imposing a penalty under this Chapter shall be made— 

(a) by the Income-tax Officer, where the penalty exceeds ten thousand rupees; 

(b)  by  the  19[Assistant  Commissioner  or  Deputy  Commissioner],  where  the  penalty  exceeds 

twenty thousand rupees, 

except with the prior approval of the 20[Joint Commissioner]. 

21[(3) An income-tax authority on making an order under this Chapter imposing a penalty, unless he is 

himself the Assessing Officer, shall forthwith send a copy of such order to the Assessing Officer.] 

1. Ins. by Act 46 of 1986, s. 26 (w.e.f. 10-9-1986). 
2. Ins. by Act 3 of 1989, s. 57 (w.e.f. 1-4-1989). 
3. Subs. by Act 4 of 1988, s. 114 for “section 270, clause (a) and clause (b) of sub-section (1) of section 271, section 271A, 

section  271B,  sub-section  (2),  of  section  272A,  sub-section  (1)  of  section  272AA,  sub-section  (1)  of  section  272B”                
(w.e.f. 1-4-1989). 

4. Ins. by Act 14 of 2001, s. 94 (w.e.f. 1-4-2002). 
5. Ins. by Act 12 of 1990, s. 50 (w.e.f. 1-4-1990). 
6. Subs. by Act 21 of 2006, s. 55, for “section 271C” (w.e.f. 1-4-2007). 
7. Subs. by Act 23 of 2004, s. 59, for “section 271F” (w.e.f. 1-4-2005).  Earlier the quoted words were inserted by 26 of 

1997, s. 55 (w.e.f. 1-4-1997). 

8. Subs by Act 18 of 2005, s. 61, for “section 271FA” (w.e.f. 1-4-2006). 
9. Subs. by Act 20 of 2015, s. 77, for “section 271FB, section 271G” (w.e.f. 1-4-2016). Earlier “section 271G” inserted by 

Act 14 of 2001, s. 94 (w.e.f. 1-4-2002). 

10. Ins. by Act 28 of 2016, s. 108 (w.e.f. 1-4-2017). 
11. Ins. by Act 23 of 2012, s. 105 (w.e.f. 1-7-2012). 
12. Ins. by Act 20 of 2015, s. 77 (w.e.f. 1-6-2015). 
13. Ins. by Act 7 of 2017, s. 88 (w.e.f. 1-4-2017). 
14. Subs. by Act 11 of 1987, s. 69, for “section 272B or” (w.e.f. 1-4-1987). 
15. Ins. by Act 20 of 2002, s. 106 (w.e.f. 1-6-2002). 
16. Subs. by Act 21 of 2006, s. 55 for “sub-section (1) of section 272BB” (w.e.f. 1-6-2006). 
17. Subs. by Act 20 of 2002, s. 106 for “section 272BB or” (w.e.f. 1-6-2002). 
18. Ins. by Act 4 of 1988, s. 115 (w.e.f. 1-4-1989). Earlier it was amended by Act of 42 of 1970, s. 49 (w.e.f. 1-4-1971) and 

later omitted by act 41 of 1975, s. 65 (w.e.f. 1-4-1975).  

19. Subs. by Act 21 of 1998, s. 3, for “Assistant Commissioner” (w.e.f. 1-10-1998).  
20. Subs by s. 3, ibid, for “Deputy Commissioner” (w.e.f. 1-10-1998). 
21. Subs. by Act 4 of 1988, s. 115, for sub-section (3) (w.e.f. 1-4-1987). Earlier it was amended by Act 29 of 1977, s. 19                  

(w.e.f. 10-7-1978). 

798 

                                                           
1[275.  Bar  of  limitation  for  imposing  penalties.—2[(1)]  No  order  imposing  a  penalty  under  this 

Chapter shall be passed— 

3[(a) in a case where the relevant assessment or other order is the subject-matter of an appeal to 
the 4*** Commissioner (Appeals) under section 246 5[or section 246A] or an appeal to the Appellate 
Tribunal  under section  253,  after  the  expiry  of  the  financial  year  in  which  the  proceedings,  in  the 
course of which action for the imposition of penalty has been initiated, are completed, or six months 
from the end of the month in which the order of the 4*** Commissioner (Appeals) or, as the case may 
be, the Appellate Tribunal is received by the 6[Principal Chief Commissioner or Chief Commissioner] 
or 7[Principal Commissioner or Commissioner], whichever period expires later: 

8[Provided that in a case where the relevant assessment or other order is the subject-matter of an 
appeal  to  the  Commissioner  (Appeals)  under section  246 or section  246A,  and  the  Commissioner 
(Appeals) passes  the order on or after the 1st day of June, 2003 disposing of such appeal, an order 
imposing penalty shall be passed before the expiry of the financial year in which the proceedings, in 
the course of which action for imposition of penalty has been initiated, are completed, or within one 
year from the end of the financial year in which the order of the Commissioner (Appeals) is received 
by  the  6[Principal  Chief  Commissioner  or  Chief  Commissioner]  or  7[Principal  Commissioner  or 
Commissioner], whichever is later;] 

(b)  in  a  case  where  the  relevant  assessment  or  other  order  is  the  subject-matter  of  revision 
under section 263 8[or section 264], after the expiry of six months from the end of the month in which 
such order of revision is passed; 

(c) in any other case, after the expiry of the financial year in which the proceedings, in the course 
of which action for the imposition of penalty has been initiated, are completed, or six months from 
the end of the month in which action for imposition of penalty is initiated, whichever period expires 
later.] 

9[(1A) In a case where the relevant assessment or other order is the subject-matter of an appeal to the 
Commissioner  (Appeals)  under section  246 or section  246A or  an  appeal  to  the  Appellate  Tribunal 
under section 253 or an appeal to the High Court under section 260A or an appeal to the Supreme Court 
under section  261 or  revision  under section  263 or section  264 and  an  order  imposing  or  enhancing  or 
reducing or cancelling penalty or dropping the proceedings for the imposition of penalty is passed before 
the  order  of  the  Commissioner  (Appeals)  or  the  Appellate  Tribunal  or  the  High  Court  or  the  Supreme 
Court  is  received  by  the  6[Principal  Chief  Commissioner  or  Chief  Commissioner]  or  the  7[Principal 
Commissioner or Commissioner] or the order of revision under section 263 or section 264 is passed, an 
order  imposing  or  enhancing  or  reducing  or  cancelling  penalty  or  dropping  the  proceedings  for  the 
imposition of penalty may be passed on the basis of assessment as revised by giving effect to such order 

1. Subs. by Act 42 of 1970, s. 50, for section 275 (w.e.f. 1-4-1971). 

2. Section 275 renumbered as sub-section (1) thereof by Act 36 of 1989, s. 26 (w.e.f. 1-4-1989). 

3. Subs. by Act 4 of 1988, s. 116, for clauses (a) and (b) excluding the Explanation (w.e.f. 1-4-1989). 

4. The words and brackets “Deputy Commissioner (Appeals) or the” omitted by Act 21 of 1998, s. 65 (w.e.f. 1-10-1998). 

5. Ins. by Act 10 of 2000, s. 70 (w.e.f. 1-6-2000). 

6. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013).  

7. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 

8. Ins. by Act 32 of 2003, s. 96 (w.e.f. 1-6-2003). 

9. Ins. by Act 29 of 2006, s. 18 (w.e.f. 13-7-2006). 

799 

                                                           
of  the  Commissioner  (Appeals)  or,  the  Appellate Tribunal  or  the  High  Court,  or  the  Supreme  Court  or 
order of revision under section 263 or section 264: 

Provided that  no  order  of  imposing  or  enhancing  or  reducing  or  cancelling  penalty  or  dropping  the 

proceedings for the imposition of penalty shall be passed— 

(a) unless the assessee has been heard, or has been given a reasonable opportunity of being heard; 

(b)  after  the  expiry  of  six  months  from  the  end  of  the  month  in  which  the  order  of  the 
Commissioner  (Appeals)  or  the  Appellate  Tribunal  or  the  High  Court  or  the  Supreme  Court  is 
received  by  the  1[Principal  Chief  Commissioner  or  Chief  Commissioner]  or  the  2[Principal 
Commissioner or Commissioner] or the order of revision under section 263 or section 264 is passed: 

Provided further that the provisions of sub-section (2) of section 274 shall apply in respect of the 

order imposing or enhancing or reducing penalty under this sub-section.] 

3[(2) The provisions of this section as they stood immediately before their amendment by the Direct 
Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any action initiated for the 
imposition of penalty on or before the 31st day of March, 1989.] 

4[Explanation.—In computing the period of limitation for the purposes of this section,— 

(i)  the  time  taken  in  giving  an  opportunity  to  the  assessee  to  be  reheard  under  the  proviso  to  

section 129; 

(ii) any period during which the immunity granted under section 245H remained in force; and 

(iii) any period during which a proceeding under this Chapter for the levy of penalty is stayed by 

an order or injunction of any court,  

shall be excluded.]] 

CHAPTER XXII 

OFFENCES AND PROSECUTIONS 

5[275A.  Contravention  of  order  made  under  sub-section  (3)  of section  132.—Whoever 
contravenes any order referred to in 6[the second proviso to sub-section (1) or] sub-section (3) of section 
132 shall  be  punishable  with  rigorous  imprisonment  which  may  extend  to  two  years  and  shall  also  be 
liable to fine.] 

1. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). 

2. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 

3. Ins. by Act 36 of 1989, s. 26 (w.e.f. 1-4-1989). 

4. Subs. by Act 41 of 1975, s. 66, for the Explanation (w.e.f. 1-1-1976). 

5. Ins. by Act 1 of 1965, s. 4 (w.e.f. 12-3-1965). 

6. Ins. by Act 12 of 1990, s. 47 (w.e.f. 1-4-1990). 

800 

                                                           
1[275B. Failure to comply with the provisions of clause (iib) of sub-section (1) of section 132.—If 
a  person  who  is  required  to  afford  the  authorised  officer  the  necessary  facility  to  inspect  the  books  of 
account or other documents, as required under clause (iib) of sub-section (1) of section 132, fails to afford 
such facility to the authorised officer, he shall be punishable with rigorous imprisonment for a term which 
may extend to two years and shall also be liable to fine.] 

2[276. Removal, concealment, transfer or delivery of property to thwart tax recovery.—Whoever 
fraudulently removes, conceals, transfers or delivers to any person, any property or any interest therein, 
intending thereby to prevent that property or interest therein from being taken in execution of a certificate 
under the provisions of the Second Schedule shall be punishable with rigorous imprisonment for a term 
which may extend to two years and shall also be liable to fine.] 

3[276A.  Failure  to  comply  with  the  provisions  of  sub-sections  (1)  and  (3)  of section  178.—If  a 

person 4*** — 

(i) fails to give the notice in accordance with sub-section (1) of section 178; or 

(ii) fails to set aside the amount as required by sub-section (3) of that section; or 

(iii) parts with any of the assets of the company or the properties in his hands in contravention of 

the provisions of the aforesaid sub-section, 

he shall be punishable with rigorous imprisonment for a term which may extend to two years: 

Provided that  in  the  absence  of  special  and  adequate  reasons  to  the  contrary  to  be  recorded  in  the 

judgment of the court, such imprisonment shall not be for less than six months.] 

276AA. [Failure to comply with the provisions of section 269AB or section 269-I].—Omitted by 
the Finance Act, 1986 (23 of 1986), s. 37 (w.e.f. 1-10-1986). Original section was inserted by the Income-
tax (Amendment) Act, 1981 (22 of 1981), s. 10 (w.e.f. 1-7-1982). 

5[276AB.  Failure  to  comply  with  the  provisions  of sections  269UC, 269UE and  269UL.—
Whoever  4***  fails  to  comply  with  the  provisions  of section  269UC or  fails  to  surrender  or  deliver 
possession of the property under sub-section (2) of section 269UE or contravenes the provisions of sub-
section  (2)  of section  269UL shall  be  punishable  with  rigorous  imprisonment  for  a  term  which  may 
extend to two years and shall also be liable to fine: 

Provided that  in  the  absence  of  special  and  adequate  reasons  to  the  contrary  to  be  recorded  in  the 

judgment of the court, such imprisonment shall not be for less than six months.] 

1. Ins. by Act 20 of 2002, s. 107 (w.e.f. 1-6-2002). 

2. Ins. by Act 4 of 1988, s. 117 (w.e.f. 1-4-1989). 
3. Ins. by Act 10 of 1965, s. 58 (w.e.f. 1-4-1965). 

4. The words “, without reasonable cause or excuse,” omitted by Act 46 of 1986, s. 27 (w.e.f. 10-9-1986). 

5. Ins. by Act 23 of 1986, s. 36 (w.e.f. 13-5-1986). 

801 

                                                           
1[2[276B. Failure  to  pay  tax  to  the  credit  of  Central  Government  under  Chapter  XII-D  or        

XVII-B.—If a person fails to pay to the credit of the Central Government,— 

(a) the tax deducted at source by him as required by or under the provisions of Chapter XVII-B; 

or 

(b) the tax payable by him, as required by or under— 

(i) sub-section (2) of section 115-O; or 

(ii) the second proviso to section 194B, 

he shall be punishable with rigorous imprisonment for a term which shall not be less than three months 
but which may extend to seven years and with fine.] 

3[276BB. Failure  to  pay  the  tax  collected  at  source.—If  a  person fails to  pay  to  the  credit of the 
Central Government, the tax collected by him as required under the provisions of section 206C, he shall 
be punishable with rigorous imprisonment for a term which shall not be less than three months but which 
may extend to seven years and with fine.] 

276C. Wilful attempt to evade tax, etc.—(1) If a person wilfully attempts in any manner whatsoever 
to evade any tax, penalty or interest chargeable  4[or imposable, or under reports his income,] under this 
Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of 
this Act, be punishable,— 

(i) in a case where the amount sought to be evaded 5[or tax on under-reported income] exceeds 
6[twenty-five  hundred  thousand  rupees],  with  rigorous  imprisonment  for  a  term  which  shall  not  be 
less than six months but which may extend to seven years and with fine; 

(ii) in any other case, with rigorous imprisonment for a term which shall not be less than three 

months but which may extend to 7[two years] and with fine. 

(2) If a person wilfully attempts in any manner whatsoever to evade the payment of any tax, penalty 
or interest under this Act, he shall, without prejudice to any penalty that may be imposable on him under 
any other provision of this Act, be punishable with rigorous imprisonment for a term which shall not be 
less than three months but which may extend to 8[two years] and shall, in the discretion of the court, also 
be liable to fine. 

Explanation.—For the purposes of this section, a wilful attempt to evade any tax, penalty or interest 

chargeable or imposable under this Act or the payment thereof shall include a case where any person— 

(i)  has  in  his  possession  or  control  any  books  of  account  or  other  documents  (being  books  of 
account  or  other  documents  relevant  to  any  proceeding  under  this  Act)  containing  a  false  entry  or 
statement; or 

(ii) makes or causes to be made any false entry or statement in such books of account or other 

documents; or 

1. Subs. by Act 26 of 1997, s. 56, for section 276B (w.e.f. 1-6-1997). 
2. Subs. by Act 41 of 1975, s. 68, for section 276B and 276C (w.e.f. 1-10-1975). Earlier section 276C was inserted by Act 
42 of 1970, s. 52 (w.e.f. 1-4-1971) and section 276B was inserted by Act 19 of 1968, s. 21 (w.e.f. 1-4-1968) and later on 
section 276B amended by Act 46 of 1986, s. 27 (w.e.f. 10-9-1986). 

3. Ins. by Act 26 of 1988, s. 46 (w.e.f. 1-6-1988). 
4. Subs. by Act 28 of 2016, s. 109, for “or imposable” (w.e.f. 1-4-2017). 
5. Ins. by s. 109, ibid. (w.e.f. 1-4-2017). 
6. Subs. by Act 23 of 2012, s. 106, for “one hundred thousand rupees” (w.e.f.1-7-2012). 
7. Subs. by s. 106, ibid., for “three years” (w.e.f. 1-7-2012). 

802 

                                                           
 
(iii)  wilfully  omits  or  causes  to  be  omitted  any  relevant  entry  or  statement  in  such  books  of 

account or other documents; or 

(iv) causes any other circumstance to exist which will have the effect of enabling such person to 

evade any tax, penalty or interest chargeable or imposable under this Act or the payment thereof. 

276CC. Failure to furnish returns of income.—If a person wilfully fails to furnish in due time 1[the 
return  of  fringe  benefits  which  he  is  required  to  furnish  under  sub-section  (1)  of section  115WD or  by 
notice given under sub-section (2) of the said section or section 115WH or] the return of income which he 
is  required  to  furnish  under  sub-section  (1)  of section  139 or  by  notice  given  under  2[clause  (i)  of          
sub-section (1) of section 142] or 3[section 148 or section 153A,] he shall be punishable,— 

(i) in a case where the amount of tax, which would have been evaded if the failure had not been 
discovered, exceeds  4[twenty-five hundred thousand rupees], with rigorous imprisonment for a term 
which shall not be less than six months but which may extend to seven years and with fine; 

(ii) in any other case, with imprisonment for a term which shall not be less than three months but 

which may extend to 5[two years] and with fine: 

Provided that a person shall not be proceeded against under this section for failure to furnish in 
due time the  6[return of fringe benefits under sub-section (1) of section 115WD or return of income 
under sub-section (1) of section 139]— 

(i) for any assessment year commencing prior to the 1st day of April, 1975; or 

(ii) for any assessment year commencing on or after the 1st day of April, 1975, if— 

(a) the return is furnished by him before the expiry of the assessment year; or 

(b)  the  7[tax  payable  by  such  person,  not  being  a  company,]  on  the  total  income 
determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax 
deducted at source, does not exceed three thousand rupees.]] 

8[276CCC. Failure  to  furnish  return  of  income  in  search  cases.—If  a  person  wilfully  fails  to 
furnish in due time the return of total income which he is required to furnish by notice given under clause 
(a) of section 158BC, he shall be punishable with imprisonment for a term which shall not be less than 
three months but which may extend to three years and with fine: 

Provided that  no  person  shall  be  punishable  for  any  failure  under  this  section  in  respect  of  search 
initiated  under section  132 or  books  of  account,  other  documents  or  any  assets  requisitioned  under    
section 132A, after the 30th day of June, 1995 but before the 1st day of January, 1997.] 

9[276D. Failure  to  produce  accounts  and  documents.—If  a  person  wilfully  fails  to  produce,  or 
cause to be produced, on or before the date specified in any notice served on him under sub-section (1) 
of section 142, such accounts and documents as are referred to in the notice 10[or wilfully fails to comply 
with a direction issued to him under sub-section (2A) of that section], he shall be punishable with rigorous 
imprisonment for a term which may extend to one year 11[and with fine].] 

1. Ins. by Act 18 of 2005, s. 62 (w.e.f. 1-4-2006). 
2. Subs. by Act 4 of 1988, s. 126, for “sub-section (2) of section 139” (w.e.f. 1-4-1989). 
3. Subs. by Act 32 of 2003, s. 97, for “section 148” (w.e.f. 1-6-2003). 
4. Subs. by Act 23 of 2012, s. 107, “one hundred thousand rupees” (w.e.f. 1-7-2012). 
5. Subs. by s. 107, ibid., for “three years” (w.e.f. 1-7-2012).  
6. Subs. by Act 18 of 2005, s. 62, for “return of income under sub-section (1) of section 139” (w.e.f. 1-4-2006). 
7. Subs. by Act 13 of 2018, s. 54, for “tax payable by him” (w.e.f. 1-4-2018). 
8. Ins. by Act 14 of 1997, s. 10 (w.e.f. 1-1-1997).  
9. Ins. by Act 42 of 1970, s. 52 (w.e.f. 1-4-1971). 
10. Ins. by Act 41 of 1975, s. 69 (w.e.f. 1-4-1976). 
11. Subs. by Act 25 of 2014, s. 74, for “or with fine equal to a sum calculated at a rate which shall not be less than four 
rupees or more than ten rupees for every day during which the default continues, or with both “ (w.e.f. 1-10-2014). 

803 

                                                           
276DD. [Failure  to  comply  with  the  provisions  of section  269SS].—Omitted  by  the  Direct  Tax 
Laws (Amendment) Act, 1987 (4 of 1987), s. 119 (w.e.f. 1-4-1989). Earlier it was inserted by the Finance 
Act (21 of 1984), s. 31 (w.e.f. 1-4-1984) and later on amended by the Taxation Laws (Amendments and 
Miscellaneous Provisions) Act (46 of 1986), s. 27 (w.e.f. 10-9-1986). 

276E. [Failure  to  comply  with  the  provisions  of  section  269T].—Omitted  by  s.  119,  ibid.,                  

(w.e.f. 1-4-1989). Earlier it was inserted by the Income-Tax (Second Amendment) Act (38 of 1981), s. 4 
(w.e.f.  11-7-1981)  and  later  on  amended  by  the  Taxation  Laws  (Amendments  and  Miscellaneous 
Provisions) Act (46 of 1986), s. 27 (w.e.f. 10-9-1986). 

1[277. False statement in verification, etc.—If a person makes a statement in any verification under 
this Act or under any rule made thereunder, or delivers an account or statement which is false, and which 
he either knows or believes to be false, or does not believe to be true, he shall be punishable,— 

(i) in a case where the amount of tax, which would have been evaded if the statement or account 
had  been  accepted  as  true,  exceeds  2[twenty-five  hundred  thousand  rupees],  with  rigorous 
imprisonment for a term which shall not be less than six months but which may extend to seven years 
and with fine; 

(ii) in any other case, with  rigorous imprisonment for a term which shall not be less than three 

months but which may extend to 3[two years] and with fine. 

4[277A. Falsification  of  books  of  account  or  document,  etc.—If  any  person  (hereafter  in  this 
section referred to as the first person) wilfully and with intent to enable any other person (hereafter in this 
section referred to as the second person) to evade any tax or interest or penalty chargeable and imposable 
under  this  Act,  makes  or  causes  to  be  made  any  entry  or  statement  which  is  false  and  which  the  first 
person either knows to be false or does not believe to be true, in any books of account or other document 
relevant to or useful in any proceedings against the first person or the second person, under this Act, the 
first person shall be punishable with rigorous imprisonment for a term which shall not be less than three 
months but which may extend to 5[two years] and with fine. 

Explanation.—For the purposes of establishing the charge under this section, it shall not be necessary 
to prove that the second person has actually evaded any tax, penalty or interest chargeable or imposable 
under this Act.] 

278. Abetment of false return, etc.—If a person abets or induces in any manner another person to 
make and deliver an account or a statement or declaration relating to 6[any income or any fringe benefits 
chargeable to tax] which is false and which he either knows to be false or does not believe to be true or to 
commit an offence under sub-section (1) of section 276C, he shall be punishable,— 

(i)  in a case where the amount of tax, penalty or interest which would have been evaded, if the 
declaration,  account  or  statement  had  been  accepted  as  true,  or  which  is  wilfully  attempted  to  be 
evaded,  exceeds  7[twenty-five  hundred  thousand  rupees],  with  rigorous  imprisonment  for  a  term 
which shall not be less than six months but which may extend to seven years and with fine; 

(ii)  in any other case, with rigorous imprisonment for a term which shall not be less than three 

months but which may extend to 8[two years] and with fine. 

1. Subs. by Act 41 of 1975, s. 70, for sections 277 and 278 (w.e.f. 1-10-1975). 
2. Subs. by Act 23 of 2012, s. 108, for “one hundred thousand rupees” (w.e.f. 1-7-2012). 
3. Subs. by s. 108, ibid., for “three years” (w.e.f. 1-7-2012). 
4. Ins. by Act 23 of 2004, s. 60 (w.e.f. 1-10-2004). 
5. Subs. by Act 23 of 2012, s. 109, for “three years” (w.e.f. 1-7-2012). 
6. Subs. by Act 18 of 2005, s. 63, for “any income chargeable to tax” (w.e.f. 1-4-2006). 
7. Subs. by Act 23 of 2012, s. 110, for “one hundred thousand rupees” (w.e.f. 1-7-2012). 
8. Subs. by s. 110, ibid., for “three years” (w.e.f. 1-7-2012). 

804 

                                                           
278A. Punishment  for  second  and  subsequent  offences.—If  any  person  convicted  of  an  offence 
(1)  of section  276C or section  276CC 1[or section  276DD]    
under section  276B or  sub-section 
2[or section  276E] or section  277 or section  278 is  again  convicted  of  an  offence  under  any  of  the 
aforesaid provisions, he shall be punishable for the second and for every subsequent offence with rigorous 
imprisonment for a term which shall not be less than six months but which may extend to seven years and 
with fine. 

3[278AA. Punishment not to be imposed in certain cases.—Notwithstanding anything contained in 
the provisions of section 276A, section 276AB, 4[or section 276B,] no person shall be punishable for any 
failure referred to in the said provisions if he proves that there was reasonable cause for such failure.] 

5[278AB. Power  of 6[Principal  Commissioner  or  Commissioner]  to  grant  immunity  from 
prosecution.—(1) A person may make an application to the 6[Principal Commissioner or Commissioner] 
for  granting  immunity  from  prosecution,  if  he  has  made  an  application  for  settlement  under section 
245C and the proceedings for settlement have abated under section 245HA. 

(2) The application to the 6[Principal Commissioner or Commissioner] under sub-section (1) shall not 

be made after institution of the prosecution proceedings after abatement. 

(3) The 6[Principal Commissioner or Commissioner] may, subject to such conditions as he may think 
fit  to  impose,  grant  to  the  person  immunity  from  prosecution  for  any  offence  under  this  Act,  if  he  is 
satisfied  that  the  person  has,  after  the  abatement,  co-operated  with  the  income-tax  authority  in  the 
proceedings before him and has made a full and true disclosure of his income and the manner in which 
such income has been derived: 

Provided that where the application for settlement under section 245C had been made before the 1st 
day of June, 2007, the 6[Principal Commissioner or Commissioner] may grant immunity from prosecution 
for any offence under this Act or under the Indian Penal Code (45 of 1860) or under any other Central Act 
for the time being in force. 

(4) The immunity granted to a person under sub-section (3) shall stand withdrawn, if such person fails 
to comply with any condition subject to which the immunity was granted and thereupon the provisions of 
this Act shall apply as if such immunity had not been granted. 

(5)  The  immunity  granted  to  a  person  under  sub-section  (3)  may,  at  any  time,  be  withdrawn  by 
the 6[Principal Commissioner or Commissioner], if he is satisfied that such person had, in the course of 
any  proceedings,  after  abatement,  concealed  any  particulars  material  to  the  assessment  from  the           
income-tax authority or had given false evidence, and thereupon such person may be tried for the offence 
with  respect  to  which  the  immunity  was  granted  or  for  any  other  offence  of  which  he  appears  to  have 
been guilty in connection with the proceedings.] 

1. Ins. by Act 32 of 1985, s. 35 (w.e.f. 24-5-1985). 
2. Ins. by Act 38 of 1981, s. 5 (w.e.f. 11-7-1981). 
3. Ins. by Act 46 of 1986, s. 28 (w.e.f. 10-9-1986). 
4. Subs. by Act 4 of 1988, s. 120, for “section 276B, section 276DD or section 276E” (w.e.f. 1-4-1989). 
5. Ins. by Act 18 of 2008, s. 54 (w.e.f. 1-4-2008). 
6. Subs. by Act 25 of 2014, s. 4, for “Commissioner” (w.e.f. 1-6-2013). 

805 

                                                           
278B. Offences  by  companies.—(1)  Where  an  offence  under  this  Act  has  been  committed  by  a 
company,  every  person  who,  at  the  time  the  offence  was  committed,  was  in  charge  of,  and  was 
responsible to, the company for the conduct of the business of the company as well as the company shall 
be  deemed  to  be  guilty  of  the  offence  and  shall  be  liable  to  be  proceeded  against  and  punished 
accordingly: 

Provided that  nothing  contained  in  this  sub-section  shall  render  any  such  person  liable  to  any 
punishment if he proves that the offence was committed without his knowledge or that he had exercised 
all due diligence to prevent the commission of such offence. 

(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been 
committed  by  a  company  and  it  is  proved  that  the  offence  has  been  committed  with  the  consent  or 
connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other 
officer  of  the  company,  such  director,  manager,  secretary  or  other  officer  shall  also  be  deemed  to  be 
guilty of that offence and shall be liable to be proceeded against and punished accordingly. 

1[(3)  Where  an  offence  under  this  Act  has  been  committed  by  a  person,  being  a  company,  and  the 
punishment for such offence is imprisonment and fine, then, without prejudice to the provisions contained 
in sub-section (1) or sub-section (2), such company shall be punished with fine and every person, referred 
to in sub-section (1), or the director, manager, secretary or other officer of the company referred to in sub-
section (2), shall be liable to be proceeded against and punished in accordance with the provisions of this 
Act.] 

Explanation.—For the purposes of this section,— 

(a) “company” means a body corporate, and includes— 

(i) a firm; and 

(ii) an association of persons or a body of individuals whether incorporated or not; and 

(b) “director”, in relation to— 

(i) a firm, means a partner in the firm; 

(ii) any association of persons or a body of individuals, means any  member controlling the 

affairs thereof. 

278C. Offences  by  Hindu  undivided  families.—(1)  Where  an  offence  under  this  Act  has  been 
committed by a Hindu undivided family, the karta thereof shall be deemed to be guilty of the offence and 
shall be liable to be proceeded against and punished accordingly: 

Provided that nothing contained in this sub-section shall render the karta liable to any punishment if 
he  proves  that  the  offence  was  committed  without  his  knowledge  or  that  he  had  exercised  all  due 
diligence to prevent the commission of such offence. 

(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act, has been 
committed  by  a  Hindu  undivided family  and it  is  proved  that  the offence  has  been  committed  with  the 
consent  or  connivance  of,  or  is  attributable  to  any  neglect  on  the  part  of,  any  member  of  the  Hindu 
undivided family, such member shall also be deemed to be guilty of that offence and shall be liable to be 
proceeded against and punished accordingly. 

1. Ins. by Act 23 of 2004, s. 61 (w.e.f. 1-10-2004). 

806 

                                                           
278D. Presumption as to assets, books of account, etc., in certain cases.—(1) Where during the 
course of any search made under section 132, any money, bullion, jewellery or other valuable article or 
thing (hereafter in this section referred to as the assets) or any books of account or other documents has or 
have been found in the possession or control of any person and such assets or books of account or other 
documents are tendered by the prosecution in evidence against such person or against such person and the 
person  referred  to  in section  278 for  an  offence  under  this  Act,  the  provisions  of  sub-section  (4A) 
of section  132shall,  so  far  as  may  be,  apply  in  relation  to  such  assets  or  books  of  account  or  other 
documents. 

(2) Where any assets or books of account or other documents taken into custody, from the possession 
or control of any person, by the officer or authority referred to in clause (a) or clause (b) or clause (c), as 
the case may be, of sub-section (1) of section 132A are delivered to the requisitioning officer under sub-
section  (2)  of  that  section  and  such  assets,  books  of  account  or  other  documents  are  tendered  by  the 
prosecution in evidence against such person or against such person and the person referred to in section 
278 for an offence under this Act, the provisions of sub-section (4A) of section 132 shall, so far as may 
be, apply in relation to such assets or books of account or other documents.] 

1[278E. Presumption  as  to  culpable  mental  state.—(1)  In  any  prosecution  for  any  offence  under 
this  Act  which  requires  a  culpable  mental  state  on  the  part  of  the  accused,  the  court  shall  presume  the 
existence of such mental state but it shall  be a defence for the accused to prove the fact that he had no 
such mental state with respect to the act charged as an offence in that prosecution. 

Explanation.—In this sub-section, “culpable mental state” includes intention, motive or knowledge of 

a fact or belief in, or reason to believe, a fact. 

(2) For the purposes of this section, a fact is said to be proved only when the court believes it to exist 
beyond  reasonable  doubt  and  not  merely  when  its  existence  is  established  by  a  preponderance  of 
probability.] 

279. Prosecution to be at instance of 2[ 3[Principal Chief Commissioner or Chief Commissioner] 
or 4[Principal Commissioner or Commissioner]].—5[(1) A person shall not be proceeded against for an 
6[ section  275B,] section  276, section  276A, section  276B, section 
offence  under section  275A, 
276BB, section  276C, section  276CC,section  276D, 7[section  277 , section  277A or section  278] except 
with the previous sanction of the 4[Principal Commissioner or Commissioner] or Commissioner (Appeals) 
or the appropriate authority: 

Provided that  the  3[Principal  Chief  Commissioner  or  Chief  Commissioner]  or,  as  the  case  may  be, 
8[Principal  Director  General  or  Director]  General  may  issue  such  instructions  or  directions  to  the 
aforesaid income-tax authorities as he may deem fit for institution of proceedings under this sub-section. 

Explanation.—For the purposes of this section, “appropriate authority” shall have the same meaning 

as in clause (c) of section 269UA.] 

(1A)  A  person  shall  not  be  proceeded  against  for  an  offence  under section  276C or section  277 in 
relation to the assessment for an assessment year in respect of which the penalty imposed or imposable on 
him under 9[section 270A or] clause (iii) of sub-section (1) of section 271 has been reduced or waived by 
an order under section 273A.] 

1. Ins. by Act 46 of 1986, s. 29 (w.e.f. 10-9-1986). 
2. Subs. by Act 4 of 1988, s. 2, for “Commissioner” (w.e.f. 1-4-1988). 
3. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.r.e.f. 1-6-2013). 
4. Subs. by s. 4, ibid., for “Commissioner” (w.r.e.f. 1-6-2013). 
5. Subs. by Act 49 of 1991, s. 70, for sub-section (1) (w.e.f. 1-10-1991). 
6. Ins. by Act 20 of 2002, s. 108 (w.e.f 1-6-2002). 
7. Subs. by Act 23 of 2004, s. 62, for “section 277 of section 278” (w.e.f. 1-10-2004). 
8. Subs. by Act 25 of 2014, s. 4, for “Director General” (w.r.e.f. 1-6-2013). 
9. Ins. by Act 28 of 2016, s. 110 (w.e.f. 1-4-2017). 

807 

                                                           
1[(2)  Any  offence  under  this  Chapter  may,  either  before  or  after  the  institution  of  proceedings,  be 
compounded  by  the  2[Principal  Chief  Commissioner  or  Chief  Commissioner]  or  a  3[Principal  Director 
General or Director General]. 

4[(3) Where any proceeding has been taken against any person under sub-section (1), any statement 
made  or  account  or  other  document  produced  by  such  person  before  any  of  the  income-tax  authorities 
specified in  5[clauses (a) to (g)] of section 116 shall not be inadmissible as evidence for the purpose of 
such proceedings merely on the ground that such statement was made or such account or other document 
was  produced  in  the  belief  that  the  penalty  imposable  would  be  reduced  or  waived,  6[under section 
273A] or that the offence in respect of which such proceeding was taken would be compounded. 

7[Explanation.—For the removal of doubts, it is hereby declared that the power of the Board to issue 
orders, instructions or directions under this Act shall include and shall be deemed always to have included 
the  power  to  issue  instructions  or  directions  (including  instructions  or  directions  to  obtain  the  previous 
approval of the Board) to other income-tax authorities for the proper composition of offences under this 
section.] 

8[279A. Certain offences to be non-cognizable.—Notwithstanding anything contained in the Code 
of  Criminal  Procedure,  1973  (2  of  1974),  an  offence  punishable  under section  276B or section 
276C or section  276CC or section  277 or section  278 shall  be  deemed  to  be  non-cognizable  within  the 
meaning of that Code.] 

9[279B. Proof of entries in records or documents.—Entries in the records or other documents in the 
custody of an income-tax authority shall be admitted in evidence in any proceedings for the prosecution 
of  any  person  for  an  offence  under  this  Chapter,  and  all  such  entries  may  be  proved  either  by  the 
production of the records or other documents in the custody of the income-tax authority containing such 
entries, or by the production of a copy of the entries certified by the income-tax authority having custody 
of  the  records  or  other  documents  under  its  signature  and  stating  that  it  is  a  true  copy  of  the  original 
entries and that such original entries are contained in the records or other documents in its custody.] 

280. Disclosure  of  particulars  by  public  servants.—(1)  If  a  public  servant  10[furnishes  any 
information  or  produces  any  document  in  contravention  of  the  provisions  of  sub-section  (2)  of section 
138], he shall be punishable with imprisonment which may extend to six months, and shall also be liable 
to fine. 

(2)  No  prosecution  shall  be  instituted  under  this  section  except  with  the  previous  sanction  of  the 

Central Government. 

11[280A. Special Courts.—(1) The Central Government, in consultation with the Chief Justice of the 
High  Court,  may,  for  trial  of  offences  punishable  under  this  Chapter,  by  notification,  designate  one  or 
more courts of Magistrate of the first class as Special Court for such area or areas or for such cases or 
class or group of cases as may be specified in the notification. 

Explanation.—In  this  sub-section,  “High  Court”  means  the  High  Court  of  the  State  in  which  a 
Magistrate  of  first  class  designated  as  Special  Court  was  functioning  immediately  before  such 
designation. 

1. Subs. by Act 49 of 1991, s. 70 (w.e.f. 1-10-1991). Earlier substituted by Act 26of 1988, s. 47 (w.e.f. 1-4-1989). 
2. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.r.e.f. 1-6-2013). 
3. Subs.  by s. 4, ibid., for “Director General” (w.r.e.f. 1-6-2013). 
4. Ins. by Act 1 of 1965, s. 5 (w.e.f. 12-3-1965). 
5. Subs. by Act 4 of 1988, s. 126, for “ clauses (a), (b), (c), (d) and (e)” (w.e.f. 1-4-1988). 
6. Subs. by Act 41 of 1975, s. 71, for “under sub-section (4A) of section 271” (w.e.f. 1-10-1975). 
7. Ins. by Act 49 of 1991, s. 70 (w.r.e.f. 1-4-1962). 
8. Ins. by Act 41 of 1975, s. 72 (w.e.f. 1-10-1975). 
9. Ins. by Act 3 of 1989, s. 53 (w.e.f. 1-4-1989). 
10.Subs.  by  Act  5  of  1964,  s.  43,  for  “discioses  any  particulars,  the  disclosure  of  which  is  prohibited  by  section  137,”             

(w.e.f. 1-4-1964). 

11. Ins. by Act 23 of 2012, s. 111 (w.e.f. 1-7-2012). 

808 

                                                           
(2)  While  trying  an  offence  under  this  Act,  a  Special  Court  shall  also try  an  offence,  other  than  an 
offence  referred  to  in  sub-section  (1),  with  which  the  accused  may,  under  the  Code  of  Criminal 
Procedure, 1973 (2 of 1974), be charged at the same trial. 

280B. Offences  triable  by  Special  Court.—Notwithstanding  anything  contained  in  the  Code  of 

Criminal Procedure, 1973 (2 of 1974),— 

(a)  the  offences  punishable  under  this  Chapter  shall  be  triable  only  by  the  Special  Court,  if  so 
designated, for the area or areas or for cases or class or group of cases, as the case may be, in which 
the offence has been committed: 

Provided that a court competent to try offences under section 292,— 

(i) which has been designated as a Special Court under this section, shall continue to try the 

offences before it or offences arising under this Act after such designation; 

(ii)  which  has  not  been  designated  as  a  Special  Court  may  continue  to  try  such  offence 

pending before it till its disposal; 
(b) a Special Court may, upon a complaint made by an authority authorised in this behalf under 

this Act take cognizance of the offence for which the accused is committed for trial. 
280C.  Trial  of  offences  as  summons  case.—Notwithstanding  anything  contained  in  the  Code  of 
Criminal  Procedure,  1973  (2  of  1974),  the  Special  Court,  shall  try,  an  offence  under  this  Chapter 
punishable with imprisonment not exceeding two years or with fine or with both, as a summons case, and 
the provisions of the Code of Criminal Procedure, 1973 as applicable in the case of trial of summons case, 
shall apply accordingly. 

280D.  Application  of  Code  of  Criminal  Procedure,  1973  to  proceedings  before  Special              

Court.—(1) Save as otherwise provided in this Act, the provisions of the Code of Criminal Procedure, 
1973 (2 of 1974) (including the provisions as to bails or bonds), shall apply to the proceedings before a 
Special Court and the person conducting the prosecution before the Special Court, shall be deemed to be a 
Public Prosecutor: 

Provided that  the  Central  Government  may  also  appoint  for  any  case  or  class  or  group  of  cases  a 

Special Public Prosecutor. 

(2)  A  person  shall  not  be  qualified  to  be  appointed  as  a  Public  Prosecutor  or  a  Special  Public 
Prosecutor under this section unless he has been in practice as an advocate for not less than seven years, 
requiring special knowledge of law. 

(3) Every person appointed as a Public Prosecutor or  a Special Public Prosecutor under this section 
shall be deemed to be a Public Prosecutor within the meaning of clause (u) of section 2 of the Code of 
Criminal Procedure, 1973 (2 of 1974) and the provisions of that Code shall have effect accordingly.] 

280E.  CHAPTER  XXII-A  dealing  with  Annuity  Deposits  containing  sections  280A  to  280X  were 
omitted  by  Finance  Act,  1988  (26  of  1988),  s.  48  (w.e.f.  1-4-1988).  Sections  280A  to  280D  were 
subsequently inserted by Act 23 of 2012, s. 111 (w.e.f. 1-7-2012). 

[CHAPTER XXII-B TAX CREDIT CERTIFICATES].—Omitted by the Finance Act, 1990 (12 of 

1990), s. 48 (w.e.f. 1-4-1990). 

[280Y. Definitions].—Omitted by s. 48, ibid. (w.e.f. 1-4-1990). 
[280Z. Tax  credit  certificates  to  certain  equity  shareholders].—Omitted  by  s.  48,  ibid.                            

(w.e.f. 1-4-1990). 

[280ZA.  Tax  credit  certificates  for  shifting  of  industrial  undertaking  from  urban  area].—
Omitted by the Finance Act, 1987 (11 of 1987), s. 70 (w.e.f. 1-4-1988). Original section was inserted by 
the Finance Act, 1965 (10 of 1965), s. 62 (w.e.f. 1-4-1965). 

[280ZB. Tax  credit  certificate  to  certain manufacturing  companies  in  certain  cases].—Omitted 

by the Finance Act, 1990 (12 of 1990), s. 48 (w.e.f. 1-4-1990). 

[280ZC. Tax credit certificate in relation to exports].—Omitted by s. 48, ibid. (w.e.f. 1-4-1990). 
[280ZD. Tax credit certificates in relation to increased production of certain goods].—Omitted 

by the s. 48, ibid. (w.e.f. 1-4-1990). 

[280ZE. Tax credit certificate scheme].—Omitted by s. 48, ibid. (w.e.f. 1-4-1990). 

809 

CHAPTER XXIII 

MISCELLANEOUS 

1[281. Certain transfers to be void.—(1) Where, during the pendency of any proceeding under this 
Act or after the completion thereof, but before the service of notice under rule 2 of the Second Schedule, 
any assessee creates a charge on, or parts with the possession (by way of sale, mortgage, gift, exchange or 
any other mode of transfer whatsoever) of, any of his assets in favour of any other person, such charge or 
transfer shall be void as against any claim in respect of any tax or any other sum payable by the assessee 
as a result of the completion of the said proceeding or otherwise: 

Provided that such charge or transfer shall not be void if it is made— 

(i) for adequate consideration and without notice of the pendency of such proceeding or, as the 

case may be, without notice of such tax or other sum payable by the assessee ; or 

(ii) with the previous permission of the 2[Assessing Officer]. 

(2) This section applies to cases where the amount of tax or other sum payable or likely to be payable 

exceeds five thousand rupees and the assets charged or transferred exceed ten thousand rupees in value. 

Explanation.—In this section, “assets” means land, building, machinery, plant, shares, securities and 
fixed  deposits  in  banks,  to  the  extent  to  which  any  of  the  assets  aforesaid  does  not  form  part  of  the  
stock-in-trade of the business of the assessee.] 

281A. [Effect of failure to furnish information in respect of properties held benami].—Rep. by 

the Benami Transactions (Prohibition) Act, 1988 (46 of 1988), s. 7 (w.e.f. 19-5-1988). 

3[281B. Provisional  attachment  to  protect  revenue  in  certain  cases.—(1)  Where,  during  the 
pendency of any proceeding for the assessment of any income or for the assessment or reassessment of 
any income which has escaped assessment, the 2[Assessing Officer] is of the opinion that for the purpose 
of protecting the interests of the revenue it is  necessary so to do, he may, with the previous approval of 
the  4[5[Principal  Chief  Commissioner  or  Chief  Commissioner], 
6[Principal  Commissioner  or 
Commissioner], 7[Principal Director General or Director General] or 8[Principal Director or Director]], by 
order in writing, attach provisionally any property belonging to the assessee in the manner provided in the 
Second Schedule. 

9* 

* 

* 

* 

* 

(2)  Every  such  provisional  attachment  shall  cease  to have  effect  after  the  expiry  of  a  period  of  six 

months from the date of the order made under sub-section (1): 

1. Subs. by Act 41 of 1975, s. 73, for section 281 (w.e.f. 1-10-1975). 
2. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
3. Ins. by Act 41 of 1975, s. 74 (w.e.f. 1-10-1975). 
4.  Subs.  by  Act  26  of  1997,  s.  57,  for  “Chief  Commissioner  or  Commissioner”  (w.e.f.  1-10-1996).  Earlier  “Chief 

Commissioner or Commissioner” was substituted for “Commissioner” by Act 4 of 1988, s. 2 (w.e.f. 1-4-1988). 

5. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). 
6. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 
7. Subs. by s. 4, ibid., for “Director General” (w.e.f. 1-6-2013). 
8. Subs. by s. 4, ibid., for “Director” (w.e.f. 1-6-2013). 
9. The Explanation omitted by Act 28 of 2016, s. 111 (w.e.f. 1-6-2016).  

810 

 
 
 
 
 
 
 
 
                                                           
the 

Provided that 

1[2[Principal  Chief  Commissioner  or  Chief  Commissioner], 

3[Principal 
Commissioner  or  Commissioner],  4[Principal  Director  General  or  Director  General]  or  5[Principal 
Director  or  Director]]  may,  for  reasons  to  be  recorded  in  writing,  extend  the  aforesaid  period  by  such 
further period or periods as he thinks fit, so, however, that the total period of extension shall not in any 
case exceed 6[two years or sixty days after the date of order of assessment or reassessment, whichever is 
later].] 

7* 

* 

* 

* 

* 

8[(3) Where the assessee furnishes a guarantee from a scheduled bank for an amount not less than the 
fair market value of the property provisionally attached under sub-section (1), the Assessing Officer shall, 
by an order in writing, revoke such attachment: 

Provided that where the Assessing Officer is satisfied that a guarantee from a scheduled bank for an 
amount lower than the fair market value of the property is sufficient to protect the interests of the revenue, 
he may accept such guarantee and revoke the attachment. 

(4)  The  Assessing  Officer  may,  for  the  purposes  of  determining  the  value  of  the  property 
provisionally  attached  under  sub-section  (1),  make  a  reference  to  the  Valuation  Officer  referred  to 
in section 142A, who shall estimate the fair market value of the property in the manner provided under 
that  section  and  submit  a  report  of  the  estimate  to  the  Assessing  Officer  within  a  period  of  thirty  days 
from the date of receipt of such reference. 

(5) An order revoking the provisional attachment under sub-section (3) shall be made— 

(i)  within  forty-five  days  from  the  date  of  receipt  of  the  guarantee,  where  a  reference  to  the 

Valuation Officer has been made under sub-section (4); or 

(ii) within fifteen days from the date of receipt of guarantee in any other case. 

(6) Where a notice of demand specifying a sum payable is served upon the assessee and the assessee 
fails to pay that sum within the time specified in the notice of demand, the Assessing Officer may invoke 
the guarantee furnished under sub-section (3), wholly or in part, to recover the amount. 

(7)  The  Assessing  Officer  shall,  in  the  interests  of  the  revenue,  invoke  the  bank  guarantee,  if  the 
assessee  fails  to  renew  the  guarantee  referred  to  in  sub-section  (3),  or  fails  to  furnish  a  new  guarantee 
from a scheduled bank for an equal amount, fifteen days before the expiry of the guarantee referred to in 
sub-section (3). 

(8)  The  amount  realised  by  invoking  the  guarantee  referred  to  in  sub-section  (3)  shall  be  adjusted 
against  the  existing  demand  which  is  payable  by  the  assessee  and  the  balance  amount,  if  any,  shall  be 
deposited in the Personal Deposit Account of the Principal Commissioner or Commissioner in the branch 
of  the  Reserve  Bank  of  India  or  the  State  Bank  of  India  or  of  its  subsidiaries  or  any  bank  as  may  be 
appointed by the Reserve Bank of India as its agent under the provisions of sub-section (1) of section 45 
of  the  Reserve  Bank  of  India  Act,  1934  (2  of  1934)  at  the  place  where  the  office  of  the  Principal 
Commissioner or Commissioner is situate. 

1.  Subs.  by  Act  26  of  1997,  s.  57,  for  “Chief  Commissioner  or  Commissioner”  (w.e.f.  1-10-1996).  Earlier  “Chief 

Commissioner or Commissioner” was substituted for “Commissioner” by Act 4 of 1988, s. 2 (w.e.f. 1-4-1988). 

2. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). 
3. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 
4. Subs. by s. 4, ibid., for “Director General” (w.e.f. 1-6-2013). 
5. Subs. by s. 4, ibid., for “Director” (w.e.f. 1-6-2013). 
6. Subs. by s. 75, ibid., for “two years” (w.e.f. 1-10-2014). 
7. The Second and third proviso omitted by s. 75, ibid. (w.e.f. 1-10-2014). 
8. Ins. by Act 28 of 2016, s. 111 (w.e.f. 1-6-2016). 

811 

 
 
 
 
 
 
 
 
                                                           
(9)  Where  the  Assessing  Officer  is  satisfied  that  the  guarantee  referred  to  in  sub-section  (3)  is  not 

required any more to protect the interests of the revenue, he shall release that guarantee forthwith. 

Explanation.—For the purposes of this section, the expression “scheduled bank” shall mean a bank 

included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934).] 

1[282. Service of notice generally.—(1) The service of a notice or summon or requisition or order or 
any other communication under this Act (hereafter in this section referred to as “communication”) may be 
made by delivering or transmitting a copy thereof, to the person therein named,— 

(a) by post or by such courier services as may be approved by the Board; or 

(b)  in  such  manner  as  provided  under  the  Code  of  Civil  Procedure,  1908  (5  of  1908)  for  the 

purposes of service of summons; or 

(c) in the form of any electronic record as provided in Chapter IV of the Information Technology 

Act, 2000 (21 of 2000); or 

(d) by any other means of transmission of documents as provided by rules made by the Board in 

this behalf. 

(2) The Board may make rules providing for the addresses (including the address for electronic mail 
or electronic mail message) to which the communication referred to in sub-section (1) may be delivered 
or transmitted to the person therein named. 

Explanation.—For the purposes of this section, the expressions “electronic mail” and “electronic mail 
message” shall have the meanings as assigned to them in Explanation to section 66A of the Information 
Technology Act, 2000 (21 of 2000).] 

2[282A. Authentication of notices and other documents.—(1) Where this Act requires a notice or 
other document to be issued by any income-tax authority, such notice or other document shall be 3[signed 
and issued in paper form or communicated in electronic form by that authority in accordance with such 
procedure as may be prescribed]. 

(2) Every notice or other document to be issued, served or given for the purposes of this Act by any 
income-tax  authority,  shall  be  deemed  to  be  authenticated  if  the  name  and  office  of  a  designated  
income-tax authority is printed, stamped or otherwise written thereon. 

(3)  For  the  purposes  of  this  section,  a  designated  income-tax  authority  shall  mean  any  income-tax 
authority  authorised  by  the  Board  to  issue,  serve  or  give  such  notice  or  other  document  after 
authentication in the manner as provided in sub-section (2).] 

282B. [Allotment  of  Document  Identification  Number].—Omitted  by  the  Finance  Act,  2011  

(8 of 2011), s. 31 (w.e.f. 1-4-2011). 

1. Subs. by Act 33 of 2009, s. 77, for section 282 (w.e.f. 1-10-2009). 
2. Ins. by Act 18 of 2008, s. 55 (w.e.f. 1-6-2008). 
3. Subs. by Act 28 of 2016, s. 112, for “signed in manuscript by that authority” (w.e.f. 1-6-2016). 

812 

                                                           
283. Service of notice when family is disrupted or firm, etc., is dissolved.—(1) After a finding of 
total  partition  has  been  recorded  by  the  1[Assessing  Officer]  under section  171 in  respect  of  any  Hindu 
family, notices under this Act in respect of the income of the Hindu family shall be served on the person 
who was the last manager of the Hindu family, or, if such person is dead, then on all adults who were 
members of the Hindu family immediately before the partition. 

(2) Where a firm or other association of persons is dissolved, notices under this Act in respect of the 
income of the firm or association may be served on any person who was a partner (not being a minor) or 
member of the association, as the case may be, immediately before its dissolution. 

284. Service of notice in the case of discontinued business.—Where an assessment is to be made 
under section 176, the Assessing Officer may serve on the person whose income is to be assessed, or, in 
the  case  of  a  firm  or  an  association  of  persons,  on  any  person  who  was  a  member  of  such  firm  or 
association at the time of its discontinuance or, in the case of a company, on the principal officer thereof, 
a notice containing all or any of the requirements which may be included in a notice under sub-section (2) 
of section 139, and the provisions of this Act shall, so far as may be, apply accordingly as if the notice 
were a notice issued under that section. 

2[285. Submission  of  statement  by  a  non-resident  having  liaison  office.—Every  person,  being  a 
non-resident  having  a  liaison  office  in  India  set  up  in  accordance  with  the  guidelines  issued  by  the 
Reserve Bank of India under the Foreign Exchange Management Act, 1999 (42 of 1999), shall, in respect 
of its activities in a financial year, prepare and deliver or cause to be delivered to the Assessing Officer 
having jurisdiction, within sixty days from the end of such financial year, a statement in such form and 
containing such particulars as may be prescribed.] 

3[285A. Furnishing  of  information  or  documents  by  an  Indian  concern  in  certain      cases.—
Where any share of, or interest in, a company or an entity registered or incorporated outside India derives, 
directly or indirectly, its value substantially from the assets located in India, as referred to in Explanation 
5 to  clause  (i)  of  sub-section  (1)  of section  9,  and  such  company  or,  as  the  case  may  be,  entity,  holds, 
directly  or  indirectly,  such  assets  in  India  through,  or  in,  an  Indian  concern,  then,  such  Indian  concern 
shall,  for  the  purposes  of  determination  of  any  income  accruing  or  arising  in  India  under  clause  (i)  of              
sub-section  (1)  of section 9,  furnish  within  the  prescribed  period to  the  prescribed  income-tax  authority 
the information or documents, in such manner, as may be prescribed.] 

4[285B. Submission of statements by producers of cinematograph films.—Any person carrying on 
the production of a cinematograph film during the whole or any part of any financial year shall, in respect 
of  the  period  during  which  such  production  is  carried  on  by  him  in  such  financial  year,  prepare  and 
deliver  or  cause  to  be  delivered  to  the  1[Assessing  Officer],  within  thirty  days  from  the  end  of  such 
financial  year  or  within  thirty  days  from  the  date  of  the  completion  of  the  production  of  the  film, 
whichever  is  earlier,  a  statement  in  the  prescribed  form  containing  particulars  of  all  payments  of  over 
5[fifty thousand rupees] in the aggregate made by him or due from him to each such person as is engaged 
by him in such production 6***.] 

1. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2. Ins. by Act 8 of 2011, s. 32 (w.e.f. 1-6-2011). Earlier it was omitted by Act 11 of 1987, s. 71, (w.e.f. 1-6-1987). 
3. Ins. by Act 20 of 2015, s. 78 (w.e.f. 1-4-2016). Earlier it was inserted by Act 31 of 1964, s. 18, (w.e.f. 6-10-1964) and 
later amended by the Act 41 of 1975, s. 76, (w.e.f. 1-4-1976). And then omitted by 26 of 1988, s. 50 (w.e.f. 1-4-1988). 

4. Ins. by Act 41 of 1975, s. 76 (w.e.f. 1-4-1976). 
5. Subs. by Act 10 of 2000, s. 71, for “twenty-five thousand rupees” (w.e.f. 1-4-2001).  Earlier it was subs. by Act 21 of 

1998, s. 63, (w.e.f. 1-4-1999).   

6. The words “as employee or otherwise” omitted by Act 13 of 1989, s. 24 (w.e.f. 1-6-1989). 

813 

                                                           
1[285BA. Obligation to furnish statement of financial transaction or reportable account. — 

(1) Any person, being— 

(a) an assessee; or 

(b) the prescribed person in the case of an office of Government; or 

(c) a local authority or other public body or association; or 

(d) the Registrar or Sub-Registrar appointed under section 6 of the Registration Act, 1908 (16 

of 1908); or 

(e)  the  registering  authority  empowered  to  register  motor  vehicles  under  Chapter  IV  of  the 

Motor Vehicles Act, 1988 (59 of 1988); or 

(f) the Post Master General as referred to in clause (j) of section 2 of the Indian Post Office 

Act, 1898 (6 of 1898); or 

(g) the Collector referred to in clause (g) of section 3 of the Right to Fair Compensation and 

Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (30 of 2013); or 

(h)  the  recognised  stock  exchange  referred  to  in  clause  (f)  of  section  2  of  the  Securities 

Contracts (Regulation) Act, 1956 (42 of 1956); or 

(i) an officer of the Reserve Bank of India, constituted under section 3 of the Reserve Bank of 

India Act, 1934 (2 of 1934); or 

(j)  a  depository  referred  to  in  clause  (e)  of  sub-section  (1)  of  section  2  of  the  Depositories 

Act, 1996 (22 of 1996); or 

(k) a prescribed reporting financial institution, 

who  is  responsible  for  registering,  or,  maintaining  books  of  account  or  other  document  containing  a 
record of any specified financial transaction or any reportable account as may be prescribed, under any 
law for the time being in force, shall furnish a statement in respect of such specified financial transaction 
or such reportable account which is registered or recorded or maintained by him and information relating 
to which is relevant and required for the purposes of this Act, to the income-tax authority or such other 
authority or agency as may be prescribed. 

(2) The statement referred to in sub-section (1) shall be furnished for such period, within such time 

and in the form and manner, as may be prescribed. 

(3) For the purposes of sub-section (1), “specified financial transaction” means any— 

(a)  transaction  of  purchase,  sale  or  exchange  of  goods  or  property  or  right  or  interest  in  a 

property; or 

1.  Subs.  by  Act  25  of  2014,  s.  76,  for  “section  285BA”  (w.e.f.  1-4-2015).  Earlier  inserted  by  Act  32  of  2003,  s.  98,                   

(w.e.f. 1-4-2005) and later on subs. by Act 23 of 2004, s. 63 (w.e.f. 1-4-2005). 

814 

                                                           
(b) transaction for rendering any service; or 

(c) transaction under a works contract; or 

(d) transaction by way of an investment made or an expenditure incurred; or 

(e) transaction for taking or accepting any loan or deposit, 

which may be prescribed: 

Provided that  the  Board  may  prescribe  different  values  for  different  transactions  in  respect  of 

different persons having regard to the nature of such transaction: 

Provided further that the value or, as the case may be, the aggregate value of such transactions during 

a financial year so prescribed shall not be less than fifty thousand rupees. 

(4)  Where  the  prescribed  income-tax  authority  considers  that  the  statement  furnished  under  sub-
section (1) is defective, he may intimate the defect to the person who has furnished such statement and 
give  him  an  opportunity  of  rectifying  the  defect  within  a  period  of  thirty  days  from  the  date  of  such 
intimation or within such further period which, on an application made in this behalf, the said income-tax 
authority  may, in his discretion, allow; and if the defect is not rectified within the said period of thirty 
days or, as the case may be, the further period so allowed, then, notwithstanding anything contained in 
any other provision of this Act, such statement shall be treated as an invalid statement and the provisions 
of this Act shall apply as if such person had failed to furnish the statement. 

(5) Where a person who is required to furnish a statement under sub-section (1) has not furnished the 
same within the specified time, the prescribed income-tax authority may serve upon such person a notice 
requiring him to furnish such statement within a period not exceeding thirty days from the date of service 
of such notice and he shall furnish the statement within the time specified in the notice. 

(6)  If  any  person,  having  furnished  a  statement  under  sub-section  (1),  or  in  pursuance  of  a  notice 
issued under sub-section (5), comes to know or discovers any inaccuracy in the information provided in 
the statement, he shall within a period of ten days inform the income-tax authority or other authority or 
agency referred to in sub-section (1), the inaccuracy in such statement and furnish the correct information 
in such manner as may be prescribed. 

(7) The Central Government may, by rules made under this section, specify— 

(a)  the  persons  referred  to  in  sub-section  (1)  to  be  registered  with  the  prescribed  income-tax 

authority; 

(b) the nature of information and the manner in which such information shall be maintained by 

the persons referred to in clause (a); and 

(c)  the  due  diligence  to  be  carried  out  by  the  persons  for  the  purpose  of  identification  of  any 

reportable account referred to in sub-section (1).] 

815 

1[286.  Furnishing  of  report  in  respect  of  international  group.—(1)  Every  constituent  entity 
resident  in  India,  shall,  if  it  is  constituent  of  an  international  group,  the  parent  entity  of  which  is  not 
resident in India, notify the prescribed income-tax authority (herein referred to as prescribed authority) in 
the form and manner, on or before such date, as may be prescribed,— 

(a) whether it is the alternate reporting entity of the international group; or 

(b)  the  details  of  the  parent  entity  or  the  alternate  reporting  entity,  if  any,  of  the  international 

group, and the country or territory of which the said entities are resident. 

(2)  Every  parent  entity  or the  alternate  reporting  entity,  resident in  India,  shall,  for  every  reporting 
accounting year, in respect of the international group of which it is a constituent, furnish a report, to the 
prescribed  authority  2[within  a  period  of  twelve  months  from  the  end  of  the  said  reporting  accounting 
year], in the form and manner as may be prescribed. 

(3) For the purposes of sub-section (2) 3[and sub-section (4)], the report in respect of an international 

group shall include,— 

(a)  the  aggregate  information  in  respect  of  the  amount  of  revenue,  profit  or  loss  before  
income-tax, amount of income-tax paid, amount of income-tax accrued, stated capital, accumulated 
earnings, number of employees and tangible assets not being cash or cash equivalents, with regard to 
each country or territory in which the group operates; 

(b) the details of each constituent entity of the group including the country or territory in which 
such constituent entity is incorporated or organised or established and the country or territory where it 
is resident; 

(c) the nature and details of the main business activity or activities of each constituent entity; and 

(d) any other information as may be prescribed. 

(4) A constituent entity of an international group, resident in India, other than the entity referred to in 
sub-section (2), shall furnish the report referred to in the said sub-section, in respect of the international 
group  for  a  reporting  accounting  year  3[within  the  period  as  may  be  prescribed],  if  the  parent  entity  is 
resident of a country or territory,— 

3[(a)  where  the  parent  entity  is  not  obligated  to  file  the  report  of  the  nature  referred  to  in  sub-

section (2);] 

4[(aa)] with which India does not have an agreement providing for exchange of the report of the 

nature referred to in sub-section (2); or 

(b)  there  has  been  a  systemic  failure  of  the  country  or  territory  and  the  said  failure  has  been 

intimated by the prescribed authority to such constituent entity: 

Provided that where there are more than one such constituent entities of the group, resident in India, 

the report shall be furnished by any one constituent entity, if,— 

(a) the international group has designated such entity to furnish the report in accordance with the 

provisions of sub-section (2) on behalf of all the constituent entities resident in India; and 

(b)  the  information  has  been  conveyed  in  writing  on  behalf  of  the  group  to  the  prescribed 

authority. 

1. Ins. by Act 28 of 2016, s. 113 (w.e.f. 1-4-2017). 
2. Subs. by Act 13 of 2018, s. 55, for “on or before the due date specified under sub-section (1) of section 139, for furnishing 

the return of income for the relevant accounting year” (w.r.e.f. 1-4-2017). 

3. Ins. by s. 55, ibid. (w.r.e.f. 1-4-2017). 
4. Clause (a) relettered as clause (aa) thereof by s. 55, ibid. (w.r.e.f. 1-4-2017). 

816 

                                                           
(5)  Nothing  contained  in  sub-section  (4)  shall  apply,  if,  an  alternate  reporting  entity  of  the 
international  group  has  furnished  a  report  of  the  nature  referred  to  in  sub-section  (2),  with  the  tax 
authority of the country or territory in which such entity is resident, on or before the date specified  1[by 
that country or territory] and the following conditions are satisfied, namely:— 

(a)  the  report  is  required  to  be  furnished  under  the  law  for  the  time  being  in  force  in  the  said 

country or territory; 

(b) the said country or territory has entered into an agreement with India providing for exchange 

of the said report; 

(c) the prescribed authority has not conveyed any systemic failure in respect of the said country 

or territory to any constituent entity of the group that is resident in India; 

(d) the said country or territory has been informed in writing by the constituent entity that it is the 

alternate reporting entity on behalf of the international group; and 

(e)  the  prescribed  authority  has  been  informed  by  the  2[entity]  referred  to  in  sub-section  (4)  in 

accordance with sub-section (1). 

(6) The prescribed authority may, for the purposes of determining the accuracy of the report furnished 
by any reporting entity, by issue of a notice in writing, require the entity to produce such information and 
document as may be specified in the notice within thirty days of the date of receipt of the notice: 

Provided that the prescribed authority may, on an application made by such entity, extend the period 

of thirty days by a further period not exceeding thirty days. 

(7)  The  provisions  of  this  section  shall  not  apply  in  respect  of  an  international  group  for  an 
accounting  year,  if  the  total  consolidated  group  revenue,  as  reflected  in  the  consolidated  financial 
statement for the accounting year preceding such accounting year does not exceed the amount, as may be 
prescribed. 

(8) The provisions of this section shall be applied in accordance with such guidelines and subject to 

such conditions, as may be prescribed. 

(9) For the purposes of this section,— 

(a) “accounting year” means,— 

(i) a previous year, in a case where the parent entity or alternate reporting entity is resident in 

India; or 

(ii) an annual accounting period, with respect to which the parent entity of the international 
group prepares its financial statements under any law for the time being in force or the applicable 
accounting standards of the country or territory of which such entity is resident, in any other case; 

3[(b) “agreement” means a combination of all of the following agreements, namely:–– 

(i)  an  agreement  entered  into  under  sub-section  (1)  of  section  90  or  sub-section  (1)  of             

section 90A; and 

(ii) an agreement for exchange of the report referred to in sub-section (2) and notified by the 

Central Government;] 

(c)  “alternate  reporting  entity”  means  any  constituent  entity  of  the  international  group  that  has 
been designated by such group, in the place of the parent entity, to furnish the report of the nature 
referred to in sub-section (2) in the country or territory in which the said constituent entity is resident 
on behalf of such group; 

1. Subs. by Act 13 of 2018, s. 55, for “in the said sub-section” (w.r.e.f. 1-4-2017). 
2. Subs. by s. 55, ibid., for “entities” (w.r.e.f. 1-4-2017). 
3. Subs. by s. 55, ibid., for clause (b) (w.r.e.f. 1-4-2017).  

817 

                                                           
(d) “constituent entity” means,—  

(i) any separate entity of an international group that is included in the consolidated financial 
statement of the said group for financial reporting purposes, or may be so included for the said 
purpose, if the equity share of any entity of the international group were to be listed on a stock 
exchange; 

(ii)  any  such  entity  that  is  excluded  from  the  consolidated  financial  statement  of  the 

international group solely on the basis of size or materiality; or 

(iii)  any  permanent  establishment  of  any  separate  business  entity  of the international  group 
included in 1[sub-clause (i) or sub-clause (ii)], if such business unit prepares a separate financial 
statement  for  such  permanent  establishment  for  financial  reporting,  regulatory,  tax  reporting  or 
internal management control purposes; 

(e)  “group”  includes  a  parent  entity  and  all  the  entities  in  respect  of  which,  for  the  reason  of 

ownership or control, a consolidated financial statement for financial reporting purposes,— 

(i)  is  required  to  be  prepared  under  any  law  for  the  time  being  in  force  or  the  accounting 

standards of the country or territory of which the parent entity is resident; or 

(ii) would have been required to be prepared had the equity shares of any of the enterprises 

were listed on a stock exchange in the country or territory of which the parent entity is resident; 

(f) “consolidated financial statement” means the financial statement of an international group in 
which the assets, liabilities, income, expenses and cash flows of the parent entity and the constituent 
entities are presented as those of a single economic entity; 

(g) “international group” means any group that includes,— 

(i) two or more enterprises which are resident of different countries or territories; or 

(ii) an enterprise, being a resident of one country or territory, which carries on any business 

through a permanent establishment in other countries or territories; 

(h)  “parent  entity”  means  a  constituent  entity,  of  an  international  group  holding,  directly  or 
indirectly, an interest in one or more of the other constituent entities of the international group, such 
that,— 

(i)  it  is  required  to  prepare  a  consolidated  financial  statement  under  any  law  for  the  time 
being  in  force  or  the  accounting  standards  of  the  country  or  territory  of  which  the  entity  is 
resident; or 

(ii) it would have been required to prepare a consolidated financial statement had the equity 

shares of any of the enterprises were listed on a stock exchange, 

and, there is no other constituent entity of such group which, due to ownership of any interest, directly or 
indirectly,  in  the  first  mentioned  constituent  entity,  is  required  to  prepare  a  consolidated  financial 
statement,  under  the  circumstances  referred  to  in 1[sub-clause  (i) or  sub-clause  (ii)],  that  includes  the 
separate financial statement of the first mentioned constituent entity; 

(i)  “permanent  establishment”  shall  have  the  meaning  assigned  to  it  in  clause  (iiia)  of  

section 92F; 

(j) “reporting accounting year” means the accounting year in respect of which the financial and 

operational results are required to be reflected in the report referred to in 2[sub-section (2) and (4)]; 

1. Subs. by Act 13 of 2018, s. 55, for “clause (i) or clause (ii)” (w.r.e.f. 1-4-2017). 
2. Subs. by s. 55, ibid., for “sub-section (2)” (w.r.e.f. 1-4-2017). 

818 

                                                           
(k)  “reporting  entity”  means  the  constituent  entity  including  the  parent  entity  or  the  alternate 
in  

the  nature 

furnish  a 

report  of 

required 

referred 

that 

to 

to 

is 

reporting  entity, 
sub-section (2); 

(l) “systemic failure” with respect to a country or territory means that the country or territory has 
an agreement with India providing for exchange of report of the nature referred to in sub-section (2), 
but— 

(i) in violation of the said agreement, it has suspended automatic exchange; or 

(ii)  has  persistently  failed  to  automatically  provide  to  India  the  report  in  its  possession  in 

respect of any international group having a constituent entity resident in India.] 

1[287.  Publication  of  information  respecting  assessees  in  certain  cases.—(1)  If  the  Central 
Government is of opinion that it is necessary or expedient in the public interest to publish the names of 
any assessees and any other particulars relating to any proceedings  2[or prosecutions] under this Act in 
respect of such assessees, it may cause to be published such names and particulars in such manner as it 
thinks fit. 

3[(2) No publication under this section shall be made in relation to any penalty imposed under this Act 
until  the  time  for  presenting  an  appeal  to  the  4[***  Commissioner  (Appeals)]  has  expired  without  an 
appeal having been presented or the appeal, if presented, has been disposed of.] 

Explanation.—In  the  case  of  a  firm,  company  or  other  association  of  persons,  the  names  of  the 
partners of the firm, directors, managing agents, secretaries and treasurers, or managers of  the company, 
or  the  members  of  the association,  as the  case  may  be,  may  also  be  published  if,  in the  opinion  of the 
Central Government, the circumstances of the case justify it.] 

5[287A.  Appearance  by  registered  valuer  in  certain  matters.—Any  assessee  who  is  entitled  or 
required  to  attend  before  any  income-tax  authority  or  the  Appellate  Tribunal  in  connection  with  any 
matter  relating  to  the  valuation  of  any  asset,  otherwise  than  when  required  under section  131 to  attend 
personally for examination on oath or affirmation, may attend by a registered valuer. 

Explanation.—In  this  section,  “registered  valuer”  has  the  same  meaning  as  in  clause  (oaa)  of  

section 2 of the Wealth-tax Act, 1957 (27 of 1957). 

288.  Appearance  by  authorised  representative.—(1)  Any  assessee  who  is  entitled  or  required  to 
attend  before  any  income-tax  authority  or  the  Appellate  Tribunal  in  connection  with  any  proceeding 
under this  Act  otherwise  than  when required  under section  131 to  attend  personally  for  examination  on 
oath  or  affirmation,  may,  subject  to  the  other  provisions  of  this  section,  attend  by  an  authorised 
representative. 

(2)  For  the  purposes  of  this  section,  “authorised  representative”  means  a  person  authorised  by  the 

assessee in writing to appear on his behalf, being— 

(i) a person related to the assessee in any manner, or a person regularly employed by the assessee; 

or 

1. Subs. by Act 5 of 1964, s. 45, for section 287 (w.e.f. 1-4-1964). 
2. Ins. by Act 41 of 1975, s. 77 (w.e.f. 1-10-1975). 
3. Subs. by s. 77, ibid., for sub-section (2) (w.e.f. 1-10-1975). 
4. The words and brackets “Deputy Commissioner (Appeals) or the” omitted by Act 21 of 1998, s. 65 (w.e.f. 1-10-1998). 
Which was substituted  as “Deputy Commissioner (Appeals)” for “Appellate Assistant Commissioner” by Act 4 of 1988, 
s.  2  (w.e.f.  1-4-1988)  and  the  words  and  brackets  “or  the  commissioner  (Appeals)”  were  inserted  after  “Appellate 
Assistant Commissioner” by Act 22 of 1977, s. 39 and the Fifth Schedule (w.e.f. 1-4-1977). 

5. Ins. by Act 45 of 1972, s. 6 (w.e.f. 1-1-1973). 

819 

                                                           
(ii) any officer of a Scheduled Bank with which the assessee maintains a current account or has 

other regular dealings; or 

(iii) any legal practitioner who is entitled to practise in any civil court in India; or 

(iv) an accountant; or 

(v)  any  person  who  has  passed  any  accountancy  examination  recognised  in  this  behalf  by  the 

Board; or 

(vi) any person who has acquired such educational qualifications as the Board may prescribe for 

this purpose; or 

1[(via) any person who, before the coming into force of this Act in the Union territory of Dadra 
and Nagar Haveli, Goa†, Daman and Diu, or Pondicherry, attended before an income-tax authority in 
the said territory on behalf of any assessee otherwise than in the capacity of an employee or relative 
of that assessee; or]  

(vii)  any  other  person  who,  immediately  before  the  commencement  of  this  Act,  was  an  
income-tax practitioner within the meaning of clause (iv) of sub-section (2) of section 61 of the Indian 
Income-tax Act, 1922 (11 of 1922), and was actually practicing as such. 

2[Explanation.—In this section, “accountant” means a chartered accountant as defined in clause (b) of 
sub-section  (1)  of  section  2  of  the  Chartered  Accountants  Act,  1949  (38  of  1949)  who  holds  a  valid 
certificate of practice under sub-section (1) of section 6 of that Act, but does not include [except for the 
purposes of representing the assessee under sub-section (1)]— 

(a) in case of an assessee, being a company, the person who is not eligible for appointment as an 
auditor of the said company in accordance with the provisions of sub-section (3) of section 141 of the 
Companies Act, 2013 (18 of 2013); or 

(b) in any other case,— 

(i) the assessee himself or in case of the assessee, being a firm or association of persons or 

Hindu undivided family, any partner of the firm, or member of the association or the family; 

(ii) in case of the assessee, being a trust or institution, any person referred to in clauses (a), 

(b), (c) and (cc) of sub-section (3) of section 13; 

(iii) in case of any person other than persons referred to in sub-clauses (i) and (ii), the person 
who  is  competent  to  verify  the  return  under section  139 in  accordance  with  the  provisions 
of section 140; 

(iv) any relative of any of the persons referred to in sub-clauses (i), (ii) and (iii); 

(v) an officer or employee of the assessee; 

(vi) an individual who is a partner, or who is in the employment, of an officer or employee of 

the assessee; 

1. Ins. by the Taxation Laws (Extension to Union Territories) Regulation, 1963 (3 of 1963), s. 3(2) part II and the Schedule 

(w.e.f. 1-4-1963). 

† Goa has now become a State by Act 18 of 1987, s. 5 (w.e.f. 30-5-1987). 
2. Subs. by Act 20 of 2015, s. 79, for the Explanation (w.e.f. 1-6-2015). 

820 

                                                           
(vii) an individual who, or his relative or partner— 

(I) is holding any security of, or interest in, the assessee: 

Provided that the relative may hold security or interest in the assessee of the face value 

not exceeding one hundred thousand rupees; 

(II) is indebted to the assessee: 

Provided that the relative may be indebted to the assessee for an amount not exceeding 

one hundred thousand rupees; 

(III) has given a guarantee or provided any security in connection with the indebtedness 

of any third person to the assessee: 

Provided that the relative may give guarantee or provide any security in connection with 
the indebtedness of any third person to the assessee for an amount not exceeding one hundred 
thousand rupees; 

(viii) a person who, whether directly or indirectly, has business relationship with the assessee 

of such nature as may be prescribed; 

(ix) a person who has been convicted by a court of an offence involving fraud and a period of 

ten years has not elapsed from the date of such conviction. 

1* 

* 

(4) No person— 

* 

* 

* 

(a)  who  has  been  dismissed  or  removed  from  Government  service  after  the  1st  day  of            

April, 1938; or 

(b) who has been convicted of an offence connected with any income-tax proceeding or on whom 
a penalty has been imposed under this Act, other than a penalty imposed on him under 2[clause (ii) of 
sub-section (1) of] section 271 3[clause (d) of sub-section (1) of section 272A or]; or 

4[(c) who has become an insolvent; or 

(d) who has been convicted by a court for an offence involving fraud, 

shall  be  qualified  to  represent  an  assessee  under  sub-section  (1),  for  all  times  in  the  case  of  a  person 
referred to  in  clause  (a),  for  such time  as the  Principal  Chief  Commissioner  or Chief  Commissioner or 
Principal Commissioner or Commissioner may by order determine in the case of a person referred to in 
clause  (b), for  the  period  during  which  the  insolvency  continues  in  the  case  of  a  person  referred  to  in 
clause (c), and for a period of ten years from the date of conviction in the case of a person referred to in 
clause (d).] 

(5) If any person— 

(a) who is a legal practitioner or an accountant is found guilty of misconduct in his professional 
capacity by any authority entitled to institute disciplinary proceedings against him, an order passed by 
that authority shall have effect in relation to his right to attend before an income-tax authority as it has 
in relation to his right to practise as a legal practitioner or accountant, as the case may be; 

1. Sub-section (3) omitted by Act 67 of 1984, s. 52 (w.e.f. 1-10-1984). 
2. Ins. by Act 12 of 1990, s. 49 (w.e.f. 1-4-1990). 
3. Ins. by Act 28 of 2016, s. 114 (w.e.f. 1-4-2017). 
4. Subs. by Act 20 of 2015, s. 79, for certain words, brackets and letter (w.e.f. 1-6-2015). 

821 

 
 
 
 
 
 
 
 
                                                           
(b) who is not a legal practitioner or an accountant, is found guilty of misconduct in connection 
with any income-tax proceedings by the prescribed authority, the prescribed authority may direct that 
he shall thenceforth be disqualified to represent an assessee under sub-section (1). 

(6) Any order or direction under clause (b) of sub-section (4) or clause (b) of sub-section (5) shall be 

subject to the following conditions, namely:— 

(a) no such order or direction shall be made in respect of any person unless he has been given a 

reasonable opportunity of being heard; 

(b) any person against whom any such order or direction is made may, within one month of the 

making of the order or direction, appeal to the Board to have the order or direction cancelled; and 

(c) no such order or direction shall take effect until the expiration of one month from the making 

thereof, or, where an appeal has been preferred, until the disposal of the appeal. 

(7)  A  person  disqualified  to  represent  an  assessee  by  virtue  of  the  provisions  of  sub-section  (3)  of 
section 61 of the Indian Income-tax Act, 1922 (11 of 1922), shall be disqualified to represent an assessee 
under sub-section (1). 

1[Explanation.—For the purposes of this section, “relative” in relation to an individual, means— 

(a) spouse of the individual; 

(b) brother or sister of the individual; 

(c) brother or sister of the spouse of the individual; 

(d) any lineal ascendant or descendant of the individual; 

(e) any lineal ascendant or descendant of the spouse of the individual; 

(f) spouse of a person referred to in clause (b), clause (c), clause (d) or clause (e); 

(g)  any  lineal  descendant  of  a  brother  or  sister  of  either  the  individual  or  the  spouse  of  the 

individual.] 

2[288A. Rounding off of income.—3[The amount of total income] computed in accordance with 
the foregoing provisions of this Act shall be rounded off to the nearest multiple of ten rupees and for 
this purpose any part of a rupee consisting of paise shall be ignored and thereafter if such amount is 
not  a  multiple  of  ten,  then,  if  the  last  figure  in  that  amount  is  five  or  more,  the  amount  shall  be 
increased to the next higher amount which is a multiple of ten and if the last figure is less than five, 
the amount shall be reduced to the next lower amount which is a multiple of ten; and the amount so 
rounded off shall be deemed to be the total income of the assessee for the purposes of this Act.] 

4* 

* 

* 

* 

* 

5[288B. Rounding off amount payable and refund due.—Any amount payable, and the amount 
of  refund  due,  under  the  provisions  of  this  Act  shall  be  rounded  off  to  the  nearest  multiple  of  ten 
rupees and for this purpose any part of a rupee consisting of paise shall be ignored and thereafter if 
such amount is not a multiple of ten, then, if the last figure in that amount is five or more, the amount 
shall be increased to the next higher amount which is a multiple of ten and if the last figure is less 
than five, the amount shall be reduced to the next lower amount which is a multiple of ten.] 

1. Ins. by Act 20 of 2015, s. 79 (w.e.f. 1-6-2015). 
2. Ins. by Act 13 of 1966, s. 34 (w.e.f. 1-4-1966). 
3. Subs. by Act 19 of 1968, s. 30 and the Third Schedule, for “(1) Subject to the provisions of sub-section (2), the amount of 

total income” (w.e.f. 1-4-1969). 

4. Sub-section (2) and Explanation, omitted by s. 30 and the Third Schedule, ibid. (w.e.f. 1-4-1969). 
5. Subs. by Act 29 of 2006, s. 19, for section 288B (w.e.f. 13-7-2006). 

822 

 
 
 
 
 
 
 
                                                           
289. Receipt to be given.—A receipt shall be given for any money paid or recovered under this Act. 

290. Indemnity.—Every person deducting, retaining, or paying any tax in pursuance of this Act in 
respect  of  income  belonging  to  another  person  is  hereby  indemnified  for  the  deduction,  retention,  or 
payment thereof. 

291. Power  to  tender immunity from  prosecution.—(1) The  Central  Government  may,  if  it  is  of 
opinion  (the  reasons  for  such  opinion  being  recorded  in  writing)  that  with  a  view  to  obtaining  the 
evidence  of  any  person  appearing  to  have  been  directly  or  indirectly  concerned  in  or  privy  to  the 
concealment of income or to the evasion of payment of tax on income 1[it is necessary or expedient so to 
do], tender to such person immunity from prosecution for any offence under this Act or under the Indian 
Penal Code (45 of 1860), or under any other Central Act for the time being in force and also from the 
imposition  of  any  penalty  under  this  Act  on  condition  of  his  making  a  full  and  true  disclosure  of  the 
whole circumstances relating to the concealment of income or evasion of payment of tax on income. 

(2)  A  tender  of  immunity  made  to,  and  accepted  by,  the  person  concerned,  shall,  to  the  extent  to 
which the immunity extends, render him immune from prosecution for any offence in respect of which 
the tender was made or from the imposition of any penalty under this Act. 

(3)  If  it  appears  to  the  Central  Government  that  any  person  to  whom  immunity  has  been  tendered 
under  this  section  has  not  complied  with  the  condition  on  which  the  tender  was  made  or  is  wilfully 
concealing  anything  or  is  giving  false  evidence,  the  Central  Government  may  record  a  finding  to  that 
effect, and thereupon the immunity shall be deemed to have been withdrawn, and any such person may be 
tried  for  the  offence  in  respect  of  which  the  tender  of  immunity  was  made  or  for  any  other  offence  of 
which he appears to have been guilty in connection with the same matter and shall also become liable to 
the imposition of any penalty under this Act to which he would otherwise have been liable. 

292. Cognizance of offences.—No court inferior to that of a presidency magistrate or a magistrate of 

the first class shall try any offence under this Act. 

2[292A. Section 360 of the Code of Criminal Procedure, 1973, and the Probation of Offenders 
Act,  1958,  not  to  apply.—Nothing  contained  in  section  360  of  the  Code  of  Criminal  Procedure,  1973      
(2 of 1974), or in the Probation of Offenders Act, 1958 (20 of 1958), shall apply to a person convicted of 
an offence under this Act unless that person is under eighteen years of age. 

292B. Return  of  income,  etc.,  not  to  be  invalid  on  certain  grounds.—No  return  of  income, 
assessment, notice, summons or other proceeding, furnished or made or issued  or taken or purported to 
have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be 
invalid  or  shall  be  deemed  to  be  invalid  merely  by  reason  of  any  mistake,  defect  or  omission  in  such 
return of income, assessment, notice, summons or other proceeding if such return of income, assessment, 
notice,  summons  or  other  proceeding  is  in  substance  and  effect  in  conformity  with  or  according  to  the 
intent and purpose of this Act.] 

3[292BB. Notice deemed to be valid in certain circumstances.—Where an assessee has appeared in 
any  proceeding  or  co-operated  in  any  inquiry  relating  to  an  assessment  or  reassessment,  it  shall  be 
deemed that any notice under any provision of this Act, which is required to be served upon him, has been 
duly  served  upon  him  in  time  in  accordance  with the  provisions of this  Act  and  such assessee shall  be 
precluded from taking any objection in any proceeding or inquiry under this Act that the notice was— 

(a) not served upon him; or 

1. Ins. by Act 13 of 1963, s. 18 (w.e.f. 28-4-1963).  
2. Ins. by Act 41 of 1975, s. 78 (w.e.f. 1-10-1975). 
3. Ins. by Act 18 of 2008, s. 56 (w.e.f. 1-4-2008). 

823 

                                                           
(b) not served upon him in time; or 

(c) served upon him in an improper manner: 

Provided that  nothing  contained  in  this  section  shall  apply  where  the  assessee  has  raised  such 

objection before the completion of such assessment or reassessment.] 

1[292C. Presumption as to assets, books of account, etc.—2[(1)] Where any books of account, other 
documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or 
control of any person in the course of a search under section 132 3[or survey under section 133A], it may, 
in any proceeding under this Act, be presumed— 

(i)  that  such  books  of  account,  other  documents,  money,  bullion,  jewellery  or  other  valuable 

article or thing belong or belongs to such person; 

(ii) that the contents of such books of account and other documents are true; and 

(iii) that the signature and every other part of such books of account and other documents which 
purport  to  be  in  the  handwriting  of  any  particular  person  or  which  may  reasonably  be  assumed  to 
have  been  signed  by,  or  to  be  in  the  handwriting  of,  any  particular  person,  are  in  that  person’s 
handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped 
and executed or attested by the person by whom it purports to have been so executed or attested.] 

4[(2) Where any books of account, other documents or assets have been delivered to the requisitioning 
officer  in  accordance  with  the  provisions  of section  132A,  then,  the  provisions  of  sub-section  (1)  shall 
apply as if such books of account, other documents or assets which had been taken into custody from the 
person  referred  to  in  clause  (a)  or  clause  (b)  or  clause  (c),  as  the  case  may  be,  of  sub-section  (1)  of          
section 132A, had been found in the possession or control of that person in the course of a search under        
section 132.] 

5[292CC. Authorisation  and  assessment  in  case  of  search  or  requisition.—(1)  Notwithstanding 

anything contained in this Act,— 

(i)  it  shall  not  be  necessary  to  issue  an  authorisation  under section  132 or  make  a  requisition 

under section 132A separately in the name of each person; 

(ii)  where  an  authorisation  under section  132 has  been 

issued  or  requisition 

  under               

section 132A has been made mentioning therein the name of more than one person, the mention of 
such  names  of  more  than  one  person  on  such  authorisation  or  requisition  shall  not  be  deemed  to 
construe that it was issued in the name of an association of persons or body of individuals consisting 
of such persons. 

(2)  Notwithstanding  that  an  authorisation  under section  132 has  been  issued  or  requisition 
under section 132A has been made mentioning therein the name of more than one person, the assessment 
or  reassessment  shall  be  made  separately  in  the  name  of  each  of  the  persons  mentioned  in  such 
authorisation or requisition.] 

1. Ins. by Act 22 of 2007, s. 78 (w.e.f. 1-10-1975). 
2. Section 292C renumbered as sub-section (1) thereof by Act 18 of 2008, s. 57 (w.e.f. 1-10-1975). 
3. Ins. by ibid. s. 57 (w.r.e.f. 1-6-2002). 
4. Ins. by ibid. s. 57 (w.r.e.f. 1-10-1975). 
5. Ins. by Act 23 of 2012, s. 112 (w.e.f. 1-4-1976).  

824 

                                                           
293. Bar of suits in civil courts.—No suit shall be brought in any civil court to set aside or modify 
1[any proceeding taken or order made] under this Act; and no prosecution, suit or other proceeding shall 
lie  against  2[the  Government  or]  any  officer  of  the  Government  for  anything  in  good  faith  done  or 
intended to be done under this Act. 

3[293A. Power  to  make  exemption,  etc.,  in  relation  to  participation  in  the  business  of 
prospecting for, extraction, etc., of mineral oils.—(1) If the Central Government is satisfied that it is 
necessary or expedient so to do in the public interest, it may, by notification in the Official Gazette, make 
an exemption, reduction in rate or other modification in respect of income-tax in favour of any class of 
persons specified in sub-section (2) or in regard to the whole or any part of the income of such class of 
persons  4[or  in  regard  to  the  status  in  which  such  class  of  persons  or  the  members  thereof  are  to  be 
assessed on their income from the business referred to in clause (a) of sub-section (2): 

Provided that  the  notification  for  modification in  respect  of  the status  may  be  given  effect from  an 

assessment year beginning on or after the 1st day of April, 1993.] 

(2) The persons referred to in sub-section (1) are the following, namely:— 

(a)  persons with whom the Central Government has entered into agreements for the association 
or  participation  of  that  Government  or  any  person  authorised  by  that  Government  in  any  business 
consisting of the prospecting for or extraction or production of mineral oils; 

(b)  persons providing any services or facilities or supplying any ship, aircraft, machinery or plant 
(whether by way of sale or hire) in connection with any business consisting of the prospecting for or 
extraction or production of mineral oils carried on by that Government or any person specified by that 
Government in this behalf by notification in the Official Gazette; and 

(c)  employees of the persons referred to in clause (a) or clause (b). 

(3) Every notification issued under this section shall be laid before each House of Parliament. 

5[Explanation.—For the purposes of this section,— 

(a)  “mineral oil” includes petroleum and natural gas; 

(b) “status”  means  the  category  under  which  the  assessee  is  assessed  as  “individual”,  “Hindu 

undivided family” and so on.]] 

6[293B. Power  of  Central  Government  or  Board  to  condone  delays  in  obtaining  approval.—
Where, under any provision of this Act, the approval of the Central Government or the Board is required 
to be obtained before a specified date, it shall be open to the Central Government or, as the case may be, 
the Board to condone, for sufficient cause, any delay in obtaining such approval.] 

7[293C. Power to withdraw approval.—Where the Central Government or the Board or an income-
tax  authority,  who  has  been  conferred  upon  the  power  under  any  provision  of  this  Act  to  grant  any 
approval to any assessee, the Central Government or the Board or such authority  may, notwithstanding 
that  a  provision  to  withdraw  such  approval  has  not  been  specifically  provided  for  in  such  provision, 
withdraw such approval at any time: 

1. Subs. by Act 26 of 1988, s. 51, for “any order made” (w.r.e.f. 1-3-1988).  
2. Ins. by Act 5 of 1964, s. 46 (w.e.f. 1-4-1964). 
3. Ins. by Act 16 of 1981, s. 22 (w.e.f. 1-4-1981). 
4. Ins. by Act 22 of 1995, s . 49 (w.r.e.f. 1-4-1993). 
5. Subs. by s. 49, ibid., for the Explanation (w.r.e.f. 1-4-1993). 
6. Ins. by Act 4 of 1988, s. 121 (w.e.f. 1-4-1989). 
7. Ins. by Act 33 of 2009, s. 79 (w.e.f. 1-10-2009). 

825 

                                                           
Provided that  the  Central  Government  or  Board  or  income-tax  authority  shall,  after  giving  a 
reasonable opportunity of showing cause against the proposed withdrawal to the assessee concerned, at 
any time, withdraw the approval after recording the reasons for doing so.] 

294. Act to have effect pending legislative provision for charge of tax.—If on the 1st day of April 
in any assessment year provision has not yet been made by a Central Act for the charging of income-tax 
1*** for that assessment year, this Act shall nevertheless have effect until such provision is so made as if 
the provision in force in the preceding assessment year or the provision proposed in the Bill then before 
Parliament, whichever is more favourable to the assessee, were actually in force. 

2[294A. Power to make exemption,  etc., in relation to certain Union territories.—If the Central 
Government  considers  it  necessary  or  expedient  so  to  do  for  avoiding  any  hardship  or  anomaly  or 
removing any difficulty that may arise as a result of the application of this Act to the Union territories of 
Dadra and Nagar Haveli, Goa*, Daman and Diu, and Pondicherry, or in the case of the Union territory of 
Pondicherry,  for  implementing  any  provision  of  the  Treaty  of  Cession  concluded  between  France  and 
India  on  the  28th  day  of  May,  1956,  that  Government  may,  by  general  or  special  order,  make  an 
exemption, reduction in rate or other modification in respect of income-tax or super-tax in favour of any 
assessee or class of assessees or in regard to the whole or any part of the income of any assessee or class 
of assessees: 

Provided that the power conferred by this section shall not be exercisable after the 31st day of March, 

1967, except for the purpose of rescinding an exemption, reduction or modification already made.] 

295. Power to make rules.—(1) The Board may, subject to the control of the Central Government, 
by notification in the Gazette of India, make rules for the whole or any part of India for carrying out the 
purposes of this Act. 

(2)  In  particular,  and  without  prejudice  to  the  generality  of  the  foregoing  power,  such  rules  may 

provide for all or any of the following matters:— 

(a)  the ascertainment and determination of any class of income; 

(b)  the manner in which and the procedure by which the income shall be arrived at in the case 

of— 

(i)  income derived in part from agriculture and in part from business; 

(ii)  persons residing outside India; 

3[(iii)   an  individual  who  is  liable  to  be  assessed  under  the  provisions  of  sub-section  (2) 

of section 64;] 

(c)   the  determination  of  the  value  of  any  perquisite  chargeable  to  tax  under  this  Act  in  such 

manner and on such basis as appears to the Board to be proper and reasonable; 

(d)  the percentage on the written down value which may be allowed as depreciation in respect of 

buildings, machinery, plant or furniture; 

4[(dd)  the  extent  to  which,  and  the  conditions  subject  to  which,  any  expenditure  referred  to  in  

sub-section (3) of section 37 may be allowed;] 

5[(dda) the matters specified in sub-sections (2) and (3) of section 44AA;] 

1. The words “or super-tax” omitted by Act 10 of 1965, s. 63 (w.e.f. 1-4-1965). 
2.  Ins.  by  the  Taxation  Laws  (Extension  to  Union  Territories)  Regulation,  1963  (3  of  1963),  s.  3  and  the  Schedule                         

(w.e.f. 1-4-1963). 

3. Ins. by Act 42 of 1970, s. 55 (w.e.f. 1-4-1971). 
4. Ins. by Act 5 of 1964, s. 47 (w.e.f. 1-4-1964). 
5. Ins. by Act 41 of 1975, s. 79 (w.e.f. 1-4-1976). 

826 

                                                           
1[2[(e)]  the conditions or limitations subject to which any payment of rent made by an assessee 

shall be deducted under section 80GG; 

3[(ee) the matters specified in Chapter X-A;] 

(eea)  the  cases,  the  nature  and  value  of  assets,  the  limits  and  heads  of  expenditure  and  the 

outgoings, which are required to be prescribed under sub-section (6) of section 139; 

(eeb)  the  time  within  which  any  person  may  apply  for  the  allotment  of  a  permanent  account 
number, the form and the manner in which such application may be made and the particulars which 
such application shall contain and the transactions with respect to which permanent account numbers 
shall be quoted on documents relating to such transactions under section 139A; 

4[(eeba)  the  documents,  statements,  receipts,  certificates  or  audited  reports  which  may  not  be 
furnished  along  with  the  return  but  shall  be  produced  before  the  Assessing  Officer  on  demand 
under section 139C; 

(eebb)  the  class  or  classes  of  persons  who  shall  be  required  to  furnish  the  return  of  income  in 
electronic form; the form and the manner of furnishing the said return in electronic form; documents, 
statements, receipts, certificates or reports which shall not be furnished with the return in electronic 
form  and  the  computer  resource  or  electronic  record  to  which  such  return  may  be  transmitted 
under section 139D;] 

(eec) the form of the report of audit and the particulars which such report shall contain under sub-

section (2A) of section 142;] 

3[(eed) remuneration of Chairperson and members of the Approving Panel under sub-section (18) 
and  procedure  and  manner  for  constitution  of,  functioning  and  disposal  of  references  by,  the 
Approving Panel under sub-section (21) of section 144BA;] 

 (f)   the  manner  in  which  and  the  period  to  which  any  such  income  as  is  referred  to  in section 

180 may be allocated; 

5[(fa)  the  form  and  manner  in  which  the  information  relating  to  payment  of  any  sum  may  be 

furnished under sub-section (6) of section 195;] 

(g)  the authority to be prescribed for any of the purposes of this Act; 

(h)   the  procedure  for  giving  effect  to  the  terms  of  any  agreement  for  the  granting  of  relief  in 
respect of double taxation or for the avoidance of double taxation which may be entered into by the 
Central Government under this Act; 

6[(ha)  the  procedure  for  granting  of  relief  or  deduction,  as  the case  may  be,  of  any  income-tax 
paid in any country or specified territory outside India, under section 90 or section 90A or section 91, 
against the income-tax payable under this Act;] 

 (i)  the form and manner in which any application, claim, return or information may be made or 

furnished and the fees that may be levied in respect of any application or claim; 

1. Ins. by Act 41 of 1975, s. 79 (w.e.f. 1-4-1976). 
2.  Clasue  (ee)  renumbered  as  clause  (e)  thereof  by  Act  17  of  2013,  s.  59  (w.e.f.  1-4-2016).  Earlier  clause  (e)  omitted  by               

Act 18 of 2005, s. 64 (w.e.f. 1-4-2006) which was amended by Act 20 of 1967, s. 33 and the Third Schedule (w.e.f. 1-4-
1968). 

3. Ins. by s. 59, ibid. (w.e.f. 1-4-2016). 
4. Ins. by Act 22 of 2007, s. 79 (w.r.e.f. 1-6-2006). 
5. Ins. by Act 18 of 2008, s. 58 (w.e.f. 1-4-2008). 
6. Ins. by Act 20 of 2015, s. 80 (w.e.f. 1-6-2015). 

827 

                                                           
 (j)  the manner in which any document required to be filed under this Act may be verified; 

(k)  the procedure to be followed on applications for refunds; 

1[(kk) the procedure to be followed in calculating interest payable by assessees or interest payable 
by Government to assessees under any provision of this Act, including the rounding off of the period 
for which such interest is to be calculated in cases where such period includes a fraction of a month, 
and specifying the circumstances in which and the extent to which petty amounts of interest payable 
by assessees may be ignored;] 

(l)  the regulation of any matter for which provision is made in section 230; 

(m) the form and manner in which any appeal or cross-objection may be filed under this Act, the 
fee payable in respect thereof and the manner in which intimation of any such order as is referred to 
in clause (c) of sub-section (2) of section 249 may be served; 

2[(mm) the circumstances in which, the conditions subject to which and the manner in which, the 
3[*** or the Commissioner (Appeals)] may permit an appellant to produce evidence which he did not 
produce or which he was not allowed to produce before the 4[Assessing Officer];] 

5[(mma) the form in which the statement under section 285B shall be delivered to the 4[Assessing 

Officer];] 

 (n)   the  maintenance  of  a  register  of  persons  other  than  legal  practitioners  or  accountants  as 
defined  in  sub-section  (2)  of section  288 practising  before  income-tax  authorities  and  for  the 
constitution of and the procedure to be followed by the authority referred to in sub-section (5) of that 
section; 

(o)  the issue of certificate verifying the payment of tax by assessees; 

(p)  any other matter which by this Act is to be, or may be, prescribed. 

(3)  In  cases  coming  under  clause  (b)  of  sub-section  (2),  where  the  income  liable  to  tax  cannot  be 
definitely ascertained, or can be ascertained only with an amount of trouble and expense to the assessee 
which in the opinion of the Board is unreasonable, the rules made under this section may— 

(a) prescribe methods by which an estimate of such income may be made; and 

(b) in cases coming under sub-clause (i) of clause (b) of sub-section (2) specify the proportion of 

the income which shall be deemed to be income liable to tax, 

and an assessment based on such estimate or proportion shall be deemed to be duly made in accordance 
with the provisions of this Act. 

6[(4) The power to make rules conferred by this section shall include the power to give retrospective 
effect, from a date not earlier than the date of commencement of this Act, to the rules or any of them and, 
unless the contrary is permitted (whether expressly or by necessary implication), no retrospective effect 
shall be given to any rule so as to prejudicially affect the interests of assessees.] 

1.  Ins. by Act 42 of 1970, s. 55 (w.e.f. 1-4-1971). 
2. Ins. by Act 16 of 1972, s. 41 (w.e.f. 1-4-1972). 
3.  The  words  “Deputy  Commissioner  (Appeals)  or  the”  omitted  by  Act  21  of  1998,  s.  65  (w.e.f.  1-10-1998).  Earlier  the 
words  “Deputy  Commissioner  (Appeals)”  were  substituted  by  Act  4  of  1988,  s.  2,  for  “Appellate  Assistant 
Commissioner” (w.e.f. 1-4-1988) and the words “or the Commissioner (Appeals)” were inserted by Act 29 of 1977, s. 39 
and the Fifth Schedule (w.e.f. 10-7-1978). 

4. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
5. Ins. by Act 41 of 1975, s. 79 (w.e.f. 1-4-1976). 
6. Ins. by Act 26 of 1974, s. 14 (w.e.f. 18-8-1974). 

828 

                                                           
1[2[296. Rules  and  certain  notifications  to  be  placed  before  Parliament.—The  Central 
Government  shall  cause  every  rule  made  under  this  Act  ,  3[the  rules  of  procedure  framed  by  the 
Settlement  Commission  under  sub-section  (7)  of section  245F,  the  Authority  for  Advance  Rulings 
under section  245V and  the  Appellate  Tribunal  under  sub-section  (5)  of section  255] and  4[every 
notification  issued  before  the  1st  day  of  June,  2007  under  sub-clause  (iv)  of  clause  (23C)  of              
section  10] 5[and  every  notification  issued  under  sub-section  (1C)  of section  139] 6[or  third  proviso  to 
sub-section (1) of section 153A or second proviso to sub-section (1) of section 153C] to be laid as soon as 
may be after the rule is made or the notification is issued before each House of Parliament while it is in 
session,  for  a  total  period  of  thirty  days,  which  may  be  comprised  in  one  session  or  in  two  or  more 
successive  sessions,  and  if,  before  the  expiry  of  the  session  immediately  following  the  session  or  the 
successive sessions aforesaid, both Houses agree in making any modification in the rule or notification or 
both Houses agree that the rule or notification should not be made or issued, that rule or notification shall 
thereafter have effect, only in such modified form or be of no effect, as the case may be; so, however, that 
any such modification or annulment shall be without prejudice to the validity of anything previously done 
under that rule or notification.]] 

297. Repeals and savings.—(1) The Indian Income-tax Act, 1922 (11 of 1922), is hereby repealed. 

(2) Notwithstanding the repeal of the Indian Income-tax Act, 1922 (11 of 1922) (hereinafter referred 

to as the repealed Act),— 

(a) where a return of income has been filed before the commencement of this Act by any person 
for any assessment year, proceedings for the assessment of that person for that year may be taken and 
continued as if this Act had not been passed; 

(b)  where  a  return  of  income  is  filed  after  the  commencement  of  this  Act  otherwise  than  in 
pursuance  of  a  notice  under section  34 of  the  repealed  Act  by  any  person  for  the  assessment  year 
ending on the 31st day of March, 1962, or any earlier year, the assessment of that person for that year 
shall be made in accordance with the procedure specified in this Act; 

(c) any proceeding pending on the commencement of this Act before any income-tax authority, 
the Appellate Tribunal or any court, by way of appeal, reference, or revision, shall be continued and 
disposed of as if this Act had not been passed; 

(d)  where  in  respect  of  any  assessment  year  after  the  year  ending  on  the  31st  day  of                            

March, 1940,— 

(i) a notice under section 34 of the repealed Act had been issued before the commencement of 
this Act, the proceedings in pursuance of such notice may be continued and disposed of as if this 
Act had not been passed; 

(ii)  any  income  chargeable  to  tax  had  escaped  assessment  within  the  meaning  of  that 
expression in section 147 and no proceedings under section 34 of the repealed Act in respect of 
any such income are pending at the commencement of this Act, a notice under section 148 may, 
subject  to  the  provisions  contained  in section  149 or section  150,  be  issued  with  respect  to  that 
assessment year and all the provisions of this Act shall apply accordingly; 
(e) 7[subject to the provisions of clause (g) and clause (j) of this sub-section,] section 23A of the 
repealed  Act  shall  continue  to  have  effect  in  relation  to  the  assessment  of  any  company  or  its 
shareholders for the assessment year ending on the 31st day of March, 1962 or any earlier year, and 
the provisions of the repealed Act shall apply to all matters arising out of such assessment as fully and 
effectually as if this Act had not been passed; 

1. Restored by Act 3 of 1989, s. 95 (w.e.f.1-4-1989). Earlier it was substituted by Act 4 of 1988, s. 122 (w.e.f. 1-4-1989). 
2. Subs. by Act 41 of 1975, s. 80, for “section 296” (w.e.f. 1-4-1976). 
3. Ins. by Act 32 of 1994, s. 49 (w.e.f. 1-6-1994). 
4.  Subs.  by  Act  22  of  2007,  s.  80,  for  “every  notification  issued  under  sub-clause  (iv)  of  clause  (23C)  of  section  10”              

(w.e.f. 1-6-2007). 

5. Ins. by Act 8 of 2011, s. 33 (w.e.f. 1-6-2011). 
6.  Ins. by Act 23 of 2012, s. 113 (w.e.f. 1-7-2012). 
7. Ins. by Act 13 of 1963, s. 19 (w.e.f. 1-4-1962).  

829 

                                                           
 
(f) any proceeding for the imposition of a penalty in respect of any assessment completed before 
the first day of April, 1962, may be initiated and any such penalty may be imposed as if this Act had 
not been passed; 

(g)  any  proceeding  for  the  imposition  of  a  penalty  in  respect  of  any  assessment  for  the  year 
ending on the 31st day of March, 1962, or any earlier year, which is completed on or after the 1st day 
of April, 1962, may be initiated and any such penalty may be imposed under this Act; 

(h) any election or declaration made or option exercised by an assessee under any provision of the 
repealed Act and in force immediately before the commencement of this Act shall be deemed to have 
been  an  election  or  declaration  made  or  option  exercised  under the corresponding  provision  of  this 
Act; 

(i) where, in respect of any assessment completed before the commencement of this Act, a refund 
falls due after such commencement or default is made after such commencement in the payment of 
any sum due under such completed assessment, the provisions of this Act relating to interest payable 
by the Central Government on refunds and interest payable by the assessee for default shall apply; 

(j)  any  sum  payable  by  way  of  income-tax,  super-tax,  interest,  penalty  or  otherwise  under  the 
repealed Act may be recovered under this Act, but without prejudice to any action already taken for 
the recovery of such sum under the repealed Act; 

(k) any agreement entered into, appointment made, approval given, recognition granted, direction, 
instruction, notification, order or rule issued under any provision of the repealed Act shall, so far as it 
is not inconsistent with the corresponding provision of this Act, be deemed to have been entered into, 
made,  granted,  given  or  issued  under  the  corresponding  provision  aforesaid  and  shall  continue  in 
force accordingly; 

(l) any notification issued under sub-section (1) of section 60  1[ or section 60A] of the repealed 
Act  and  in  force  immediately  before  the  commencement  of  this  Act  shall,  to  the  extent  to  which 
provision has not been made under this Act, continue in force 2***: 

3[Provided that the  Central Government  may  rescind any  such  notification  or amend  it  so as  to 

rescind any exemption, reduction in rate or other modification made thereunder;] 

(m)  where  the  period  prescribed  for  any  application,  appeal,  reference  or  revision  under  the 
repealed  Act  had  expired on  or  before the  commencement  of  this  Act,  nothing  in  this  Act  shall  be 
construed as enabling any such application, appeal, reference or revision to be made under this Act by 
reason only of the fact that a longer period therefor is prescribed or provision is made for extension of 
time in suitable cases by the appropriate authority. 

298. Power to remove difficulties.—(1) If any difficulty arises in giving effect to the provisions of 
this Act the Central Government may, by general or special order, do anything not inconsistent with such 
provisions which appears to it to be necessary or expedient for the purpose of removing the difficulty. 

(2) In particular, and without prejudice to the generality of the foregoing power, any such order may 
provide for the adaptations or modifications subject to which the repealed Act shall apply in relation to 
the assessments for the assessment year ending on the 31st day of March, 1962, or any earlier year. 

4[(3) If any difficulty arises in giving effect to the provisions of this Act as amended by the Direct Tax 
Laws (Amendment) Act, 1987, the Central Government may, by order, do anything not inconsistent with 
such provisions for the purpose of removing the difficulty: 

Provided that no such order shall be made after the expiration of three years from the 1st day of April, 

1988. 

(4) Every order made under sub-section (3) shall be laid before each House of Parliament. 

1. Ins. by Act 13 of 1966, s. 13 (w.e.f. 1-4-1962). 
2. The words “until rescinded by the Central Government” omitted by Act 54 of 1972, s. 7 (w.e.f. 9-9-1972). 
3. The proviso added by s. 7, ibid., (w.e.f. 9-9-1972). 
4. Sub-section (3) added by Act 4 of 1988, s. 123 (w.e.f. 1-4-1988). 

830 

                                                           
THE FIRST SCHEDULE 

INSURANCE BUSINESS 

[See section 44] 

A.—Life insurance business 

1. Profits of life insurance business to be compu    ted separately.—In the case of a person who 
carries on or at any time in the previous year carried on life insurance business, the profits and gains of 
such person from that business shall be computed separately from his profits and gains from any other 
business. 

1[2. Computation  of  profits  of  life  insurance  business.—The  profits  and  gains  of  life  insurance 
business shall be taken to be the annual average of the surplus arrived at by adjusting the surplus or deficit 
disclosed  by  the  actuarial  valuation  made  in  accordance  with  the  Insurance  Act,  1938  (4  of  1938),  in 
respect of the last inter-valuation period ending before the commencement of the assessment year, so as to 
exclude  from  it  any  surplus  or  deficit  included  therein  which  was  made  in  any  earlier  inter-valuation 
period.] 

3. [Deductions.] Omitted by the Finance Act, 1976 (66 of 1976), s. 23(w.e.f. 1-4-1977). Earlier, the 
rule was first amended by the Finance Act, 1966 (13 of 1966), s. 36 (w.e.f. 1-4-1966) and by the Finance 
Act, 1965 (10 of 1965), s. 65 (w.e.f. 1-4-1965).] 

4. Adjustment  of  tax  paid  by  deduction  at  source.—Where  for  any  year  an  assessment  of  the 
profits of life insurance business is made in accordance with the annual average of a surplus disclosed by 
a  valuation  for  an  inter-valuation  period  exceeding  twelve  months,  then,  in  computing  the  income-tax 
payable for that year, credit shall not be given in accordance with section 199 for the income-tax paid in 
the previous year, but credit shall be given for the annual average of the income-tax paid by deduction at 
source from interest on securities or otherwise during such period. 

B.—Other insurance business 

5. Computation  of  profits  and  gains  of  other  insurance  business.—The  profits  and  gains  of  any 
business  of  insurance  other  than  life  insurance  shall  be  taken  to  be  the  2[profit  before  tax  and 
appropriations as disclosed in the profit and loss account prepared in accordance with the provisions of 
the  Insurance  Act,  1938  (4  of  1938)  or  the  rules  made  thereunder  or  the  provisions  of  the  Insurance 
Regulatory  and  Development  Authority  Act,  1999  (4  of  1999)  or  the  regulations  made  thereunder,] 
subject to the following adjustments:— 

 (a)  subject  to  the  other  provisions  of  this  rule,  3[any  expenditure  or  allowance  including  any 
amount  debited  to  the  profit  and  loss  account  either  by  way  of  a  provision  for  any  tax,  dividend, 
reserve  or  any  other  provision  as  may  be  prescribed]  which  is  not  admissible  under  the  provisions 
of 4[sections 30 to 43B] in computing the profits and gains of a business shall be added back; 

1. Subs. by Act 66 of 1976, s. 23 (w.e.f. 1-4-1977).  
2. Subs. by Act 33 of 2009, s. 80, for certain words (w.e.f. 1-4-2011). 
3. Subs. by Act 21 of 1998, s. 64, for “any expenditure or allowance” (w.r.e.f. 1-4-1989). 
4. Subs. by Act 4 of 1988, s. 126, for “section 30 to 43A” (w.e.f. 1-4-1989). 

831 

                                                           
1[(b) (i) any gain or loss on realisation of investments shall be added or deducted, as the case may 

be, if such gain or loss is not credited or debited to the profit and loss account; 

(ii) any provision for diminution in the value of investment debited to the profit and loss account, 

shall be added back;] 

(c) such amount carried over to a reserve for unexpired risks as may be prescribed in this behalf 

shall be allowed as a deduction. 

C.—Other provisions 

6. Profits and gains of non-resident person.—(1) The profits and gains of the branches in India of a 
person  not  resident  in  India  and  carrying  on  any  business  of  insurance,  may,  in  the  absence  of  more 
reliable data, be deemed to be that proportion of the world income of such person which corresponds to 
the proportion which his premium income derived from India bears to his total premium income. 

(2) For the purposes of this rule, the world income in relation to life insurance business of a person 
not resident in India shall be computed in the manner laid down in this Act for the computation of the 
profits and gains of life insurance business carried on in India. 

7. Interpretation.—(1) For the purposes of these rules— 

2* 

* 

* 

 (ii) “investments” includes securities, stocks and shares; 

3* 

* 

* 

* 

* 

* 

* 

(iv) “life insurance business” means life insurance business as defined in clause (11) of section 2 

of the Insurance Act, 1938 (4 of 1938); 

(v) “rule” means a rule contained in this Schedule. 

(2) References in these rules to the Insurance Act, 1938 (4 of 1938), or any provision thereof, shall, in 
relation to the Life Insurance Corporation of India, be construed as references to that Act or provision as 
read with section 43 of the Life Insurance Corporation Act, 1956 (31 of 1956). 

1. Subs. by Act 14 of 2010, s. 52, for clause (b) (w.e.f. 1-4-2011). 
2. Clause (i) omitted by Act 66 of 1976, s. 23 (w.e.f. 1-4-1977). Earlier clause (i) was amended by Act 20 of 1967,  s. 32 

(w.e.f. 1-4-1967). 

3. Clause (iii) omitted by s. 23, ibid. (w.e.f. 1-4-1977). 

832 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
THE SECOND SCHEDULE 

PROCEDURE FOR RECOVERY OF TAX 

1[[See sections 222 and 276]] 

PART I 

__________ 

GENERAL PROVISIONS 

1. Definitions.—In this Schedule, unless the context otherwise requires,— 

2[(a)  “certificate”,  except  in  rules  7,  44,  65  and  sub-rule  (2)  of  rule  66,  means  the  certificate 
drawn up by the Tax Recovery Officer under section 222 in respect of any assessee referred to in that 
section;] 

(b) “defaulter” means the assessee mentioned in the certificate; 

(c)  “execution”,  in  relation  to  a  certificate,  means  recovery  of  arrears  in  pursuance  of  the 

certificate; 

(d) “movable property” includes growing crops; 

(e) “officer” means a person authorised to make an attachment or sale under this Schedule; 

(f) “rule” means a rule contained in this Schedule; and 

(g) “share in a corporation” includes stock, debenture-stock, debentures or bonds. 

2.  Issue  of  notice.—3[When  a  certificate  has  been  received  by  the  Tax  Recovery  Officer  from  the 
4[Assessing  Officer]]  for  the  recovery  of  arrears  under  this  Schedule,  the  Tax  Recovery  Officer  shall 
cause to be served upon the defaulter a notice requiring the defaulter to pay the amount specified in the 
certificate within fifteen days from the date of service of the notice and intimating that in default steps 
would be taken to realise the amount under this Schedule. 

3. When certificate may be executed.—No step in execution of a certificate shall be taken until the 
period  of  fifteen  days  has  elapsed  since the  date  of  the  service  of  the  notice  required  by  the  preceding 
rule: 

Provided that, if the Tax Recovery Officer is satisfied that the defaulter is likely to conceal, remove or 
dispose  of  the  whole  or  any  part  of  such  of  his  movable  property  as  would  be  liable  to  attachment  in 
execution  of  a  decree  of  a  civil  court  and  that  the  realisation  of  the  amount  of  the  certificate  would  in 
consequence be delayed or obstructed, he may at any time direct, for reasons to be recorded in writing, an 
attachment of the whole or any part of such property: 

Provided  further that  if  the  defaulter  whose  property  has  been  so  attached  furnishes  security  to  the 
satisfaction of the Tax Recovery Officer, such attachment shall be cancelled from the date on which such 
security is accepted by the Tax Recovery Officer. 

1. Subs. by Act 4 of 1988, s. 124, for “See section 222” (w.e.f. 1-4-1989). 
2. Subs. by s. 124, ibid., for clause (a) (w.e.f. 1-4-1989). 
3. Restored by Act 3 of 1989, s. 95 (1-4-1989). 
4. Subs. by s. 54, ibid., for “Income-tax Officer” (w.e.f. 1-4-1988). 

833 

                                                           
4. Mode of recovery.—If the amount mentioned in the notice is not paid  within the time specified 
therein  or  within  such  further  time  as  the  Tax  Recovery  Officer  may  grant  in  his  discretion,  the  Tax 
Recovery Officer shall proceed to realise the amount by one or more of the following modes:— 

(a) by attachment and sale of the defaulter’s movable property; 

(b) by attachment and sale of the defaulter’s immovable property; 

(c) by arrest of the defaulter and his detention in prison; 

(d)  by  appointing  a  receiver  for  the  management  of  the  defaulter’s  movable  and  immovable 

properties. 

5.  Interest,  costs  and  charges  recoverable.—There  shall  be  recoverable,  in  the  proceedings  in 

execution of every certificate,— 

(a) such interest upon the amount of tax or penalty or other sum to which the certificate relates as 

is payable in accordance with sub-section (2) of section 220, and 

(b) all charges incurred in respect of— 

(i)  the  service  of  notice  upon  the  defaulter  to  pay  the  arrears,  and  of  warrants  and  other 

processes, and 

(ii) all other proceedings taken for realising the arrears. 

6. Purchaser’s title.—(1) Where property is sold in execution of a certificate, there shall vest in the 
purchaser  merely  the  right,  title  and  interest  of  the  defaulter  at  the  time  of  the  sale,  even  though  the 
property itself be specified. 

(2)  Where  immovable  property  is  sold  in  execution  of  a  certificate,  and  such  sale  has  become 
absolute,  the  purchaser’s  right,  title  and  interest  shall  be  deemed  to  have  vested  in  him  from  the  time 
when the property is sold, and not from the time when the sale becomes absolute. 

7.  Suit  against  purchaser  not  maintainable  on  ground  of  purchase  being  made  on  behalf  of 
plaintiff.—(1) No suit shall be maintained against any person claiming title under a purchase certified by 
the Tax Recovery Officer in the manner laid down in this Schedule, on the ground that the purchase was 
made on behalf of the plaintiff or on behalf of someone through whom the plaintiff claims. 

(2)  Nothing  in  this  section  shall  bar  a  suit  to  obtain  a  declaration  that  the  name  of  any  purchaser 
certified  as  aforesaid  was  inserted  in  the  certificate  fraudulently  or  without  the  consent  of  the  real 
purchaser, or interfere with the right of a third person to proceed against that property, though ostensibly 
sold to the certified purchaser, on the ground that it is liable to satisfy a claim of such third person against 
the real owner. 

1[8. Disposal  of  proceeds  of  execution.—(1)  Whenever  assets  are  realised  by  sale  or  otherwise  in 

execution of a certificate, the proceeds shall be disposed of in the following manner, namely:— 

(a) they shall first be adjusted towards the amount due under the certificate in execution of which 

the assets were realised and the costs incurred in the course of such execution; 

(b)  if  there  remains  a  balance  after  the  adjustment  referred  to  in  clause  (a),  the  same  shall  be 
utilised for satisfaction of any other amount recoverable from the assessee under this Act which may 
be due on the date on which the assets were realised; and 

1. Subs. by Act 4 of 1988, s. 124, for rule 8 (w.e.f. 1-4-1989). 

834 

                                                           
(c) the balance, if any, remaining after the adjustments under clauses (a) and (b) shall be paid to 

the defaulter. 

(2) If the defaulter disputes any adjustment under clause (b) of sub-rule (1), the Tax Recovery Officer 

shall determine the dispute.] 

9. General  bar  to  jurisdiction  of  civil  courts,  save  where  fraud  alleged.—Except  as  otherwise 
expressly  provided  in  this  Act,  every  question  arising  between  the  1[Tax  Recovery  Officer]  and  the 
defaulter or their representatives, relating to the execution, discharge or satisfaction of a certificate  2***, 
or relating to the confirmation or setting aside by an order under this Act of a sale held in execution of 
such certificate, shall be determined, not by suit, but by order of the Tax Recovery Officer before whom 
such question arises: 

Provided that a suit may be brought in a civil court in respect of any such question upon the ground of 

fraud. 

10. Property exempt from attachment.—(1) All such property as is by the Code of Civil Procedure, 
1908 (5 of 1908), exempted from attachment and sale in execution of a decree of a civil court shall be 
exempt from attachment and sale under this Schedule. 

(2)  The  Tax  Recovery  Officer’s  decision  as  to  what  property  is  so  entitled  to  exemption  shall  be 

conclusive. 

11. Investigation by Tax Recovery Officer.—(1) Where any claim is preferred to, or any objection 
is made to the attachment or sale of, any property in execution of a certificate, on the ground that such 
property is not liable to such attachment or sale, the Tax Recovery Officer shall proceed to investigate the 
claim or objection: 

Provided that no such investigation shall be made where the Tax Recovery Officer considers that the 

claim or objection was designedly or unnecessarily delayed. 

(2) Where the property to which the claim or objection applies has been advertised for sale, the Tax 
Recovery Officer ordering the sale may postpone it pending the investigation of the claim or objection, 
upon such terms as to security or otherwise as the Tax Recovery Officer shall deem fit. 

(3) The claimant or objector must adduce evidence to show that— 

(a) (in the case of immovable property) at the date of the service of the notice issued under this 

Schedule to pay the arrears, or 

(b) (in the case of movable property) at the date of the attachment, 

he had some interest in, or was possessed of, the property in question. 

(4)  Where,  upon  the  said  investigation,  the  Tax  Recovery  Officer  is  satisfied  that,  for  the  reason 
stated in the claim or objection, such property was not, at the said date, in the possession of the defaulter 
or of some person in trust for him or in the occupancy of a tenant or other person paying rent to him, or 
that, being in the possession of the defaulter at the said date, it was so in his possession, not on his own 
account or as his own property, but on account of or in trust for some other person, or partly on his own 
account  and  partly  on  account  of  some  other  person,  the  Tax  Recovery  Officer  shall  make  an  order 
releasing the property, wholly or to such extent as he thinks fit, from attachment or sale. 

1. Subs. by Act 3 of 1989, s. 54, for “Assessing Officer” (w.e.f. 1-4-1989). 
2. The words “duly filed under this Act” omitted by Act 4 of 1988, s. 124 (w.e.f. 1-4-1989). 

835 

                                                           
(5)  Where  the  Tax  Recovery  Officer  is  satisfied  that  the  property  was,  at  the  said  date,  in  the 
possession  of  the  defaulter  as  his  own  property  and  not  on  account  of  any  other  person,  or  was  in  the 
possession of some other person in trust for him, or in the occupancy of a tenant or other person paying 
rent to him, the Tax Recovery Officer shall disallow the claim. 

(6) Where a claim or an objection is preferred, the party against whom an order is made may institute 
a suit in a civil court to establish the right which he claims to the property in dispute; but, subject to the 
result of such suit (if any), the order of the Tax Recovery Officer shall be conclusive. 

12. Removal of attachment on satisfaction or cancellation of certificate.—Where— 

(a) the amount due, with costs and all charges and expenses resulting from the attachment of any 

property or incurred in order to hold a sale, are paid to the Tax Recovery Officer, or 

(b) the certificate is cancelled, 

the attachment shall be deemed to be withdrawn and, in the case of immovable property, the withdrawal 
shall, if the defaulter so desires, be proclaimed at his expense, and a copy of the proclamation shall be 
affixed in the manner provided by this Schedule for a proclamation of sale of immovable property. 

13.  Officer  entitled  to  attach  and  sell.—The  attachment  and  sale  of  movable  property  and  the 
attachment and sale of immovable property may be made by such persons as the Tax Recovery Officer 
may from time to time direct. 

14.  Defaulting  purchaser  answerable  for  loss  on  resale.—Any  deficiency  of  price  which  may 
happen on a resale by reason of the purchaser’s default, and all expenses attending such resale, shall be 
certified to the 1[Tax Recovery Officer] by the officer holding the sale, and shall, at the instance of either 
the  Tax  Recovery  Officer  or  the  defaulter,  be  recoverable  from  the  defaulting  purchaser  under  the 
procedure provided by this Schedule: 

Provided that no such application shall be entertained unless filed within fifteen days from the date of 

resale. 

15. Adjournment  or  stoppage  of  sale.—(1)  The  Tax  Recovery  Officer  may,  in  his  discretion, 
adjourn any sale hereunder to a specified day and hour; and the officer conducting any such sale may, in 
his discretion, adjourn the sale, recording his reasons for such adjournment: 

Provided that, where the sale is  made in, or within the precincts of, the office of the Tax Recovery 

Officer, no such adjournment shall be made without the leave of the Tax Recovery Officer. 

(2) Where a sale of immovable property is adjourned under sub-rule (1) for a longer period than one 
calendar  month,  a  fresh  proclamation  of  sale  under  this  Schedule  shall  be  made  unless  the  defaulter 
consents to waive it. 

(3) Every sale shall be stopped if, before the lot is knocked down, the arrears and costs (including the 
costs of the sale) are tendered to the officer conducting the sale, or proof is given to his satisfaction that 
the amount of such arrears and costs has been paid to the Tax Recovery Officer who ordered the sale. 

16. Private  alienation  to  be  void  in  certain  cases.—(1)  Where  a  notice  has  been  served  on  a 
defaulter under rule 2, the defaulter or his representative in interest shall not be competent to mortgage, 
charge, lease or otherwise deal with any property belonging to him except with the permission of the Tax 
Recovery  Officer,  nor  shall  any  civil  court  issue  any  process  against  such  property  in  execution  of  a 
decree for the payment of money. 

1. Subs. by Act 3 of 1989, s. 54, for “Assessing Officer” (w.e.f. 1-4-1989). 

836 

                                                           
(2) Where an attachment has been made under this Schedule, any private transfer or delivery of the 
property  attached  or  of  any  interest  therein  and  any  payment  to  the  defaulter  of  any  debt,  dividend  or 
other  moneys  contrary  to  such  attachment,  shall  be  void  as  against  all  claims  enforceable  under  the 
attachment. 

17.  Prohibition  against  bidding  or  purchase  by  officer.—No  officer  or  other  person  having  any 
duty to perform in connection with any sale under this Schedule shall, either directly or indirectly, bid for, 
acquire or attempt to acquire any interest in the property sold. 

18. Prohibition against sale on holidays.—No sale under this Schedule shall take place on a Sunday 
or other general holiday recognised by the State Government or on any day which has been notified by 
the State Government to be a local holiday for the area in which the sale is to take place. 

19.  Assistance  by  police.—Any  officer  authorised  to  attach  or  sell  any  property  or  to  arrest  the 
defaulter  or  charged  with  any  duty  to  be  performed  under  this  Schedule,  may  apply  to  the  officer-in-
charge of the nearest police station for such assistance as may be necessary in the discharge of his duties, 
and the authority to whom such application is made shall depute a sufficient number of police officers for 
furnishing such assistance. 

1[19A. Entrustment of certain functions by Tax Recovery Officer.—A Tax Recovery Officer may, 
with the previous approval of the 2[Joint Commissioner], entrust any of his functions as the Tax Recovery 
Officer  to  any  other  officer  lower  than  him  in  rank  (not  being  lower  in  rank  than  an  Inspector  of  
Income-tax) and such officer shall, in relation to the functions so entrusted to him, be deemed to be a Tax 
Recovery Officer.] 

PART II 

__________________ 

ATTACHMENT AND SALE OF MOVABLE PROPERTY 

Attachment 

20. Warrant.—Except as otherwise provided in this Schedule, when any  movable property is to be 
attached, the officer shall be furnished by the Tax Recovery Officer (or other officer empowered by him 
in that behalf) a warrant in writing and signed with his name specifying the name of the defaulter and the 
amount to be realised. 

21. Service of copy of warrant.—The officer shall cause a copy of the warrant to be served on the 

defaulter. 

22. Attachment.—If, after service of the copy of the warrant, the amount is not paid forthwith, the 

officer shall proceed to attach the movable property of the defaulter. 

23.  Property  in  defaulter’s  possession.—Where  the  property  to  be  attached  is  movable  property 
(other than agricultural produce) in the possession of the defaulter, the attachment shall be made by actual 
seizure,  and  the  officer  shall  keep  the  property  in  his  own  custody  or  the  custody  of  one  of  his 
subordinates and shall be responsible for due custody thereof: 

Provided that when the property seized is subject to speedy and natural decay or when the expense of 

keeping it in custody is likely to exceed its value, the officer may sell it at once. 

1. Subs. by Act 4 of 1988, s. 124, for rule 19A (w.e.f. 1-4-1989). 
2. Subs. by Act 21 of 1998, s. 3, for “Deputy Commissioner” (w.e.f. 1-10-1998). 

837 

                                                           
24. Agricultural produce.—Where the property to be attached is agricultural produce the attachment 

shall be made by affixing a copy of the warrant of attachment— 

(a) where such produce is growing crop,—on the land on which such crop has grown, or 

(b) where such produce has been cut or gathered,—on the threshing floor or place for treading out 

grain or the like, or fodder-stack, on or in which it is deposited, 

and another copy on the outer door or on some other conspicuous part of the house in which the defaulter 
ordinarily  resides,  or  with  the  leave  of  the  Tax  Recovery  Officer,  on  the  outer  door  or  on  some  other 
conspicuous part of the house in which he carries on business or personally works for gain, or in which he 
is  known  to  have  last  resided  or  carried  on  business  or  personally  worked  for gain.  The  produce  shall, 
thereupon, be deemed to have passed into the possession of the Tax Recovery Officer. 

25. Provisions  as  to  agricultural  produce  under  attachment.—(1) Where  agricultural  produce is 
attached,  the  Tax  Recovery  Officer  shall  make  such  arrangements  for  the  custody,  watching,  tending, 
cutting and gathering thereof as he may deem sufficient;  1[and he shall have power to defray the cost of 
such arrangements]. 

(2) Subject to such conditions as may be imposed by the Tax Recovery Officer in this behalf, either in 
the  order  of  attachment  or  in  any  subsequent  order,  the  defaulter  may  tend,  cut,  gather  and  store  the 
produce and do any other act necessary for maturing or preserving it; and, if the defaulter fails to do all or 
any of such acts, any person appointed by the Tax Recovery Officer in this behalf may, subject to the like 
conditions, do all or any of such acts, and the costs incurred by such person shall be recoverable from the 
defaulter as if they were included in the certificate. 

(3) Agricultural produce attached as a growing crop shall not be deemed to have ceased to be under 

attachment or to require reattachment merely because it has been severed from the soil. 

(4) Where an order for the attachment of a growing crop has been made at a considerable time before 
the crop is likely to be fit to be cut or gathered, the Tax Recovery Officer may suspend the execution of 
the order for such time as he thinks fit, and may, in his discretion, make a further order prohibiting the 
removal of the crop pending the execution of the order of attachment. 

(5) A growing crop which from its nature does not admit of being stored shall not be attached under 
this  rule  at  any  time  less  than  twenty  days  before  the  time  at  which  it  is  likely  to  be  fit  to  be  cut  or 
gathered. 

26. Debts and shares, etc.—(1) In the case of— 

(a) a debt not secured by a negotiable instrument, 

(b) a share in a corporation, or 

(c) other movable property not in the possession of the defaulter except property deposited in, or 

in the custody of, any court, 

the attachment shall be made by a written order prohibiting,— 

  (i) in the case of the debt—the creditor from recovering the debt and the  debtor from  making 

payment thereof until the further order of the Tax Recovery Officer; 

1.  Subs.  by  Act  3  of  1989,  s.  54,  for  “and  the  Assessing  Officer  shall  bear  such  sum  as  the  Tax  Recovery  Officer  shall 

require in order to defray the cost of such arrangement” (w.e.f. 1-4-1989). 

838 

                                                           
(ii)  in  the  case  of  the  share—the  person  in  whose  name  the  share  may  be  standing  from 

transferring the same or receiving any dividend thereon; 

(iii) in the case of the other movable property (except as aforesaid)—the person in possession of 

the same from giving it over to the defaulter. 

(2) A copy of such order shall be affixed on some conspicuous part of the office of the Tax Recovery 
Officer, and another copy shall be sent, in the case of the debt, to the debtor, in the case of the share, to 
the proper officer of the corporation, and in the case of the other movable property (except as aforesaid), 
to the person in possession of the same. 

(3) A debtor prohibited under clause (i) of sub-rule (1) may pay the amount of his debt to the Tax 
Recovery Officer, and such payment shall discharge him as effectually as payment to the party entitled to 
receive the same. 

27. Attachment of decree.—(1) The attachment of a decree of a civil court for the payment of money 
or for sale in enforcement of a mortgage or charge shall be made by the issue to the civil court of a notice 
requesting the civil court to stay the execution of the decree unless and until— 

(i) the Tax Recovery Officer cancels the notice, or 

(ii)  the  1[Tax  Recovery  Officer]  or  the  defaulter  applies  to  the  court  receiving  such  notice  to 

execute the decree. 

(2)  Where  a  civil  court  receives  an  application  under  clause  (ii)  of  sub-rule  (1),  it  shall,  on  the 
application of the  1[Tax Recovery Officer] or the defaulter and subject to the provisions of the Code of 
Civil Procedure, 1908 (5 of 1908), proceed to execute the attached decree and apply the net proceeds in 
satisfaction of the certificate. 

(3) The 1[Tax Recovery Officer] shall be deemed to be the representative of the holder of the attached 

decree, and to be entitled to execute such attached decree in any manner lawful for the holder thereof. 

28. Share in movable property.—Where the property to be attached consists of the share or interest 
of the defaulter in movable property belonging to him and another as co-owners, the attachment shall be 
made by a notice to the defaulter prohibiting him from transferring the share or interest or charging it in 
any way. 

29.  Salary  of  Government  servants.—Attachment  of  the  salary  or  allowances  of  servants  of  the 
Government or a local authority may be made in the manner provided by rule 48 of Order 21 of the First 
Schedule to the Code of Civil Procedure, 1908 (5 of 1908), and the provisions of the said rule shall, for 
the purposes of this rule, apply subject to such modifications as may be necessary. 

30.  Attachment  of  negotiable  instrument.—Where  the  property  is  a  negotiable  instrument  not 
deposited in a court nor in the custody of a public officer, the attachment shall be made by actual seizure, 
and the instrument shall be brought before the Tax Recovery Officer and held subject to his orders. 

31.  Attachment  of  property  in  custody  of  court  or  public  officer.—Where  the  property  to  be 
attached is in the custody of any court or public officer, the attachment shall be made by a notice to such 
court  or  officer,  requesting  that  such  property,  and  any  interest  or  dividend  becoming  payable  thereon, 
may be held subject to the further orders of the Tax Recovery Officer by whom the notice is issued: 

Provided that, where such property is in the custody of a court, any question of title or priority arising 
between  the  1[Tax  Recovery  Officer]  and  any  other  person,  not  being  the  defaulter,  claiming  to  be 
interested in such property by virtue of any assignment, attachment or otherwise, shall be determined by 
such court. 

1. Subs. by Act 3 of 1989, s. 54, for “Assessing Officer” (w.e.f. 1-4-1989). 

839 

                                                           
32.  Attachment  of  partnership  property.—(1)  Where  the  property  to  be  attached  consists  of  an 
interest of the defaulter, being a partner, in the partnership property, the Tax Recovery Officer may make 
an order charging the share of such partner in the partnership property and profits with payment of the 
amount  due  under  the  certificate,  and  may,  by  the  same  or  subsequent  order,  appoint  a  receiver  of  the 
share of such partner in the profits, whether already declared or accruing and of any other money which 
may become due to him in respect of the partnership, and direct accounts and inquiries and make an order 
for the sale of such interest or such other order as the circumstances of the case may require. 

(2) The other persons shall be at liberty at any time to redeem the interest charged or, in the case of a 

sale being directed, to purchase the same. 

33.  Inventory.—In  the  case  of  attachment  of  movable  property  by  actual  seizure,  the  officer shall, 
after  attachment  of  the  property,  prepare  an  inventory  of  all  the  property  attached,  specifying  in  it  the 
place where it is lodged or kept, and shall forward the same to the Tax Recovery Officer and a copy of the 
inventory shall be delivered by the officer to the defaulter. 

34. Attachment  not  to  be  excessive.—The  attachment  by  seizure  shall  not  be  excessive,  that  is  to 
say,  the  property  attached  shall  be  as  nearly  as  possible  proportionate  to  the  amount  specified  in  the 
warrant. 

35.  Seizure  between  sunrise  and  sunset.—Attachment  by  seizure  shall  be  made  after  sunrise  and 

before sunset and not otherwise. 

36. Power  to  break  open  doors,  etc.—The  officer  may  break  open  any  inner  or  outer  door  or 
window of any building and enter any building in order to seize any movable property if the officer has 
reasonable  grounds  to  believe  that  such  building  contains  movable  property  liable  to  seizure  under  the 
warrant and the officer has notified his authority and intention of breaking open if admission is not given. 
He shall, however, give all reasonable opportunity to women to withdraw. 

Sale 

37. Sale.—The  Tax  Recovery  Officer  may  direct  that  any  movable  property  attached  under  this 

Schedule or such portion thereof as may seem necessary to satisfy the certificate shall be sold. 

38. Issue  of  proclamation.—When  any  sale  of  movable  property  is  ordered  by  the  Tax  Recovery 
Officer,  the  Tax  Recovery  Officer  shall  issue  a  proclamation,  in  the  language  of  the  district,  of  the 
intended sale, specifying the time and place of sale and whether the sale is subject to confirmation or not. 

39.  Proclamation  how  made.—(1)  Such  proclamation  shall  be  made  by  beat  of  drum  or  other 

customary mode,— 

(a) in the case of property attached by actual seizure— 

(i) in the village in which the property was seized, or, if the property was seized in a town or 

city, then, in the locality in which it was seized; and 

(ii) at such other places as the Tax Recovery Officer may direct; 

(b) in the case of property attached otherwise than by actual seizure, in such places, if any, as the 

Tax Recovery Officer may direct. 

(2)  A  copy  of the  proclamation  shall also  be  affixed in  a  conspicuous  part  of the  office of  the Tax 

Recovery Officer. 

40.  Sale  after  fifteen  days.—Except  where  the  property  is  subject  to  speedy  and  natural  decay  or 
when the expense of keeping it in custody is likely to exceed its value, no sale of movable property under 
this Schedule shall, without the consent in writing of the defaulter, take place until after the expiry of at 
least fifteen days calculated from the date on which a copy of the sale proclamation was affixed in the 
office of the Tax Recovery Officer. 

41. Sale of agricultural produce.—(1) Where the property to be sold is agricultural produce, the sale 

shall be held,— 

(a) if such produce is a growing crop—on or near the land on which such crop has grown, or 

840 

(b) if such produce has been cut or gathered—at or near the threshing floor or place for treading 

out grain or the like, or fodder-stack, on or in which it is deposited: 

Provided that the Tax Recovery Officer may direct the sale to be held at the nearest place of public 

resort, if he is of opinion that the produce is thereby likely to sell to greater advantage. 

(2) Where, on the produce being put up for sale,— 

(a) a fair price, in the estimation of the person holding the sale, is not offered for it, and 

(b) the owner of the produce, or a person authorised to act on his behalf, applies to have the sale 

postponed till the next day or, if a market is held at the place of sale, the next market day, 

the sale shall be postponed accordingly, and shall be then completed, whatever price may be offered for 
the produce. 

42. Special provisions relating to growing crops.—(1) Where the property to be sold is a growing 
crop and the crop from its nature admits of being stored but has not yet been stored, the day of the sale 
shall be so fixed as to admit of the crop being made ready for storing before the arrival of such day, and 
the sale shall not be held until the crop has been cut or gathered and is ready for storing. 

(2)  Where  the  crop  from  its  nature  does  not  admit  of  being  stored  or  can  be  sold  to  a  greater 
advantage in an unripe stage (e.g., as green wheat), it may be sold before it is cut and gathered, and the 
purchaser shall be entitled to enter on the land, and to do all that is necessary for the purpose of tending or 
cutting or gathering the crop. 

43. Sale to be by auction.—The property shall be sold by public auction in one or more lots as the 
officer may consider advisable, and if the amount to be realised by sale is satisfied by the sale of a portion 
of the property, the sale shall be immediately stopped with respect to the remainder of the lots. 

44. Sale by public auction.—(1) Where movable property is sold by public auction, the price of each 
lot shall be paid at the time of sale or as soon after as the officer holding the sale directs and in default of 
payment, the property shall forthwith be resold. 

(2) On payment of the purchase-money, the officer holding the sale shall grant a certificate specifying 

the property purchased, the price paid and the name of the purchaser, and the sale shall become absolute. 

(3) Where the movable property to be sold is a share in goods belonging to the defaulter and a co-
owner, and two or more persons, of whom one is such co-owner, respectively bid the same sum for such 
property or for any lot, the bidding shall be deemed to be the bidding of the co-owner. 

45. Irregularity not to vitiate sale, but any person injured may sue.—No irregularity in publishing 
or  conducting  the  sale  of  movable  property  shall  vitiate  the  sale,  but  any  person  sustaining  substantial 
injury by reason of such irregularity at the hand of any other person may institute a suit in a civil court 
against him for compensation, or (if such other person is the purchaser) for the recovery of the specific 
property and for compensation in default of such recovery. 

46. Negotiable instruments and shares in a corporation.—Notwithstanding anything contained in 
this Schedule, where the property to be sold is a negotiable instrument or a share in a corporation, the Tax 
Recovery Officer may, instead of directing the sale to be made by public auction, authorise the sale of 
such instrument or share through a broker. 

47. Order for payment of coin or currency notes to the 1[Assessing Officer].—Where the property 
attached  is  current  coin  or  currency  notes,  the  Tax  Recovery  Officer  may,  at  any  time  during  the 
continuance  of  the  attachment,  2[direct  that  such  coins  or  notes  shall  be  credited  to  the  Central 
Government and the amount so credited shall be dealt with in the manner specified in rule 8]. 

1. Subs. by Act 3 of 1989, s. 54, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2. Subs. by s. 54, ibid., for “direct that such coins or notes, or a part thereof sufficient to satisfy the certificate, be paid over 

to the Assessing Officer” (w.e.f. 1-4-1989). 

841 

                                                           
PART III 

__________________ 

ATTACHMENT AND SALE OF IMMOVABLE PROPERTY 

Attachment 

48. Attachment.—Attachment of the immovable property of the defaulter shall be made by an order 
prohibiting the defaulter from transferring or charging the property in any way and prohibiting all persons 
from taking any benefit under such transfer or charge. 

49. Service  of  notice  of  attachment.—A  copy  of  the  order  of  attachment  shall  be  served  on  the 

defaulter. 

50. Proclamation of attachment.—The order of attachment shall be proclaimed at some place on or 
adjacent to the property attached by beat of drum or other customary mode, and a copy of the order shall 
be affixed on a conspicuous part of the property and on the notice board of the office of the Tax Recovery 
Officer. 

51. Attachment to relate back from the date of service of notice.—Where any immovable property 
is  attached  under  this  Schedule,  the  attachment  shall  relate  back  to,  and  take  effect  from,  the  date  on 
which the notice to pay the arrears, issued under this Schedule, was served upon the defaulter. 

Sale 

52. Sale and proclamation of sale.—(1) The Tax Recovery Officer may direct that any immovable 
property which has been attached, or such portion thereof as may seem necessary to satisfy the certificate, 
shall be sold. 

(2)  Where  any  immovable  property  is  ordered  to  be  sold,  the  Tax  Recovery  Officer  shall  cause  a 

proclamation of the intended sale to be made in the language of the district. 

53. Contents  of  proclamation.—A  proclamation  of sale of immovable  property  shall  be drawn  up 
after  notice  to  the  defaulter,  and  shall  state  the  time  and  place  of  sale,  and  shall  specify,  as  fairly  and 
accurately as possible,— 

(a) the property to be sold; 

(b) the revenue, if any, assessed upon the property or any part thereof; 

(c) the amount for the recovery of which the sale is ordered; 1*** 

2[(cc) the reserve price, if any, below which the property may not be sold; and] 

(d) any other thing which the Tax Recovery Officer considers it material for a purchaser to know, 

in order to judge the nature and value of the property. 

54. Mode  of  making  proclamation.—(1)  Every  proclamation  for  the  sale  of  immovable  property 
shall be made at some place on or near such property by beat of drum or other customary mode, and a 
copy  of  the  proclamation  shall  be  affixed  on  a  conspicuous  part  of  the  property  and  also  upon  a 
conspicuous part of the office of the Tax Recovery Officer. 

1. The word “and” omitted by Act 41 of 1975, s. 81 (w.e.f. 1-10-1975). 
2. Ins. by s. 81, ibid, (w.e.f. 1-10-1975). 

842 

                                                           
(2)  Where  the  Tax  Recovery  Officer  so  directs,  such  proclamation  shall  also  be  published  in  the 
Official Gazette or in a local newspaper, or in both; and the cost of such publication shall be deemed to be 
costs of the sale. 

(3)  Where the  property  is  divided  into  lots  for  the  purpose  of  being  sold  separately,  it  shall  not  be 
necessary  to  make  a  separate  proclamation  for  each  lot,  unless  proper  notice  of  the  sale  cannot,  in  the 
opinion of the Tax Recovery Officer, otherwise be given. 

55. Time of sale.—No sale of immovable property under this Schedule shall, without the consent in 
writing of the defaulter, take place until after the expiration of at least thirty days calculated from the date 
on which a copy of the proclamation of sale has been affixed on the property or in the office of the Tax 
Recovery Officer, whichever is later. 

56. Sale  to  be  by  auction.—The  sale  shall  be  by  public  auction  to  the  highest  bidder  and  shall  be 

subject to confirmation by the Tax Recovery Officer: 

 1[Provided that no sale under this rule shall be made if the amount bid by the highest bidder is less 

than the reserve price, if any, specified under clause (cc) of rule 53.] 

57. Deposit  by  purchaser  and  resale  in  default.—(1)  On  every  sale  of  immovable  property,  the 
person declared to be the purchaser shall pay, immediately after such declaration, a deposit of twenty-five 
per cent on the amount of his purchase money, to the officer conducting the sale; and, in default of such 
deposit, the property shall forthwith be resold. 

(2) The full amount of purchase money payable shall be paid by the purchaser to the Tax Recovery 

Officer on or before the fifteenth day from the date of the sale of the property. 

58. Procedure  in  default  of  payment.—In  default  of  payment  within  the  period  mentioned  in  the 
preceding rule, the deposit may, if the Tax Recovery Officer thinks fit, after defraying the expenses of the 
sale, be forfeited to the Government, and the property shall be resold, and the defaulting purchaser shall 
forfeit all claims to the property or to any part of the sum for which it may subsequently be sold. 

2[59. Authority  to  bid.—(1)  Where  the  sale  of  a  property,  for  which  a  reserve  price  has  been 
specified under clause (cc) of rule 53, has been postponed for want of a bid of an amount not  less than 
such  reserve  price,  it  shall  be  lawful  for  an  3[Assessing  Officer],  if  so  authorised  by  the  4[  5[Principal 
Chief  Commissioner  or  Chief  Commissioner]  or  6[Principal  Commissioner  or  Commissioner]]  in  this 
behalf, to bid for the property on behalf of the Central Government at any subsequent sale.] 

 7[(2)] All persons bidding at the sale shall be required to declare, if they are bidding on their own 
behalf or on behalf of their principals. In the latter case, they shall be required to deposit their authority, 
and in default their bids shall be rejected. 

1. The proviso added by Act 41 of 1975, s. 81 (w.e.f. 1-10-1975). 
2. Ins. by s. 81 ibid. (w.e.f. 1-10-1975).  
3. Subs. by Act 3 of 1989, s. 54, for “Income-tax Officer” (w.e.f. 1-4-1988).   
4. Subs. by Act 4 of 1988, s. 2, for “Commissioner” (w.e.f. 1-4-1988). 
5. Subs. by Act 25 of 2014, s. 4 for “Chief Commissioner” (w.e.f. 1-6-2013). 
6. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 
7. The rule 59 re-numbered as sub-rule (2) thereof by Act 41 of 1975, s. 81 (w.e.f. 1-10-1975). 

843 

                                                           
 
1[(3) Where the 2[Assessing Officer] referred to in sub-rule (1) is declared to be the purchaser of the 
property at any subsequent sale, nothing contained in rule 57 shall apply to the case and the amount of the 
purchase price shall be adjusted towards the amount specified in the certificate.] 

60. Application  to  set  aside  sale  of  immovable  property  on  deposit.—(1)  Where  immovable 
property  has  been  sold  in  execution  of  a  certificate,  the  defaulter,  or  any  person  whose  interests  are 
affected  by  the  sale,  may,  at  any  time  within  thirty  days  from  the  date  of  the  sale,  apply  to  the  Tax 
Recovery Officer to set aside the sale, on his depositing— 

(a) 3*** the amount specified in the proclamation of sale as that for the recovery of which the sale 
was ordered, with interest thereon at the rate of 4[one and one-fourth per cent for every month or part 
of a month], calculated from the date of the proclamation of sale to the date when the deposit is made; 
and 

(b) for payment to the purchaser, as penalty, a sum equal to five per cent of the purchase money, 

but not less than one rupee. 

(2) Where a person makes an application under rule 61 for setting aside the sale of his immovable 
property,  he  shall  not,  unless  he  withdraws  that  application,  be  entitled  to  make  or  prosecute  an 
application under this rule. 

61. Application  to set  aside  sale  of  immovable  property  on  ground  of  non-service  of  notice  or 
irregularity.—Where immovable property has been sold in execution of a certificate, 5[such Income-tax 
Officer  as  may  be  authorised  by  the  6[Principal  Chief  Commissioner  or  Chief  Commissioner]    or 
7[Principal Commissioner or Commissioner] in this behalf], the defaulter, or any person whose interests 
are affected by the sale, may, at any time within thirty days from the date of the sale, apply to the Tax 
Recovery Officer to set aside the sale of the immovable property on the ground that notice was not served 
on the defaulter to pay the arrears as required by this Schedule or on the ground of a material irregularity 
in publishing or conducting the sale: 

Provided that—(a) no sale shall be set aside on any such ground unless the Tax Recovery Officer is 
satisfied  that  the  applicant  has  sustained  substantial  injury  by  reason  of  the  non-service  or  irregularity; 
and 

 (b)  an  application  made  by  a  defaulter  under  this  rule  shall  be  disallowed  unless  the  applicant 

deposits the amount recoverable from him in the execution of the certificate. 

62. Setting aside sale where defaulter has no saleable interest.—At any time within thirty days of 
the sale, the purchaser may apply to the Tax Recovery Officer to set aside the sale on the ground that the 
defaulter had no saleable interest in the property sold. 

63. Confirmation  of  sale.—(1)  Where  no  application  is  made  for  setting  aside  the  sale  under  the 
foregoing rules or where such an application is made and disallowed by the Tax Recovery Officer, the 
Tax  Recovery  Officer  shall  (if  the  full  amount  of  the  purchase  money  has  been  paid)  make  an  order 
confirming the sale, and, thereupon, the sale shall become absolute. 

1. Ins. by Act 4 of 1988, s. 124 (w.e.f. 1-4-1989). 
2. Subs. by Act 3 of 1989, s. 54, for “Income-tax Officer” (w.e.f. 1-4-1988). 
3. The words “for payment to the Assessing Officer” omitted by Act 3 of 1989, s. 54 (w.e.f. 1-4-1989). 
4. Subs. by Act 22 of 2007, s. 81, for “fifteen per cent. per annum” (w.e.f. 1-4-2008). Earlier it was substituted by Act 67 of 

1984, s. 24 for “twelve per cent” (w.e.f. 1-10-1984). Earlier it was subs. by  Act 16 of 1972, s. 25, for “nine per  cent”                   
(w.e.f. 1-4-1972). and it was subs. by Act 42 of 1970, s. 56, for “the rate of six per cent. per annum” (w.e.f. 1-4-1971).    

5. Subs. by Act 3 of 1989, s. 54, for “Assessing Officer” (w.e.f. 1-4-1989).  
6. Subs. by Act 25 of 2014, s. 4 for “Chief Commissioner” (w.e.f. 1-6-2013). 
7. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 

844 

                                                           
(2) Where such application is made and allowed, and where, in the case of an application made to set 
aside the sale on deposit of the amount and penalty and charges, the deposit is made within thirty days 
from the date of the sale, the Tax Recovery Officer shall make an order setting aside the sale: 

Provided that no order shall be made unless notice of the application has been given to the persons 

affected thereby. 

64. Return of purchase money in certain cases.—Where a sale of immovable property is set aside, 
any money paid or deposited by the purchaser on account of the purchase, together with the penalty, if 
any, deposited for payment to the purchaser, and such interest as the Tax Recovery Officer may allow, 
shall be paid to the purchaser. 

65.  Sale  certificate.—(1)  Where  a  sale  of  immovable  property  has  become  absolute,  the  Tax 
Recovery Officer shall grant a certificate specifying the property sold, and the name of the person who at 
the time of sale is declared to be the purchaser. 

(2) Such certificate shall state the date on which the sale became absolute. 

66. Postponement of sale to enable defaulter to raise amount due under certificate.—(1) Where 
an order for the sale of immovable property has been made, if the defaulter can satisfy the Tax Recovery 
Officer that there is reason to believe that the amount of the certificate may be raised by the mortgage or 
lease  or private sale  of such  property,  or  some  part  thereof, or  of  any  other  immovable  property  of  the 
defaulter, the Tax Recovery Officer may, on his application, postpone the sale of the property comprised 
in the order for sale, on such terms, and for such period as he thinks proper, to enable him to raise the 
amount. 

(2) In such case, the Tax Recovery Officer shall grant a certificate to the defaulter, authorising him, 
within  a  period  to  be  mentioned  therein,  and  notwithstanding  anything  contained  in  this  Schedule,  to 
make the proposed mortgage, lease or sale: 

Provided that  all  moneys  payable  under  such  mortgage,  lease  or  sale  shall  be  paid,  not  to  the 

defaulter, but to the Tax Recovery Officer: 

Provided also that no mortgage, lease or sale under this rule shall become absolute until it has been 

confirmed by the Tax Recovery Officer. 

67. Fresh  proclamation  before  re-sale.—Every  re-sale  of  immovable  property,  in  default  of 
payment of the purchase money within the period allowed for such payment, shall be made after the issue 
of a fresh proclamation in the manner and for the period hereinbefore provided for the sale. 

68. Bid  of  co-sharer  to  have  preference.—Where  the  property  sold  is  a  share  of  undivided 
immovable property, and two or more persons, of whom one is a co-sharer, respectively bid the same sum 
for such property or for any lot, the bid shall be deemed to be the bid of the co-sharer. 

1[68A. Acceptance  of  property  in  satisfaction  of  amount  due  from  the  defaulter.—(1)  Without 

prejudice  to  the  provisions  contained  in  this  Part,  an  2[Assessing  Officer],  duly  authorised  by  the               
3[4[Principal  Chief  Commissioner  or  Chief  Commissioner]  or 
5[Principal  Commissioner  or 
Commissioner]] in this behalf, may accept in satisfaction of the whole or any part of the amount due from 
he defaulter the property, the sale of which has been postponed for the reason mentioned in sub-rule (1) of 
rule 59, at such price as may be agreed upon between the 2[Assessing Officer] and the defaulter. 

1. Ins. by Act 41 of 1975, s. 81 (w.e.f. 1-10-1975). 
2. Subs. by Act 3 of 1989, s. 54, for “Income-tax Officer” (w.e.f. 1-4-1988). 
3. Subs. by Act 4 of 1988, s. 2, for “Commissioner” (w.e.f. 1-4-1988). 
4. Subs. by Act 25 of 2014, s. 4 for “Chief Commissioner” (w.e.f. 1-6-2013). 
5. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 

845 

                                                           
(2) Where any property is accepted under sub-rule (1), the defaulter shall deliver possession of such 
property  to  the  1[Assessing  Officer]  and  on  the  date  the  possession  of  the  property  is  delivered  to  the 
1[Assessing Officer], the property shall vest in the Central Government and the Central Government shall, 
where necessary, intimate the concerned Registering Officer appointed under the Registration Act, 1908 
(16 of 1908), accordingly. 

(3) Where the price of the property agreed upon under sub-rule (1) exceeds the amount due from the 
defaulter, such excess shall be paid by the  1[Assessing Officer] to the defaulter within a period of three 
months from the date of delivery of possession of the property and where the 1[Assessing Officer] fails to 
pay such excess within the period aforesaid, the Central Government shall, for the period commencing on 
the  expiry  of  such  period  and  ending  with  the  date  of  payment  of  the  amount  remaining  unpaid,  pay 
simple  interest  at  2[one-half  per  cent.  for  every  month  or  part  of  a  month]  to  the  defaulter  on  such 
amount.] 

3[68B. Time limit for sale of attached immovable property.—(1) No sale of immovable property 
shall be made under this Part after the expiry of three years from the end of the financial year in which the 
order  giving  rise  to  a  demand  of  any  tax,  interest,  fine,  penalty  or  any  other  sum,  for  the  recovery  of 
which  the  immovable  property  has  been  attached,  has  become  conclusive  under  the  provisions  of       
section 245-I or, as the case may be, final in terms of the provisions of Chapter XX: 

Provided that where the immovable property is required to be re-sold due to the amount of highest bid 
being less than the reserve price or under the circumstances mentioned in rule 57 or rule 58 or where the 
sale is set aside under rule 61, the aforesaid period of limitation for the sale of the immovable property 
shall stand extended by one year. 

(2) In computing the period of limitation under sub-rule (1), the period— 

(i) during which the levy of the aforesaid tax, interest, fine, penalty or any other sum is stayed by 

an order or injunction of any court; or 

(ii) during which the proceedings of attachment or sale of the immovable property are stayed by 

an order or injunction of any court; or 

(iii) commencing from the date of the presentation of any appeal against the order passed by the 

Tax Recovery Officer under this Schedule and ending on the day the appeal is decided, 

shall be excluded: 

Provided that where immediately after the exclusion of the aforesaid period, the period of limitation 
for the sale of the immovable property is less than 180 days, such remaining period shall be extended to 
180 days and the aforesaid period of limitation shall be deemed to be extended accordingly. 

(3) Where any immovable property has been attached under this Part before the 1st day of June, 1992, 
and the order giving rise to a demand of any tax, interest, fine, penalty or any other sum, for the recovery 
of which the immovable property has been attached, has also become conclusive or final before the said 
date, that date shall be deemed to be the date on which the said order has become conclusive or, as the 
case may be, final. 

(4)  Where  the  sale  of  immovable  property  is  not  made  in  accordance  with  the  provisions  of                   

sub-rule (1), the attachment order in relation to the said property shall be deemed to have been vacated on 
the expiry of the time of limitation specified under this rule.] 

1. Subs. by Act 3 of 1989, s. 54, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2.  Subs.  by  Act  22  of  2007,  s.  81,  for  “six  per  cent.  per  annum”  (w.e.f.  1-4-2008).  Earlier  it  was  substituted                              

by  Act  54  of  2003,  s.  21,  for  “eight  per  cent”  (w.e.f.  8-9-2003).  Earlier  it  was  substituted  by  Act  20  of  2002,  s.  109             
(w.e.f. 1-6-2002). and it was substituted by Act 14 of 2001, s. 95, (w.e.f. 1-6-2001). 

3. Ins. by Act 18 of 1992, s. 87 (w.e.f. 1-6-1992). 

846 

                                                           
PART IV 

APPOINTMENT OF RECEIVER 

69. Appointment  of  receiver  for  business.—(1)  Where  the  property  of  a  defaulter  consists  of  a 
business, the Tax Recovery Officer may attach the business and appoint a person as receiver to manage 
the business. 

(2) Attachment of a business under this rule shall be made by an order prohibiting the defaulter from 
transferring or charging the business in any way and prohibiting all persons from taking any benefit under 
such transfer or charge, and intimating that the business has been attached under this rule. A copy of the 
order of attachment shall be served on the defaulter, and another copy shall be affixed on a conspicuous 
part of the premises in which the business is carried on and on the notice board of the office of the Tax 
Recovery Officer. 

70. Appointment of receiver for immovable property.—Where immovable property is attached, the 
Tax  Recovery  Officer  may,  instead  of  directing  a  sale  of  the  property,  appoint  a  person  as  receiver  to 
manage such property. 

71. Powers  of  receiver.—(1)  Where  any  business  or  other  property  is  attached  and  taken  under 
management  under  the  foregoing  rules,  the  receiver  shall,  subject  to  the  control  of  the  Tax  Recovery 
Officer,  have  such  powers  as  may  be  necessary  for  the  proper  management  of  the  property  and  the 
realisation of the profits, or rents and profits, thereof. 

(2)  The  profits,  or  rents  and  profits,  of  such  business  or  other  property,  shall,  after  defraying  the 
expenses of management, be adjusted towards discharge of the arrears, and the balance, if any, shall be 
paid to the defaulter. 

72. Withdrawal of management.—The attachment and management under the foregoing rules may 
be withdrawn at any time at the discretion of the Tax Recovery Officer, or if the arrears are discharged by 
receipt of such profits and rents or are otherwise paid. 

PART V 

ARREST AND DETENTION OF THE DEFAULTER 

73. Notice  to  show  cause.—(1)  No  order  for  the  arrest  and  detention  in  civil  prison  of  a  defaulter 
shall be made unless the Tax Recovery Officer has issued and served a notice upon the defaulter calling 
upon him to appear before him on the date specified in the notice and to show cause why he should not be 
committed  to the  civil  prison,  and  unless the Tax  Recovery  Officer,  for  reasons  recorded  in  writing,  is 
satisfied— 

(a) that the defaulter, with the object or effect of obstructing the execution of the certificate, has, 
after  1[the  drawing  up  of  the  certificate  by  the  Tax  Recovery  Officer],  dishonestly  transferred, 
concealed, or removed any part of his property, or 

(b) that the defaulter has, or has had since 1[the drawing up of the certificate by the Tax Recovery 
Officer], the means to pay the arrears or some substantial part thereof and refuses or neglects or has 
refused or neglected to pay the same. 

(2) Notwithstanding anything contained in sub-rule (1), a warrant for the arrest of the defaulter may 
be issued by the Tax Recovery Officer if the Tax Recovery Officer is satisfied, by affidavit or otherwise, 
that with the object or effect of delaying the execution of the certificate, the defaulter is likely to abscond 
or leave the local limits of the jurisdiction of the Tax Recovery Officer. 

(3) Where appearance is not made in obedience to a notice issued and served under sub-rule (1), the 

Tax Recovery Officer may issue a warrant for the arrest of the defaulter. 

1. Subs. by Act 4 of 1988, s. 124, for, “the receipt of the certificate in the office of the Tax Recovery Office” (w.e.f. 1-4-

1989). 

847 

                                                           
1[(3A) A warrant of arrest issued by a Tax Recovery Officer under sub-rule (2) or sub-rule (3) may 
also be executed by any other Tax Recovery Officer within whose jurisdiction the defaulter may for the 
time being be found.] 

(4) Every person arrested in pursuance of a warrant of arrest under 2[this rule] shall be brought before 
the Tax Recovery Officer  3[issuing the warrant] as soon as practicable and in any event within twenty-
four hours of his arrest (exclusive of the time required for the journey): 

Provided that, if the defaulter pays the amount entered in the warrant of arrest as due and the costs of 

the arrest to the officer arresting him, such officer shall at once release him. 

1[Explanation.—For the purposes of this rule, where the  defaulter is a Hindu undivided family, the 

karta thereof shall be deemed to be the defaulter.] 

74. Hearing.—When a defaulter appears before the Tax Recovery Officer in obedience to a notice to 
show cause or is brought before the Tax Recovery Officer under rule 73, 4[the Tax Recovery Officer shall 
proceed to hear the 5[Assessing Officer] and take all such evidence as may be produced by him in support 
of execution by arrest, and then give the defaulter] an opportunity of showing cause why he should not be 
committed to the civil prison. 

75. Custody  pending  hearing.—Pending  the  conclusion  of  the  inquiry,  the  Tax  Recovery  Officer 
may,  in  his  discretion,  order  the  defaulter  to  be  detained  in  the  custody  of  such  officer  as  the  Tax 
Recovery  Officer  may  think  fit  or  release  him  on  his  furnishing  security  to  the  satisfaction  of  the  Tax 
Recovery Officer for his appearance when required. 

76.  Order  of  detention.—(1)  Upon  the  conclusion  of  the  inquiry,  the  Tax  Recovery  Officer  may 
make an order for the detention of the defaulter in the civil prison and shall in that event cause him to be 
arrested if he is not already under arrest: 

Provided that in order to give the defaulter an opportunity of satisfying the arrears, the Tax Recovery 
Officer  may,  before  making  the  order  of  detention,  leave  the  defaulter  in  the  custody  of  the  officer 
arresting him or of any other officer for a specified period not exceeding 15 days, or release him on his 
furnishing security to the satisfaction of the Tax Recovery Officer for his appearance at the expiration of 
the specified period if the arrears are not so satisfied. 

(2) When the Tax Recovery Officer does not make an order of detention under sub-rule (1) he shall, if 

the defaulter is under arrest, direct his release. 

77. Detention  in  and  release  from  prison.—(1)  Every  person  detained  in  the  civil  prison  in 

execution of a certificate may be so detained,— 

(a) where the certificate is for a demand of an amount exceeding two hundred and fifty rupees—

for a period of six months, and 

(b) in any other case—for a period of six weeks: 

Provided that he shall be released from such detention— 

(i) on the amount mentioned in the warrant for his detention being paid to the officer-in-charge of 

the civil prison, or 

6[(ii) on the request of the Tax Recovery Officer on any ground other than the grounds mentioned 

in rules 78 and 79.] 

1. Ins. by Act 41 of 1975, s. 81 (w.e.f. 1-10-1975). 
2. Subs. by s. 81, ibid., for “sub-rule (1) or sub-rule (2)” (w.e.f. 1-10-1975). 
3. Subs. by s. 81, ibid., for “Tax Recovery Officer” (w.e.f. 1-10-1975). 
4. Restored by Act 3 of 1989, s. 95 (w.e.f. 1-4-1989). 
5. Subs. by s. 54, ibid., for “Income-tax Officer” (w.e.f. 1-4-1988). 
6. Subs. by Act 4 of 1988, s. 124, for clause (ii) (w.e.f. 1-4-1989). Earlier amended by Act 3 of 1989, s. 55 (w.e.f. 1-4-1988). 

848 

 
                                                           
1* 

* 

* 

      * 

* 

(2) A defaulter released from detention under this rule shall not, merely by reason of his release, be 
discharged from his liability for the arrears; but he shall not be liable to be rearrested under the certificate 
in execution of which he was detained in the civil prison. 

78. Release.—(1)  The  Tax  Recovery  Officer  may  order  the  release  of  a  defaulter  who  has  been 
arrested in execution of a certificate upon being satisfied that he has disclosed the whole of his property 
and has placed it at the disposal of the Tax Recovery Officer and that he has not committed any act of bad 
faith. 

(2)  If  the  Tax  Recovery  Officer  has  ground  for  believing  the  disclosure  made  by  a  defaulter  under 
sub-rule (1) to have been untrue, he may order the rearrest of the defaulter in execution of the certificate, 
but  the  period  of  his  detention  in  the  civil  prison  shall  not  in  the  aggregate  exceed  that  authorised  by     
rule 77. 

79. Release on ground of illness.—(1) At any time after a warrant for the arrest of a defaulter has 

been issued, the Tax Recovery Officer may cancel it on the ground of his serious illness. 

(2) Where a defaulter has been arrested, the Tax Recovery Officer may release him if, in the opinion 

of the Tax Recovery Officer, he is not in a fit state of health to be detained in the civil prison. 

(3) Where a defaulter has been committed to the civil prison, he may be released therefrom by the 
Tax Recovery Officer on the ground of the existence of any infectious or contagious disease, or on the 
ground of his suffering from any serious illness. 

(4) A defaulter released under this rule may be rearrested, but the period of his detention in the civil 

prison shall not in the aggregate exceed that authorised by rule 77. 

80. Entry into dwelling house.—For the purpose of making an arrest under this Schedule— 

(a) no dwelling house shall be entered after sunset and before sunrise; 

(b)  no  outer  door  of  a  dwelling  house  shall  be  broken  open  unless  such  dwelling  house  or  a 
portion thereof is in the occupancy of the defaulter and he or other occupant of the house refuses or in 
any way prevents access thereto; but, when the person executing any such warrant has duly gained 
access to any dwelling house, he may break open the door of any room or apartment if he has reason 
to believe that the defaulter is likely to be found there; 

 (c) no room, which is in the actual occupancy of a woman who, according to the customs of the 
country,  does  not  appear  in  public,  shall  be  entered  into  unless  the  officer  authorised  to  make  the 
arrest has given notice to her that she is at liberty to withdraw and has given her reasonable time and 
facility for withdrawing. 

81. Prohibition  against  arrest  of  women  or  minors,  etc.—The  Tax  Recovery  Officer  shall  not 

order the arrest and detention in the civil prison of— 

(a) a woman, or 

(b) any person who, in his opinion, is a minor or of unsound mind. 

1. The proviso omitted by Act 4 of 1988, s. 124 (w.e.f. 1-4-1989). 

849 

 
 
 
 
 
       
       
                                                           
PART VI 

MISCELLANEOUS 

82. Officers  deemed  to  be  acting  judicially.—Every  1[2[Principal  Chief  Commissioner  or  Chief 
Commissioner]  or  3[Principal  Commissioner  or  Commissioner],  Tax  Recovery  Officer]  or  other  officer 
acting under this Schedule shall, in the discharge of his functions under this Schedule, be deemed to be 
acting judicially within the meaning of the Judicial Officers Protection Act, 1850 (18 of 1850). 

83. Power  to  take  evidence.—Every  1[2[Principal  Chief  Commissioner  or  Chief  Commissioner]  or 
3[Principal  Commissioner  or  Commissioner],  Tax  Recovery  Officer]  or  other  officer  acting  under  the 
provisions of this Schedule shall have the powers of a civil court while trying a suit for the purpose of 
receiving  evidence,  administering  oaths,  enforcing  the  attendance  of  witnesses  and  compelling  the 
production of documents. 

84. Continuance of certificate.—No certificate shall cease to be in force by reason of the death of 

the defaulter. 

85. Procedure  on  death  of  defaulter.—4[If  at  any  time  after  the  issue  of  the  certificate  by  the 
Assessing  Officer  to  the Tax  Recovery  Officer] the  defaulter  dies, the  proceedings  under  this  Schedule 
(except arrest and detention) may be continued against the legal representative of the defaulter, and the 
provisions of this Schedule shall apply as if the legal representative were the defaulter. 

86. Appeals.—5[(1) An appeal from any original order passed by the Tax Recovery Officer under this 
Schedule, not being an order which is conclusive, shall lie to the 2[Principal Chief Commissioner or Chief 
Commissioner] or 3[Principal Commissioner or Commissioner].] 

(2)  Every  appeal  under  this  rule  must  be  presented  within  thirty  days  from  the  date  of  the  order 

appealed against. 

(3)  Pending  the  decision  of  any  appeal,  execution  of  the  certificate  may  be  stayed  if  the  appellate 

authority so directs, but not otherwise. 

6[(4) Notwithstanding anything contained in sub-rule (1), where a 2[Principal Chief Commissioner or 
Chief Commissioner] or 3[Principal Commissioner or Commissioner] is authorised to exercise powers as 
such  in  respect  of  any  area,  then,  all  appeals  against  the  orders  passed  before  the  date  of  such 
authorisation by any Tax Recovery Officer authorised to exercise powers as such in respect of that area, 
or  an  area  which  is  included  in  that  area,  shall  lie  to  such  2[Principal  Chief  Commissioner  or  Chief 
Commissioner] or 3[Principal Commissioner or Commissioner].] 

87. Review.—Any  order  passed  under  this  Schedule  may,  after  notice  to  all  persons  interested,  be 
reviewed by the 2[Principal Chief Commissioner or Chief Commissioner] or 3[Principal Commissioner or 
Commissioner], Tax Recovery Officer or other officer who made the order, or by his successor in office, 
on account of any mistake apparent from the record. 

88. Recovery  from  surety.—Where  any  person  has  under  this  Schedule  become  surety  for  the 
amount due by the defaulter, he may be proceeded against under this Schedule as if he were the defaulter. 

89. [Penalties.]—Omitted  by  the  Direct  Tax  Laws  (Amendment)  Act,  1987  (4  of  1988),  s.  126               

(w.e.f. 1-4-1989). 

1.  Subs.  by  Act  4  of  1988,  s.  124,  for  “Tax  Recovery  Commissioner”  (w.e.f.  1-4-1989).  Earlier  substituted  by                     

Act 32 of 1971, s. 29, for “Tax Recovery Office” (w.e.f. 1-1-1972). 

2. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.r.e.f. 1-6-2013). 
3. Subs. by s. 4, ibid., for “Commissioner” (w.r.e.f. 1-6-2013). 
4. Restored by Act 3 of 1989, s. 95 (w.e.f. 1-4-1989). 
5. Subs. by Act 4 of 1988, s. 124, for sub-rule (1) (w.e.f. 1-4-1989). 
6. Subs. by s. 124, ibid., for sub-rule (4) (w.e.f. 1-4-1989). 

850 

                                                           
90. Subsistence allowance.—(1) When a defaulter is arrested or detained in the civil prison, the sum 
payable for the subsistence of the defaulter from the time of arrest until he is released shall be borne by 
the 1[Assessing Officer]. 

(2) Such sum shall be  calculated on the scale fixed by the State Government for the subsistence of 

judgment-debtors arrested in execution of a decree of a civil court. 

(3) Sums payable under this rule shall be deemed to be costs in the proceeding: 

Provided that the defaulter shall not be detained in the civil prison or arrested on account of any sum 

so payable. 

91. Forms.—The  Board  may  prescribe  the  form  to  be  used  for  any  order,  notice,  warrant,  or 

certificate to be issued under this Schedule. 

92.Power to make rules.—(1) The Board may make rules, consistent with the provisions of this Act, 
regulating  the  procedure  to  be  followed  by  2[Principal  Chief  Commissioners  or  Chief  Commissioners], 
3[Principal Commissioners or Commissioners], Tax Recovery Officers and other officers acting under this 
Schedule. 

(2) In particular, and without prejudice to the generality of the power conferred by sub-rule (1), such 

rules may provide for all or any of the following matters, namely:— 

 (a) the area within which 2[Principal Chief Commissioners or Chief Commissioners], 3[Principal 

Commissioners or Commissioners] or Tax Recovery Officers may exercise jurisdiction; 

 (b) the manner in which any property sold under this Schedule may be delivered; 

 (c)  the  execution  of a  document  or  the  endorsement of  a  negotiable  instrument or  a share in  a 
corporation,  by  or  on  behalf  of the Tax  Recovery  Officer,  where  such  execution  or endorsement is 
required to transfer such negotiable instrument or share to a person who has purchased it under a sale 
under this Schedule; 

 (d) the procedure for dealing with resistance or obstruction offered by any person to a purchaser 

of any immovable property sold under this Schedule, in obtaining possession of the property; 

 (e) the fees to be charged for any process issued under this Schedule; 

 (f)  the  scale  of  charges  to  be  recovered  in  respect  of  any  other  proceeding  taken  under  this 

Schedule; 

 (g) recovery of poundage fee; 

 (h)  the  maintenance  and  custody,  while  under  attachment,  of  livestock  or  other  movable 
property,  the  fees  to  be  charged  for  such  maintenance  and  custody,  the  sale  of  such  livestock  or 
property, and the disposal of proceeds of such sale; 

  (i) the mode of attachment of business. 

93. Saving  regarding  charge.—Nothing  in  this  Schedule  shall  affect  any  provision  of  this  Act 

whereunder the tax is a first charge upon any asset. 

4[94. Continuance  of  certain  pending  proceedings  and  power  to  remove  difficulties.—All 
proceedings for the recovery of tax pending immediately before the coming into force of the amendments 
to this Schedule by the Direct Tax Laws (Amendment) Act, 1987 shall be continued under this Schedule 
as amended by that Act from the stage they had reached, and, for this purpose, every certificate issued by 
the  5[Assessing  Officer]  under section  222  before  such  amendment  shall  be  deemed  to  be  a  certificate 
drawn  up  by  the  Tax  Recovery  Officer  under  that  section  after  such  amendment,  and,  if  any  difficulty 
arises  in  continuing  the  said  proceedings,  the  Board  may  issue  (whether  by  way  of  modification,  not 
affecting the substance, of any rule in this Schedule or otherwise) general or special orders which appear 
to it to be necessary or expedient for the purpose of removing the difficulty.] 

1. Restored by Act 3 of 1989, s. 95 as “Income-tax Officer” (w.e.f. 1-4-1989) and Subs. by s. 54, ibid (w.e.f. 1-4-1988). 
2. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.r.e.f. 1-6-2013). 
3. Subs. by s. 4, ibid., for “Commissioner” (w.r.e.f. 1-6-2013). 
4. Ins. by Act 4 of 1988, s. 124 (w.e.f. 1-4-1989). 
5. Subs. by Act 3 of 1989, s. 54, for “Income-tax Officer” (w.e.f. 1-4-1988). 

851 

                                                           
THE THIRD SCHEDULE 

PROCEDURE FOR DISTRAINT BY 1[ASSESSING OFFICER]  
2[OR TAX RECOVERY OFFICER] 

[See section 226(5)] 

Distraint and sale.—Where any distraint and sale of movable property are to be effected by any 
1[Assessing  Officer]  2[or  Tax  Recovery  Officer]  authorised  for  the  purpose,  such  distraint  and  sale 
shall be made, as far as may be, in the same manner as attachment and sale of any movable property 
attachable  by  actual  seizure,  and  the  provisions  of  the  Second  Schedule  relating  to  attachment  and 
sale shall, so far as may be, apply in respect of such distraint and sale. 

1. Subs. by Act 3 of 1989, s. 55, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2. Ins. by s. 55, ibid (w.e.f. 1-4-1989). 

852 

 
                                                           
THE FOURTH SCHEDULE 

PART A 

RECOGNISED PROVIDENT FUNDS 

[See sections 2(38), 10(12), 10(25), 36(1)(iv), 88(2)(vi), 111, 192(4)] 

1.  Application  of  Part.—This  Part  shall  not  apply  to  any  provident  fund  to  which  the  Provident 

Funds Act, 1925 (19 of 1925), applies. 

2. Definitions.—In this Part, unless the context otherwise requires,— 

(a)  “employer”  means  any  person  who  maintains  a  provident  fund  for  the  benefit  of  his  or  its 

employees, being— 

(i) a Hindu undivided family, company, firm or other association of persons, or 

(ii)  an  individual  engaged  in  a  business  or  profession  the  profits  and  gains  whereof  are 

assessable to income-tax under the head “Profits and gains of business or profession”; 

(b)  “employee”  means  an  employee  participating  in  a  provident  fund,  but  does  not  include  a 

personal or domestic servant; 

(c) “contribution” means any sum credited by or on behalf of any employee out of his salary, or 
by  an  employer  out  of  his  own  moneys,  to  the  individual  account  of  an  employee,  but  does  not 
include any sum credited as interest; 

(d) “balance to the credit of an employee” means the total amount to the credit of his individual 

account in a provident fund at any time; 

(e) “annual accretion”, in relation to the balance to the credit of an employee, means the increase 

to such balance in any year, arising from contributions and interest; 

(f) “accumulated balance due  to  an employee”  means  the  balance  to his credit, or  such portion 
thereof as may be claimable by him under the regulations of the fund, on the day he ceases  to be an 
employee of the employer maintaining the fund; 

(g) “regulations of a fund” means the special body of regulations governing the constitution and 

administration of a particular provident fund; and 

(h) “salary” includes dearness allowance, if the terms of employment so provide, but excludes all 

other allowances and perquisites. 

3. According and withdrawal of recognition.—(1) The  1[2[Principal Chief Commissioner or Chief 
Commissioner] or 3[Principal Commissioner or Commissioner]] may accord recognition to any provident 
fund which, in his opinion, satisfies the conditions prescribed in rule 4 and the rules made by the Board in 
this  behalf,  and  may,  at  any  time,  withdraw  such  recognition  if,  in  his  opinion,  the  provident  fund 
contravenes any of those conditions: 

1. Subs. by Act 4 of 1988, s. 2, for “Commissioner” (w.e.f. 1-4-1988). 

2. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). 

3. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013).  

853 

                                                           
1[Provided that in a case where recognition has been accorded to any provident fund on or before the 
31st day of March, 2006 and such provident fund does not satisfy the conditions set out in clause (ea) of 
rule  4,  the  recognition  to  such  fund  shall  be  withdrawn,  if  such  fund  does  not  satisfy,  on  or  before  
the 2[ 3[31st day of March, 2014]], the conditions set out in the said clause and any other condition which 
the Board may, by rules specify, in this behalf:] 

4[Provided further that nothing contained in the first proviso shall apply to the provident fund of an 
establishment  in  respect  of  which  a  notification  has  been  issued  by  the  Central  Government  under  
sub-section (2) of section 16 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 
(19 of 1952).] 

(2)  An  order  according  recognition  shall  take  effect  on  such  date  as  the  5[6[Principal  Chief 
Commissioner  or  Chief  Commissioner]  or  7[Principal  Commissioner  or  Commissioner]]  may  fix  in 
accordance with any rules the Board may make in this behalf, such date not being later than the last day 
of the financial year in which the order is made. 

(3) An order withdrawing recognition shall take effect from the date on which it is made. 

(4)  An  order  according  recognition  to  a  provident  fund  shall  not,  unless  the  5[6[Principal  Chief 
Commissioner  or  Chief  Commissioner]  or  7[Principal  Commissioner  or  Commissioner]]  otherwise 
directs, be affected by the fact that the fund is subsequently amalgamated with another provident fund on 
the  occurrence  of  an  amalgamation  of  the  undertakings  in  connection  with  which  the  two  funds  are 
maintained, or that it subsequently absorbs the whole or a part of another provident fund belonging to an 
undertaking  which  is  wholly  or  in  part  transferred  to  or  merged  in  the  undertaking  of  the  employer 
maintaining the first-mentioned fund. 

4. Conditions to be satisfied by recognised provident funds.—In order that a provident fund may 
receive and retain recognition, it shall, subject to the provisions of rule 5, satisfy the conditions set out 
below and any other conditions which the Board may, by rules, specify— 

(a)  all  employees  shall  be  employed  in  India,  or  shall  be  employed  by  an  employer  whose 

principal place of business is in India; 

(b) the contributions of an employee in any year shall be a definite proportion of his salary for 
that  year,  and  shall  be  deducted  by  the  employer  from  the  employee’s  salary  in  that  proportion,  at 
each periodical payment of such salary in that year, and credited to the employee's individual account 
in the fund; 

(c) the contributions of an employer to the individual account of an employee in any year shall 
not exceed the amount of the contributions of the employee in that year, and shall be credited to the 
employee's individual account at intervals not exceeding one year; 

(d) the fund shall be vested in two or more trustees or in the Official Trustee under a trust which 

shall not be revocable, save with the consent of all the beneficiaries; 

(e)  the  fund  shall  consist  of  contributions  as  above  specified,  received  by  the  trustees,  of 
accumulations  thereof,  and  of  interest  credited  in  respect  of  such  contributions  and  accumulations, 
and  of  securities  purchased  therewith  and  of  any  capital  gains  arising  from  the  transfer  of  capital 
assets of the fund, and of no other sums; 

1. Ins. by Act 21 of 2006, s. 56 (w.e.f. 1-4-2007). 
2. Subs. by Act 8 of 2011, s. 34, for “31st day of December, 2010” (w.e.f. 1-1-2011). 
3. Subs. by Act 17 of 2013, s. 60, for “31st day of March,  2013” (w.e.f. 1-4-2013). Earlier “the 31st day of March, 2012” 

was substituted for “the 31st day of March, 2013” by Act 23 of 2012, s. 114 (w.e.f. 1-4-2012). 

4. Ins. by Act 22 of 2007, s. 82 (w.e.f. 1-4-2007). 
5. Subs. by Act 4 of 1988, s. 2, for “Commissioner” (w.e.f. 1-4-1988). 
6. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). 
7. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 

854 

                                                           
1[(ea) the fund shall be a fund of an establishment to which the provisions of sub-section (3) of 
section 1 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952) 
apply or of an establishment which has been notified by the Central Provident Fund Commissioner 
under  sub-section  (4)  of section  1 of  the  said  Act,  and  such  establishment  shall  obtain  exemption 
under section  17 of  the  said  Act  from  the  operation  of  all  or  any  of  the  provisions  of  any  scheme 
referred to in that section;] 

(f) the employer shall not be entitled to recover any sum whatsoever from the fund, save in cases 
where the employee is dismissed for misconduct or voluntarily leaves his employment otherwise than 
on  account  of  ill-health  or  other  unavoidable  cause  before  the  expiration  of  the  term  of  service 
specified in this behalf in the regulations of the fund: 

Provided that  in  such  cases  the  recoveries  made  by  the  employer  shall  be  limited  to  the 
contributions  made  by  him  to  the  individual  account  of  the  employee,  and  to  interest  credited  in 
respect  of  such contributions  in  accordance  with the regulations  of  the  fund and  the  accumulations 
thereof; 

(g) the accumulated balance due to an employee shall be payable on the  day he ceases to be an 

employee of the employer maintaining the fund; 

(h) save as provided in clause (g) or in accordance with such conditions and restrictions as the 
Board may, by rules, specify, no portion of the balance to the credit of an employee shall be payable 
to him. 

5.  Relaxation  of  conditions.—(1)  Notwithstanding  anything  contained  in  clause  (a)  of  rule  4,  the 
2[3[Principal  Chief  Commissioner  or  Chief  Commissioner]  or 
4[Principal  Commissioner  or 
Commissioner]] may, if he thinks fit and subject to such conditions, if any, as he thinks proper to attach to 
the  recognition,  accord  recognition  to  a  fund  maintained  by  an  employer  whose  principal  place  of 
business is not in India, provided the proportion of employees employed outside India does not exceed ten 
per cent. 

(2)  Notwithstanding  anything  contained  in  clause  (b)  of  rule  4,  an  employee  who  retains  his 
employment  while  serving  in  the  armed  forces  of  the  Union  or  when  taken  into  or  employed  in  the 
national service under any law for the time being in force, may, whether he receives from the employer 
any salary or not, contribute to the fund during his service in the armed forces of the Union or while so 
taken into or employed in the national service a sum not exceeding the amount he would have contributed 
had he continued to serve the employer. 

(3) Notwithstanding anything contained in clause (e) or clause (g) of rule 4,— 

(a) at the request made in writing by the employee who ceases to be an employee of the employer 
maintaining  the  fund,  the  trustees  of  the  fund  may  consent  to  retain  the  whole  or  any  part  of  the 
accumulated balance due to the employee to be drawn by him at any time on demand; 

(b)  where  the  accumulated  balance  due  to  an  employee  who  has  ceased  to  be  an  employee  is 
retained in the fund in accordance with the preceding clause, the fund may consist also of interest in 
respect of such accumulated balance; 

1. Subs. by Act 22 of 2007, s. 82, for clause (ea) (w.e.f. 1-4-2007). 
2. Subs. by Act 4 of 1988, s. 2, for “Commissioner” (w.e.f. 1-4-1988). 
3. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). 
4. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 

855 

                                                           
1[(c)  the  fund  may  also  consist  of  any  amount  transferred  from  the  individual  account  of  an 
employee  in  any  recognised  provident  fund  maintained  by  his  former  employer  and  the  interest  in 
respect thereof.] 

(4)  Subject  to  any  rules  which  the  Board  may  make  in  this  behalf,  the  2[3[Principal  Chief 
Commissioner or Chief Commissioner] or  4[Principal Commissioner or Commissioner]] may, in respect 
of any particular fund, relax the provisions of clause (c) of rule 4,— 

(a) so as to permit the payment of larger contributions by an employer to the individual accounts 

of employees whose salaries do not in each case exceed five hundred rupees per mensem; and 

(b)  so  as  to  permit  the  crediting  by  employers  to  the  individual  accounts  of  employees  of 
periodical bonuses or other contributions  of a contingent nature, where the calculation and payment 
of such bonuses or other contributions is provided for on definite principles by the regulations of the 
fund. 

(5) Notwithstanding anything contained in clause (h) of rule 4, in order to enable an employee to pay 
the amount of tax assessed on his total income as determined under sub-rule (4) of rule 11, he shall be 
entitled to withdraw from the balance to his credit in the recognised provident fund a sum not exceeding 
the  difference  between  such  amount  and  the  amount  to  which  he  would  have  been  assessed  if  the 
transferred balance referred to in sub-rule (2) of rule 11 had not been included in his total income. 

6.  Employer’s  annual  contributions,  when  deemed  to  be  income  received  by  employee.—That 
portion  of  the  annual  accretion  in  any  previous  year  to  the  balance  at  the  credit  of  an  employee 
participating in a recognised provident fund as consists of— 

(a)  contributions  made  by  the  employer  in  excess  of  5[twelve]  per  cent.  of  the  salary  of  the 

employee, and 

(b) interest credited on the balance to the credit of the employee in so far as it 6*** is allowed at a 
rate exceeding such rate as may be fixed by the Central Government in this behalf by notification in 
the Official Gazette, 

shall be deemed to have been received by the employee in that previous year and shall be included in his 
total income for that previous year, and shall be liable to income-tax 7***. 

8[7.  Exemption  for  employee’s  contributions.—An  employee  participating  in  a  recognised 
provident  fund  shall,  in  respect  of  his  own  contributions  to  his  individual  account  in  the  fund  in  the 
previous year, be entitled to a deduction in the computation of his total income of an amount determined 
in accordance with 9[section 80C].] 

8.  Exclusion  from  total  income  of  accumulated  balance.—The  accumulated  balance  due  and 
becoming payable to an employee participating in a recognised provident fund shall be excluded from the 
computation of his total income— 

(i) if he has rendered continuous service with his employer for a period of five years or more, or 

1. Ins. by Act 20 of 1974, s. 12 (w.e.f. 1-4-1974). 
2. Subs. by Act 4 of 1988, s. 2, for “Commissioner” (w.e.f. 1-4-1988). 
3. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.e.f. 1-6-2013). 
4. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 
5. Subs. by Act 26 of 1997, s. 58, for “ten” (w.e.f. 1-4-1998). 
6. The words “exceeds one-third of the salary of the employee or” omitted by Act 44 of 1980, s. 34 (w.e.f. 1-4-1981). 
7. The words “and super-tax” omitted by Act 10 of 1965, s. 66 (w.e.f. 1-4-1965). 
8. Subs. by s. 66, ibid, for rule 7 (w.e.f. 1-4-1965). 
9. Subs. by Act 20 of 1967, s. 20, for “section 80A or, as the case may be, to a deduction from the amount of income-tax 
with which he is chargeable on his total income of an amount of income-tax determined in accordance with section 87”  
(w.e.f. 1-4-1968). 

856 

                                                           
(ii)  if,  though  he  has  not  rendered  such  continuous  service,  the  service  has  been  terminated  by 
reason of the employee’s ill-health, or by the contraction or discontinuance of the employer's business 
or other cause beyond the control of the employee, 1[or] 

 1[(iii) if, on the cessation of his employment, the employee obtains employment with any other 
employer, to the extent the accumulated balance due and becoming payable to him is transferred to 
his individual account in any recognised provident fund maintained by 2[such other employer;  or] 

 3[(iv)  if  the  entire  balance  standing  to  the  credit  of  the  employee  is  transferred  to  his  account 

under a pension scheme referred to in section 80CCD and notified by the Central Government.] 

Explanation.—Where  the  accumulated  balance  due  and  becoming  payable  to  an  employee 
participating  in  a  recognised  provident  fund  maintained  by  his  employer  includes  any  amount 
transferred from his individual account in any other recognised provident fund or funds maintained by 
his  former  employer  or  employers,  then,  in  computing  the  period  of  continuous  service  for  the 
purposes  of  clause  (i)  or  clause  (ii)  the  period  or  periods  for  which  such  employee  rendered 
continuous service under his former employer or employers aforesaid shall be included.] 

9.  Tax  on  accumulated  balance.—(1)  Where  the  accumulated  balance  due  to  an  employee 
participating in a recognised provident fund is included in his total income owing to the provisions of 
rule 8 not being applicable, the  4[Assessing Officer] shall calculate the total of the various sums of 
5[tax] which would have been payable by the employee in respect of his total income for each of the 
years concerned if the fund had not been a recognised provident fund, and the amount by which such 
total exceeds the total of all sums paid by or on behalf of such employee by way of  5[tax] for such 
years shall be payable by the employee in addition to any other  5[tax] for which he may be liable for 
the previous year in which the accumulated balance due to him becomes payable. 

(2) Where the accumulated balance due to an employee participating in a recognised provident fund 
which is not included in his total income under the provisions of rule 8 becomes payable, an amount equal 
to  the  aggregate  of  the  amounts  of  super-tax  on  annual  accretions that  would  have  been  payable  under 
section 58E of the Indian Income-tax Act, 1922 (11 of 1922), for any assessment year up to and including 
the assessment year 1932-33, if the Indian Income-tax (Second Amendment) Act, 1933 (18 of 1933), had 
come  into  force  on  the  15th  day  of  March,  1930,  shall  be  payable  by  the  employee  in  addition  to  any 
other tax payable by him for the previous year in which such balance becomes payable. 

10.  Deduction  at  source  of  tax  payable  on  accumulated  balance.—The  trustees  of  a  recognised 
provident fund, or any person authorised by the regulations of the fund to make payment of accumulated 
balances due to employees, shall, in cases where sub-rule (1) of rule 9 applies, at the time an accumulated 
balance  due  to  an  employee  is  paid,  deduct  therefrom  the  amount  payable  under  that  rule  and  all  the 
provisions of Chapter XVII-B shall apply as if the accumulated balance were income chargeable under 
the head “Salaries”. 

11. Treatment of balance in newly recognised provident fund.—(1) Where recognition is accorded 
to  a  provident  fund  with  existing  balances,  an  account  shall  be  made  of  the  fund  up  to  the  day 
immediately preceding the day on which the recognition takes effect, showing the balance to the credit of 
each employee on such day, and containing such further particulars as the Board may prescribe. 

1. Ins. by Act 20 of 1974, s. 12 (w.e.f. 1-4-1975). 
2. Subs. by Act 28 of 2016, s. 115, for “such other employer” (w.e.f. 1-4-2017). 
3. Ins. by s. 115, ibid (w.e.f. 1-4-2017). 
4. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
5. Subs. by Act 10 of 1965, s. 66, for “income-tax and super tax” (w.e.f. 1-4-1965). 

857 

                                                           
(2) The account shall also show in respect of the balance to the credit of each employee the amount 
thereof which is to be transferred to that employee’s account in the recognised provident fund, and such 
amount  (hereinafter  called  his  transferred  balance)  shall  be  shown  as  the  balance  to  his  credit  in  the 
recognised provident fund on the date on which the recognition of the fund takes effect, and sub-rule (4) 
of this rule and sub-rule (5) of rule 5 shall apply thereto. 

(3)  Any  portion  of  the  balance  to  the  credit  of  an  employee  in  the  existing  fund  which  is  not 
transferred to the recognised fund shall be excluded from the accounts of the recognised fund and shall be 
liable to income-tax 1*** in accordance with the provisions of this Act, other than this Part. 

(4) Subject to such rules as the Board may make in this behalf, the 2[Assessing Officer] shall make a 
calculation of the aggregate of all sums comprised in a transferred balance which would have been liable 
to income-tax if this Part had been in force from the date of the institution of the fund, without regard to 
any tax which may have been paid on any sum, and such aggregate (if any) shall be deemed to be income 
received by the employee in the previous year in which the recognition of the fund takes effect and shall 
be included in the employee’s total income for that previous year, and, for the purposes of assessment, the 
remainder  of  the  transferred  balance  shall  be  disregarded,  but  no  other  exemption  or  relief,  by  way  of 
refund or otherwise, shall be granted in respect of any sum comprised in such transferred balance: 

Provided that, in cases of serious accounting difficulty, the 3[4[Principal Chief Commissioner or Chief 
Commissioner]  or  5[Principal  Commissioner  or  Commissioner]]  may,  subject  to  the  said  rules,  make  a 
summary calculation of such aggregate. 

(5) Nothing in this rule shall affect the rights of the persons administering an unrecognised provident 
fund or dealing with it, or with the balance to the credit of any individual employee before recognition is 
accorded, in any manner which may be lawful. 

12.  Accounts  of  recognised  provident  funds.—(1)  The  accounts  of  a  recognised  provident  fund 
shall be maintained by the trustees of the fund and shall be in such form and for such periods, and shall 
contain such particulars, as the Board may prescribe. 

(2) The accounts shall be open to inspection at all reasonable times by income-tax authorities, and the 

trustees shall furnish to the 2[Assessing Officer] such abstracts thereof as the Board may prescribe. 

13.  Appeals.—(1)  An  employer  objecting  to  an  order  of  the  3[4[Principal  Chief  Commissioner  or 
Chief Commissioner] or  5[Principal Commissioner or Commissioner]] refusing to recognise or an order 
withdrawing recognition from a provident fund may appeal, within sixty days of such order, to the Board. 

(2) The appeal shall be in such form and shall be verified in such manner and shall be subject to the 

payment of such fee as the Board may prescribe. 

1. The words “and super -tax” omitted by Act 10 of 1965, s. 66 (w.e.f. 1-4-1965). 

2. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 

3. Subs. by s. 2, ibid., for “Commissioner” (w.e.f. 1-4-1988). 

4. Subs. by Act 25 of 2014, s. 4, for “Chief Commissioner” (w.r.e.f. 1-6-2013). 

5. Subs. by s. 4, ibid., for “Commissioner” (w.r.e.f. 1-6-2013). 

858 

                                                           
14.  Treatment  of  fund  transferred  by  employer  to  trustee.—(1)  Where  an  employer,  who 
maintains  a  provident  fund  (whether  recognised  or  not)  for  the  benefit  of  his  employees  and  has  not 
transferred  the  fund  or  any  portion  of  it,  transfers  such  fund  or  portion  to  trustees  in  trust  for  the 
employees  participating  in  the  fund,  the  amount  so  transferred  shall  be  deemed  to  be  of  the  nature  of 
capital expenditure. 

(2)  When  an  employee  participating  in  such  fund  is  paid  the  accumulated  balance  due  to  him 
therefrom, any portion of such balance as represents his share in the amount so transferred to the trustees 
(without addition of interest, and exclusive of the employee's contributions and interest thereon) shall, if 
the  employer  has  made  effective  arrangements  to  secure  that  tax  shall  be  deducted  at  source  from  the 
amount of such share when paid to the employee, be deemed to be an expenditure by the employer within 
the  meaning  of  section  37,  incurred  in  the  previous  year  in  which  the  accumulated  balance  due  to  the 
employee is paid. 

15. Provisions relating to rules.—(1) In addition to any power conferred by this Part, the Board may 

make rules— 

(a) prescribing the statements and other information to be submitted along with an application for 

recognition; 

(b) limiting the contributions to a recognised provident fund by employees of a company who are 

shareholders in the company; 

1[(bb) regulating the investment or deposit of the moneys of a recognised provident fund: 

Provided that no rule made under this clause shall require the investment of more than fifty per 
cent. of the moneys of such fund in Government securities as defined in section 2 of the Public Debt 
Act, 1944 (18 of 1944);] 

(c) providing for the assessment by way of penalty of any consideration received by an employee 
for an assignment of, or creation of a charge upon, his beneficial interest in a recognised provident 
fund; 

(d) determining the extent to and the manner in which exemption from payment of  2[tax] may be 
granted in respect of contributions and interest credited to the individual accounts of employees in a 
provident fund from which recognition has been withdrawn; and 

(e)  generally,  to  carry  out  the  purposes  of  this  Part  and  to  secure  such  further  control  over  the 
recognition of provident funds and the administration of recognised provident funds as it may deem 
requisite. 

(2) All rules made under this Part shall be subject to the provisions of section 296. 

1. Ins. by Act 42 of 1970, s. 57 (w.e.f. 1-4-1971). 
2. Subs. by Act 10 of 1965, s. 66, for “income-tax and super-tax” (w.e.f. 1-4-1965). 

859 

                                                           
PART B 

_______ 

APPROVED SUPERANNUATION FUNDS 

[See sections 2(6), 10(13), 10(25) (iii), 36(1)(iv), 87(1)(e), 192(5), 1[206]] 

1. Definitions.—In  this  Part,  unless  the  context  otherwise  requires,  “employer”,  “employee”, 
“contribution”  and  “salary”  have,  in  relation  to  superannuation  funds,  the  meanings  assigned  to  those 
expressions in rule 2 of Part A in relation to provident funds. 

2. Approval  and  withdrawal  of  approval.—(1)  The  2[3[Principal  Chief  Commissioner  or  Chief 
Commissioner]  or  4[Principal  Commissioner  or  Commissioner]]  may  accord  approval  to  any 
superannuation  fund  or  any  part  of  a  superannuation  fund  which,  in  his  opinion,  complies  with  the 
requirements of rule 3, and may at any time withdraw such approval, if, in his opinion, the circumstances 
of the fund or part cease to warrant the continuance of the approval. 

(2)  The  2[3[Principal  Chief  Commissioner  or  Chief  Commissioner]  or  4[Principal  Commissioner  or 
Commissioner]] shall communicate in writing to the trustees of the fund the grant of approval with the 
date  on  which  the  approval  is  to  take  effect,  and,  where  the  approval  is  granted  subject  to  conditions, 
those conditions. 

(3)  The  2[3[Principal  Chief  Commissioner  or  Chief  Commissioner  or  4[Principal  Commissioner  or 
Commissioner]] shall communicate in writing to the trustees of the fund any withdrawal of approval with 
the reasons for such withdrawal and the date on which the withdrawal is to take effect. 

(4)  The  2[3[Principal  Chief  Commissioner  or  Chief  Commissioner  or  4[Principal  Commissioner  or 
Commissioner]] shall neither refuse nor withdraw approval to any superannuation fund or any part of a 
superannuation fund unless he has given the trustees of that fund a reasonable opportunity of being heard 
in the matter. 

3. Conditions for approval.— In order that a superannuation fund may receive and retain approval, 
it  shall  satisfy  the  conditions  set  out  below  and  any  other  conditions  which  the  Board  may,  by  rules, 
prescribe— 

(a) the fund shall be a fund established under an irrevocable trust in connection with a trade or 
undertaking carried on in India, and not less than ninety per cent of the employees shall be employed 
in India; 

(b) the fund shall have for its sole purpose the provision of annuities for employees in the trade or 
undertaking on their retirement at or after a specified age or on their becoming incapacitated prior to 
such  retirement,  or  for  the  widows,  children  or  dependants  of  persons  who  are  or  have  been  such 
employees on the death of those persons ; 

(c) the employer in the trade or undertaking shall be a contributor to the fund ; and 

(d) all annuities, pensions and other benefits granted from the fund shall be payable only in India. 

1. Subs. by Act 11 of 1987, s. 74, for “206(2)” (w.e.f. 1-6-1987). 
2. Subs. by Act 4 of 1988, s. 2, for “Commissioner” (w.e.f. 1-4-1988). 
3. Subs. by Act 25 of 2014, s. 4 for “Chief Commissioner” (w.r.e.f. 1-6-2013). 
4. Subs. by s. 4, ibid., for “Commissioner” (w.r.e.f. 1-6-2013). 

860 

                                                           
4. Application for approval.—(1) An application for approval of a superannuation fund or part of a 
superannuation fund shall be made in writing by the trustees of the fund to the  1[Assessing Officer] by 
whom the employer is assessable, and shall be accompanied by a copy of the instrument under which the 
fund is established and by two copies of the rules 2[and, where the fund has been in existence during any 
year or years prior to the financial year in which the application for approval is made, also two copies of 
the accounts of the fund relating to such prior year or years (not being more than three years immediately 
preceding the year in which the said application is made)] for which such accounts have been made up, 
but  the  3[4[Principal  Chief  Commissioner  or  Chief  Commissioner]  or  5[Principal  Commissioner  or 
Commissioner]] may require such further information to be supplied as he thinks proper. 

(2) If any alteration in the rules, constitution, objects or conditions of the fund is made at any time 
after the date of the application for approval, the trustees of the fund shall forthwith communicate such 
alteration to the 1[Assessing Officer] mentioned in sub-rule (1), and in default of such communication any 
approval given shall, unless the  3[4[Principal Chief Commissioner or Chief Commissioner] or  5[Principal 
Commissioner or Commissioner]] otherwise orders, be deemed to have been withdrawn from the date on 
which the alteration took effect. 

5. Contributions by employer when deemed to be income of employer.—Where any contributions 
by an employer (including the interest thereon, if any) are repaid to the employer, the amount so repaid 
shall be deemed for the purpose of income-tax 6*** to be the income of the employer of the previous year 
in which it is so repaid. 

6. Deduction of tax on contributions paid to an employee.— Where any contributions made by an 
employer,  including  interest  on  contributions,  if  any,  are  paid  to  an  employee  during  his  lifetime  7[in 
circumstances other than those referred to in clause (13) of section 10], 8[tax] on the amounts so paid shall 
be deducted at the average rate of  8[tax] at which the employee was liable to  8[tax] during the preceding 
three years or during the period, if less than three years, when he was a member of the fund, and shall be 
paid  by  the  trustees  to  the  credit  of  the  Central  Government  within  the  prescribed  time  and  in  such 
manner as the Board may direct. 

7. Deduction  from  pay  of  and  contributions  on  behalf  of  employee  to  be  included  in            

return.—Where  an  employer  deducts from  the  emoluments  paid  to  an  employee  or  pays  on  his  behalf 
any  contributions  of  that  employee  to  an  approved  superannuation  fund,  he  shall  include  all  such 
deductions or payments in the return which he is required to furnish under 9*** section 206. 

8. Appeals.—(1) An employer objecting to an order of the 3[4[Principal Chief Commissioner or Chief 
Commissioner]  or  5[Principal  Commissioner  or  Commissioner]]    refusing  to  accord  approval  to  a 
superannuation fund or an order withdrawing such approval may appeal, within sixty days of such order, 
to the Board. 

(2) The appeal shall be in such form and shall be verified in such manner and shall be subject to the 

payment of such fee as may be prescribed.  

9. Liability of trustees on cessation of approval.—If a fund or a part of a fund for any reason ceases 
to be an approved superannuation fund, the trustees of the fund shall nevertheless remain liable to tax on 
any sum paid on account of returned contributions (including interest on contributions, if any), in so far as 
the sum so paid is in respect of contributions made before the fund or part of the fund ceased to be an 
approved superannuation fund under the provisions of this Part. 

1. Subs. by Act 4 of 1988, s. 2, for “Income-tax” (w.e.f. 1-4-1988). 
2. Subs. by Act 42 of 1970, s. 57, for “and of the accounts of the fund for the last three years for which such accounts have 

been made up” (w.e.f. 1-4-1971). 

3. Subs. by Act 4 of 1988, s. 2, for “Commissioner” (w.e.f. 1-4-1988). 
4. Subs. by Act 25 of 2014, s. 4 for “Chief Commissioner” (w.r.e.f. 1-6-2013). 
5. Subs. by s. 4, ibid., for “Commissioner” (w.r.e.f. 1-6-2013). 
6. The words “and super-tax” omitted by Act 10 of 1965, s. 66 (w.e.f. 1-4-1965).  
7. Ins. by s. 66, ibid, (w.e.f. 1-4-1965). 
8. Subs. by s. 66, ibid., for “income-tax and super-tax” (w.e.f. 1-4-1965).  
9. The words, brackets and figure “sub-section (1) of” omitted by Act 11 of 1987 s. 74 (w.e.f. 1-6-1987). 

861 

                                                           
10. Particulars to be furnished in respect of superannuation funds.—The trustees of an approved 
superannuation fund and any employer who contributes to an approved superannuation fund shall, when 
required by notice from the 1[Assessing Officer], within such period, not being less than twenty-one days 
from the date of the notice, as may be specified in the notice, furnish such return, statement, particulars or 
information, as the 1[Assessing Officer] may require. 

11. Provisions relating to rules.—(1) In addition to any power conferred by this Part, the Board may 

make rules— 

(a) prescribing the statements and other information to be submitted along with an application for 

approval; 

(b) prescribing the returns, statements, particulars, or information which the  1[Assessing Officer] 

may require from the trustees of an approved superannuation fund or from the employer; 

(c)  limiting  the  ordinary  annual  contribution  and  any  other  contributions  to  an  approved 

superannuation fund by an employer ; 

2[(cc) regulating the investment or deposit of the moneys of an approved superannuation fund: 

Provided that no rule made under this clause shall require the investment of more than fifty per 
cent of the moneys of such fund in Government securities as defined in section 2 of the Public Debt 
Act, 1944 (18 of 1944);] 

(d) providing for the assessment by way of penalty of any consideration received by an employee 
for  an  assignment  of,  or  creation  of  a  charge  upon,  his  beneficial  interest  in  an  approved 
superannuation fund; 

(e) determining the extent to, and the manner in, which exemption from payment of 3[tax] may be 
granted in respect of any payment made from a superannuation fund from which approval has been 
withdrawn; 

(f)  providing  for  the  withdrawal  of  approval  in  the  case  of  a  fund  which  ceases  to  satisfy  the 

requirements of this Part or of the rules made thereunder; and 

(g)  generally,  to  carry  out  the  purposes  of  this  Part  and  to  secure  such  further  control  over  the 
approval of the superannuation funds and the administration of approved superannuation funds as it 
may deem requisite. 

(2) All rules made under this Part shall be subject to the provisions of section 296. 

PART C 

APPROVED GRATUITY FUND 

4[See sections 2(5), 10(25)(iv), 17(1)(iii), 36(1)(v)] 

1. Definitions.—In  this  Part,  unless  the  context  otherwise  requires  “employer”,  “employee”, 
“contribution” and “salary” have, in relation to gratuity funds, the meanings assigned to those expressions 
in rule 2 of Part A in relation to provident funds. 

1. Subs. by Act 4 of 1988, s. 2, for “Income-tax” (w.e.f. 1-4-1988). 
2. Ins. by Act 42 of 1970, s. 57 (w.e.f. 1-4-1971). 
3. Subs by Act 10 of 1965, s. 66 for “income-tax and super-tax” (w.e.f. 1-4-1965). 
4. Subs. by Act 16 of 1972, s. 42 for “See sections 2(5), 17(1)(iii), 36 (1)(v)” (w.e.f. 1-4-1973).  

862 

                                                           
2. Approval  and  withdrawal  of  approval.—(1)  The  1[2[Principal  Chief  Commissioner  or  Chief 
Commissioner] or 3[Principal Commissioner or Commissioner]] may accord approval to any gratuity fund 
which,  in  his  opinion,  complies  with  the  requirements  of  rule  3  and  may  at  any  time  withdraw  such 
approval if, in his opinion, the circumstances of the fund cease to warrant the continuance of the approval. 

(2)  The  1[2[Principal  Chief  Commissioner  or  Chief  Commissioner]  or  3[Principal  Commissioner  or 
Commissioner]] shall communicate in writing to the trustees of the fund the grant of approval with the 
date on which the approval is to take effect and where the approval is granted subject to conditions, those 
conditions. 

(3)  The  1[2[Principal  Chief  Commissioner  or  Chief  Commissioner]  or  3[Principal  Commissioner  or 
Commissioner]]  shall communicate in writing to the trustees of the fund any withdrawal of approval with 
the reasons for such withdrawal and the date on which the withdrawal is to take effect. 

(4)  The  1[2[Principal  Chief  Commissioner  or  Chief  Commissioner]  or  3[Principal  Commissioner  or 
Commissioner]] shall neither refuse nor withdraw approval to any gratuity fund unless he has given the 
trustees of that fund a reasonable opportunity of being heard in the matter. 

3. Conditions for approval.—In order that a gratuity fund may receive and retain approval, it shall 

satisfy the conditions set out below and any other conditions which the Board may, by rules, prescribe— 

(a) the fund shall be a fund established under an irrevocable trust in connection with a trade or 
undertaking carried on in India, and not less than ninety per cent of the employees shall be employed 
in India ; 

(b) the fund shall have for its sole purpose the provision of a gratuity to employees in the trade or 
undertaking on their retirement at or after a specified age or on their becoming incapacitated prior to 
such retirement or on termination of their employment after a minimum period of service specified in 
the rules of the fund or to the widows, children or dependants of such employees on their death ; 

(c) the employer in the trade or undertaking shall be a contributor to the fund ; and 

(d) all benefits granted by the fund shall be payable only in India. 

4. Application for  approval.—(1)  An  application  for  approval  of  a  gratuity  fund  shall  be  made  in 
writing by the trustees of the fund to the  4[Assessing Officer], by whom the employer is assessable and 
shall be accompanied by a copy of the instrument under which the fund is established and by two copies 
of the rules 5[and, where the fund has been in existence during any year or years prior to the financial year 
in which the application for approval is made, also two copies of the accounts of the fund relating to such 
prior  year  or  years  (not  being  more  than  three  years  immediately  preceding  the  year  in  which  the  said 
application  is  made)  for  which  such  accounts  have  been  made  up],  but  the  1[2[Principal  Chief 
Commissioner or Chief Commissioner] or 3[Principal Commissioner or Commissioner]] may require such 
further information to be supplied as he thinks proper. 

(2) If any alteration in the rules, constitution, objects or conditions of the fund is made at any time 
after the date of the application for approval, the trustees of the fund shall forthwith communicate such 
alterations to the  4[Assessing Officer] mentioned in sub-rule (1), and in default of such communication, 
any  approval  given  shall,  unless  the  1[2[Principal  Chief  Commissioner  or  Chief  Commissioner]  or 
3[Principal Commissioner or Commissioner]] otherwise orders, be deemed to have been withdrawn from 
the date on which the alteration took effect. 

1. Subs. by Act 4 of 1988, s. 2, for “Commissioner” (w.e.f. 1-4-1988). 
2. Subs. by Act 25 of 2014, s. 4 for “Chief Commissioner” (w.e.f. 1-6-2013). 
3. Subs. by s. 4, ibid., for “Commissioner” (w.e.f. 1-6-2013). 
4. Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988). 
5. Subs by Act 42 of 1970, s. 57, for “and of the accounts of the fund for the last year for which such accounts have been 

made up” (w.e.f. 1-4-1971). 

863 

                                                           
5. Gratuity deemed to be salary.—Where any gratuity is paid to an employee during his lifetime, 

the gratuity shall be treated as salary paid to the employee for the purposes of this Act. 

6. Liability of trustees on cessation of approval.—If a gratuity fund for any reason ceases to be an 
approved gratuity fund, the trustees of the fund shall nevertheless remain liable to tax on any gratuity paid 
to any employee. 

7.  contributions  by  employer,  when  deemed  to  be  income  of  employer.— Where  any 
contributions  by  an  employer  (including  the  interest  thereon,  if  any)  are  repaid  to  the  employer,  the 
amount so repaid shall be deemed for the purposes of income-tax 1*** to be the income of the employer 
of the previous year in which they are so repaid. 

8. Appeals.—(1) An employer objecting to an order of the 2[3[Principal Chief Commissioner or Chief 
Commissioner] or 4[Principal Commissioner or Commissioner]] refusing to accord approval to a gratuity 
fund or an order withdrawing such approval may appeal, within sixty days of such order, to the Board. 

(2) The appeal shall be in such form and shall be verified in such manner and shall be subject to the 

payment of such fee as may be prescribed.  

5[8A. Particulars  to  be  furnished  in  respect  of  gratuity  funds.—The  trustees  of  an  approved 
gratuity  fund  and  any  employer  who  contributes  to  an  approved  gratuity  fund  shall,  when  required  by 
notice from the 6[Assessing Officer], furnish within such period, not being less than twenty-one days from 
the date of the notice, as may be specified in the notice, such return, statement, particulars or information, 
as the 6[Assessing Officer] may require.] 

9. Provisions relating to rules.—(1) In addition to any power conferred in this Part, the Board may 

make rules— 

(a) prescribing the statements and other information to be submitted along with an application for 

approval; 

(b) limiting the ordinary annual and other contributions of an employer to the fund; 

7[(bb) regulating the investment or deposit of the moneys of an approved gratuity fund: 

Provided that no rule made under this clause shall require the investment of more than fifty per 
cent of the moneys of such fund in Government securities as defined in section 2 of the Public Debt 
Act, 1944 (18 of 1944);] 

(c) providing for the assessment by way of penalty of any consideration received by an employee 
for an assignment of, or the creation of a charge upon, his beneficial interest in an approved gratuity 
fund; 

(d) providing for the withdrawal of the approval in the case of a fund which ceases to satisfy the 

requirements of this Part or the rules made thereunder; and 

(e)  generally,  to  carry  out  the  purposes  of  this  Part  and  to  secure  such  further  control  over  the 

approval of gratuity funds and the administration of gratuity funds as it may deem requisite. 

(2) All rules made under this Part shall be subject to the provisions of section 296. 

1. The words “and super-tax” omitted by Act 10 of 1965, s. 66 (w.e.f. 1-4-1965).  
2. Subs. by Act 4 of 1988, s. 2, for “Commissioner” (w.e.f. 1-4-1988). 
3. Subs. by Act 25 of 2014, s. 4 for “Chief Commissioner” (w.r.e.f. 1-6-2013). 
4. Subs. by s. 4, ibid., for “Commissioner” (w.r.e.f. 1-6-2013). 
5. Ins. by Act 42 of 1970, s. 57 (w.e.f. 1-4-1971).   
6. Subs. by Act 4 of 1988, s. 2, for “Income-tax” (w.e.f. 1-4-1988). 
7. Ins. by Act 42 of 1970, s. 57 (w.e.f. 1-4-1971). 

864 

 
                                                           
1[THE FIFTH SCHEDULE 
2[See section 33(1)(b)(B)(i)]] 

LIST OF ARTICLES AND THINGS 

 (1) Iron and steel (metal), ferro-alloys and special steels. 

 (2) Aluminium, copper, lead and zinc (metals). 

 (3) 3[Coal, lignite, iron ore], bauxite, manganese ore, dolomite, limestone, magnesite and mineral oil. 

 (4)  Industrial  machinery  specified  under  the  heading  "8.  Industrial  machinery",  sub-heading  "A. 
Major items of specialised equipment used in specific industries", of the First Schedule to the Industries 
(Development and Regulation) Act, 1951 (65 of 1951). 

 (5) Boilers and steam generating plants, steam engines and turbines and internal combustion engines. 

 (6) Flame and drip proof motors. 

 (7) Equipment for the generation and transmission of electricity including transformers, cables and 

transmission towers. 

 (8) Machine tools and precision tools (including their attachments and accessories, cutting tools and 

small tools), dies and jigs. 

 (9) Tractors, earth-moving machinery and agricultural implements. 

(10) Motor trucks and buses. 

(11) Steel castings and forgings and malleable iron and steel castings. 

(12) Cement and refractories. 

(13)  Fertilisers,  namely,  ammonium  sulphate,  ammonium  sulphate  nitrate (double  salt),  ammonium 
nitrate,  calcium  ammonium  nitrate  (nitrolime  stone),  ammonium  chloride,  superphosphate,  urea  and 
complex  fertilisers  of  synthetic  origin  containing  both  nitrogen  and  phosphorus,  such  as  ammonium 
phosphates, ammonium sulphate phosphate and ammo-nium nitro phosphate. 

(14) Soda ash. 

(15) Pesticides. 

(16) Paper and pulp including newsprint. 

(17) Electronic equipment, namely, radar equipment, computers, electronic accounting and business 
machines,  electronic  communication  equipment,  electronic  control  instruments  and  basic  components, 
such as valves, transistors, resistors, condensers, coils, magnetic materials and microwave components. 

(18) Petrochemicals including corresponding products manufactured from other basic raw materials 

like calcium carbide, ethyl alcohol or hydrocarbons from other sources. 

(19) Ships. 

(20) Automobile ancillaries. 

1. Ins. by Act 10 of 1965, s. 67 (w.e.f. 1-4-1965).  
2. Subs. by Act 19 of 1968, s. 30 and the Third Schedule, for “[See sections 33(1)(b)(B)(i) and 80B(7)” (w.e.f. 1-4-1969). 
Earlier substituted by Act 20 of 1967, s. 33 and the Third Schedule, for"[See sections 33(1)(b)(B)(i) and 83B(7)” (w.e.f. 
1-4-1968). Prior substituted by Act 13 of 1966, s. 37, for "[See section 33 (1) (iii) (c) I" (w.e.f. 1-4-1966). 

3. Subs. by Act 15 of 1965, s. 18, for “Iron ore” (w.e.f. 1-4-1965). 

865 

                                                           
(21) Seamless tubes. 

(22) Gears. 

(23) Ball, roller and tapered bearings. 

(24) Component parts of the articles mentioned in item Nos. (4), (5), (7) and (9), that is to say, such 
parts as are essential for the working of the machinery referred to in the items aforesaid and have been 
given for that purpose some special shape or quality which would not be essential for their use for any 
other purpose and are in complete finished form and ready for fitment. 

(25) Cotton seed oil. 

1[(26) Tea. 

(27) Printing machinery.] 

2[(28) Processed seeds. 

(29) Processed concentrates for cattle and poultry feed. 

(30) Processed (including frozen) fish and fish products. 

(31) Vegetable oils and oil-cakes manufactured by the solvent extraction process from seeds other than 

cotton seed.] 

3[(32) Textiles (including those dyed, printed or otherwise processed) made wholly or mainly of cotton, 

including cotton yarn, hosiery and rope. 

(33)  Textiles  (including  those  dyed,  printed  or  otherwise  processed)  made  wholly  or  mainly  of  jute, 

including jute twine and jute rope.]] 

1. Ins. by Act 13 of 1966, s. 37 (w.e.f. 1-4-1966). 
2. Ins. by Act 19 of 1968, s. 30 and the Third Schedule (w.e.f. 1-4-1969). 
3. Ins. by Act 14 of 1969, s. 23 (w.e.f. 1-4-1970). 

866 

                                                           
THE SIXTH SCHEDULE 

Omitted  by  the  Finance  Act,  1972  (16  of  1972),  s.  43  (w.e.f.  1-4-1973).  Originally,  the 
Schedule was inserted by the Finance Act, 1968 (19 of 1968), s. 30 and the Third Schedule (w.e.f. 
1-4-1969) and was later amended by the Finance (No. 2) Act, 1971 (32 of 1971), s. 30 (w.e.f. 1-4-
1972). 

867 

 
1[THE SEVENTH SCHEDULE 

[See section 35E] 

PART A 

_________ 

MINERALS 

1. Aluminium ores. 

2. Apatite and phosphatic ores. 

3. Beryl. 

4. Chrome ore. 

5. Coal and lignite. 

6. Columbite, Samarskite and other minerals of the "rare earths" group. 

7. Copper. 

8. Gold. 

9. Gypsum. 

10. Iron ore. 

11. Lead. 

12. Manganese ore. 

13. Molybdenum. 

14. Nickel ores. 

15. Platinum and other precious metals and their ores. 

16. Pitchblende and other uranium ores. 

17. Precious stones. 

18. Rutile. 

19. Silver. 

20. Sulphur and its ores. 

21. Tin. 

22. Tungsten ores. 

23. Uraniferousallanite, monazite and other thorium minerals. 

24. Uranium bearing tailings left over from ores after extraction of copper and gold, ilmenite and other 

titanium ores. 

25. Vanadium ores. 

26. Zinc. 

27. Zircon. 

1. Ins. by Act 42 of 1970, s. 58 (w.e.f. 1-4-1971). 

868 

                                                           
PART B 

GROUPS OF ASSOCIATED MINERALS 

1.  Apatite,  Beryl,  Cassiterite,  Columbite,  Emerald,  Felspar,  Lepidolite,  Mica,  Pitchblende,  Quartz, 

Samarskite, Scheelite, Topaz, Tantalite, Tourmaline. 

2. Iron, Manganese, Titanium, Vanadium and Nickel minerals. 

3.  Lead,  Zinc,  Copper,  Cadmium,  Arsenic,  Antimony,  Bismuth,  Cobalt,  Nickel,  Molybdenum,  and 
Uranium  minerals,  and  Gold  and  Silver,  Arsinopyrite,  Chalcopyrite,  Pyrite,  Pyphrotite  and 
Pentalandite. 

4. Chromium, Osmiridium, Platinum and Nickel minerals. 

5. Kyanite, Sillimanite, Corrundum, Dumortierite and Topaz. 

6. Gold, Silver, Tellurium, Selenium and Pyrite. 

7. Barytes, Fluorite, Chalcocite, Selenium, and minerals of Zinc, Lead and Silver. 

8. Tin and Tungsten minerals. 

9. Limestone, Dolomite and Magnesite. 

10. Ilmenite, Monazite, Zircon, Rutile, Garnet and Sillimanite. 

11. Sulphides of Copper and Iron. 

12. Coal, Fireclay and Shale. 

13. Magnetite and Apatite. 

14. Magnesite and Chromite. 

15. Talc (Soapstone and Steatite) and Dolomite. 

16. Bauxite, Laterite, Aluminous Clays, Lithomorge, Titanium, Vanadium, Gallium and Columbium 

minerals.] 

869 

 
1[THE EIGHTH SCHEDULE 

[See section 80-IA(2)(iv)(b)] 

LIST OF INDUSTRIALLY BACKWARD STATES AND UNION TERRITORIES 

(1) Arunachal Pradesh 

(2) Assam 

(3) Goa 

(4) Himachal Pradesh 

(5) Jammu and Kashmir 

(6) Manipur 

(7) Meghalaya 

(8) Mizoram 

(9) Nagaland 

(10) Sikkim 

(11) Tripura 

(12) Andaman and Nicobar Islands 

(13) Dadra and Nagar Haveli 

(14) Daman and Diu 

(15) Lakshadweep 

(16) Pondicherry.] 

________ 

[THE  NINTH  SCHEDULE].  Omitted  by  the  Taxation  Laws  (Amendment  &  Miscellaneous 
Provisions) Act, 1986 (46 of 1986), s. 31(w.e.f. 1-4-1988). Original Ninth Schedule was inserted 
by the Direct Taxes (Amendment) Act, 1974 (26 of 1974), s. 16 (w.e.f. 1-4-1975). 

[THE TENTH SCHEDULE]. Omitted by the Finance Act, 1999 (27 of 1999), s. 89 (w.e.f. 1-4-2000). 

_________ 

1.  Ins.  by  Act  38  of  1993,  s.  37  (w.e.f.  1-4-1994).  Prior  to  inseted  by  Act  26  of  1974,  s.  14  (w.e.f.  1-4-1974).  Later  on 

amended by Act 66 of 1976, s. 24 (w.e.f. 1-4-1976). And omitted by Act 46 of 1986, s. 30 (w.e.f. 1-4-1984). 

870 

 
                                                           
1[THE ELEVENTH SCHEDULE 

 2{[See section 32A, 3[section 32AB], #section 80CC(3)(a)(i), section 80-I(2), 4@[section 80J(4) and         

$section 88A(3)(a)(i)]]} 

1. Beer, wine and other alcoholic spirits. 

LIST OF ARTICLES OR THINGS 

2. Tobacco and tobacco preparations, such as, cigars and cheroots, cigarettes, biris, smoking mixtures 

for pipes and cigarettes, chewing tobacco and snuff. 

3. Cosmetics and toilet preparations. 

4. Tooth paste, dental cream, tooth powder and soap. 
5. Aerated waters in the manufacture of which blended flavouring concentrates in any form are used. 
5[Explanation.—“Blended flavouring concentrates” shall include, and shall be deemed always to have 

included, synthetic essences in any form.] 
6. Confectionery and chocolates. 
7. Gramophones, including record-players and gramophone records. 
6* 
7[9. Projectors.] 
10. Photographic apparatus and goods. 
8* 
22.  Office  machines  and  apparatus  such  as  typewriters,  calculating  machines,  cash  registering 

* 

* 

* 

* 

* 

* 

* 

* 

machines, cheque writing machines, intercom machines and teleprinters. 

Explanation.—The expression “office machines and apparatus” includes all machines and apparatus 
used  in  offices,  shops,  factories,  workshops,  educational  institutions,  railway  stations,  hotels  and 
restaurants  for  doing  office  work  9[and  for  data  processing  (not  being  computers  within  the  meaning 
of section 32AB)]. 

23. Steel furniture, whether made partly or wholly of steel. 
24. Safes, strong boxes, cash and deed boxes and strong room doors. 
25. Latex foam sponge and polyurethane foam. 
10*   
* 
27. Crown corks, or other fittings of cork, rubber, polyethylene or any other material. 
28.  Pilfer-proof  caps  for  packaging  or  other  fittings  of  cork,  rubber,  polyethylene  or  any  other 

* 

* 

* 

material. 

11*   

* 

* 

* 

*] 

1. Ins. by Act 29 of 1977, s. 28 (w.e.f. 1-4-1978). 
2. Subs. by Act 16 of 1981, s. 24, for “[See section 32A and section 80J(4)]” (w.e.f. 1-4-1981). 
#Section 80CC omitted by Act 33 of 1996, s. 22 (w.e.f. 1-4-1993). 
3. Ins. by Act 23 of 1986, s. 39 (w.e.f. 1-4-1987). 
4. Subs. by Act 12 of 1990, s. 50 for “and section 80(J)(4)” (w.e.f. 1-4-1990). 
@ Now Section 80J omitted by Act 33 of 1996, s. 29 (w.e.f. 1-4-1989). 
$Section 88A omitted by Act 33 of 1996, s. 35 (w.e.f. 1-4-1994). 
5. Ins. by Act 11 of 1987, s. 73 (w.e.f. 1-4-1988).   
6. Item 8 omitted by Act 16 of 1981, s. 24 (w.e.f. 1-4-1982). 
7. Subs. by Act 26 of 1988, s. 53, for item 9 (w.e.f. 1-4-1989). 
8. Items 11 to 21 (both inclusive) omitted by Act 16 of 1981, s. 24 (w.e.f. 1-4-1982). 
9.  Subs.  by  Act  11  of  1987,  s.  73,  for  “for  data  processing  and  for  transmission  and  reception  of  messages”  (w.e.f.  1-4-

1988). 

10. Item 26 omitted by Act 16 of 1981, s. 24 (w.e.f. 1-4-1982). 
11. Item 29 omitted by s. 24, ibid. (w.e.f. 1-4-1982). 

871 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
1[THE TWELFTH SCHEDULE 

[See section 80HHC(2)(b)(ii)] 

PROCESSED MINERALS AND ORES 

(i)  Pulverised  or  micronised—barytes,  calcite,  steatite,  pyrophylite,  wollastonite,  zircon,  bentonite, 
red or yellow oxide, red or yellow ochre, talc, quartz, feldspar, silica powder, garnet, silliminite, fireclay, 
ballclay, manganese dioxide ore. 

(ii) Processed or activated—bentonite, diatomious earth, fullers earth. 

(iii) Processed—kaoline (china clay), whiting, calcium carbonate. 

(iv)  Beneficated-chromite,  flourspar,  graphite,  vermiculite,  ilmenite,  brown  ilmenite  (lencoxene) 

rutile, monazite and other mineral concentrates. 

(v)  Mica  blocks,  mica  splittings,  mica  condenser  films,  mica  powder,  micanite,  silvered  mica, 

punched mica, mica paper, mica tapes, mica flakes. 

(vi) Exfoliated-vermiculite, calcined kyanite, magnesite, calcined magnesite, calcined alumina. 

(vii) Sized iron ore processed by mechanical screening or crushing and screening through dry process 

or mechanical crushing, screening, washing and classification through wet process. 

(viii) Iron ore concentrates processed through crushing, grinding or magnetic separation. 

(ix) Agglomerated iron ore. 

(x) Cut and polished minerals and rocks including cut and polished granite. 

Explanation.—For  the  purposes  of  this  Schedule,  “processed”,  in  relation  to  any  mineral  or  ore, 

means— 

(a)  dressing  through  mechanical  means  to  obtain  concentrates  after  removal  of  gangue  and 

unwanted deleterious substances or through other means without altering the minerological identity; 

(b) pulverisation, calcination or micronisation; 

(c) agglomeration from fines; 

(d) cutting and polishing; 

(e) washing and levigation; 

(f) benefication by mechanical crushing and screening through dry process; 

(g) sizing by crushing, screening, washing and classification through wet process; 

(h)  other  upgrading  techniques  such  as  removal  of  impurities  through  chemical  treatment, 

refining by gravity separation, bleaching, floatation or filtration.] 

1.  Ins.  by  Act  49  of  1991,  s. 71 (w.e.f.  1-4-1991).  Earlier  it  was  inserted  by  Act  14  of  1982,  s. 31  (w.e.f.  1-4-1983)  and 

omitted by Act 23 of 1986, s. 38 (w.e.f. 1-4-1987). 

872 

                                                           
1[THE THIRTEENTH SCHEDULE 
2[[See sections 80-IB(4) and 80-IC(2)]] 

LIST OF ARTICLES OR THINGS 

PART A 

FOR THE STATE OF SIKKIM 

Article or thing 

Tobacco and tobacco products (including cigarettes, cigars and gutka, etc.) 

Aerated branded beverages 

Pollution-causing paper and paper products 

FOR THE STATE OF HIMACHAL PRADESH AND THE STATE OF UTTARANCHAL 

PART B 

S. No. 

1.  

2. 

3. 

S. No. 

Activity or article or thing 

Excise classification 

Sub-class under National Industrial 
Classification (NIC), 1998 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

8. 

9. 

Tobacco  and 
tobacco  products 
including cigarettes and pan masala 

24.01 
21.06 

to  24.04  and 

1600 

Thermal  Power  Plant 
based) 

(coal/oil 

Coal washeries/dry coal processing 

Inorganic  Chemicals 
excluding 
medicinal  grade  oxygen  (2804.11), 
medicinal  grade  hydrogen  peroxide 
(2847.11), compressed air (2851.30) 

Organic  chemicals  excluding  Pro-
Hormones 
vitamins/vitamins, 
(29.39), 
(29.36), 
sugars* (29.40) 

Glycosides 

and 

dyeing 

Tanning 
extracts, 
tannins  and  their  derivatives,  dyes, 
colours, paints and varnishes; putty, 
fillers and other mastics; inks 

40102 or 40103 

 Chapter 28 

 Chapter 29 

24117 

Chapter 32 

24113 or 24114 

Marble  and  mineral  substances  not 
classified elsewhere 

Flour mills/rice mills 

Foundries using coal 

  25.04 

25.05 

 11.01 

14106 or 14107 

15311 

1. Ins. by Act 32 of 2003, s.  99 (w.e.f. 1-4-2004). 
2. Subs. by Act 23 of 2004, s. 64, for “[See section 80-IC(2)]” (w.e.f. 1-4-2005). 

873 

 
 
 
 
 
 
 
 
                                                           
S. No. 

Activity or article or thing 

Excise classification 

Sub-class under National Industrial 
Classification (NIC), 1998 

10. 

11. 

12. 

13. 

14. 

15. 

16. 

17. 

18. 

1[19. 

Minerals  fuels,  mineral  oils  and 
distillation; 
products 
bituminous 
substances:  mineral 
waxes 

their 

of 

Chapter 27 

Synthetic rubber products 

40.02 

24131 

Cement  clinkers  and  asbestos,  raw 
including fibre 

industrial 
(including 
Explosive 
explosives,  detonators  and  fuses, 
fireworks,  matches, 
propellant 
powders, etc.) 

2502.10, 2503.00 

36.01 to 36.06 

24292 

Mineral or chemical fertilizers 

31.02 to 31.05 

2412 

Insecticides,fungicides, herbicides 
and pesticides (basic manufacture 
and formulation) 

Fibre glass and articles thereof 

Manufacture  of  pulp—wood  pulp, 
mechanical  or  chemical  (including 
dissolving pulp)` 

Branded 
drinks (non-fruit based) 

aerated  water/soft 

Manufacture  of  pulp-wood  pulp, 
mechanical  or  chemical  (including 
dissolving pulp) 

Newsprint in rolls or sheets 

Writing  or  printing  paper 
printing of educational textbooks 

for 

3808.10 

24211 or 24219 

70.14 

47.01 

26102 

21011 

2201.20, 2202.20 

15541 or 15542 

4701.00 

4801.00 

4802.10 

Paper  or  paperboard, 
manufacture of which— 

in 

the 

4802.20 

(a)  the  principal  process  of  lifting 
the pulp is done by hand; and 

(b)  if  power  driven  sheet  forming 
equipment  is  used,  the  Cylinder 
Mould  VAT  does  not  exceeds  40 
inches 

to  a 
 Maplitho  paper  supplied 
Braille  press  against  an 
indent 
placed  by  the  National  Institute  for 
Visually Handicapped, Dehradun 

4802.30 

Others 

4802.90 

1. Subs. by Act 33 of 2009, s. 82, for certain entries (w.e.f. 1-4-2010). 

874 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
S. No. 

Activity or article or thing 

Excise classification 

Sub-class under National Industrial 
Classification (NIC), 1998 

Toilet or facial tissue stock, towel or 
napkin  stock and  similar paper of a 
kind  used  for  household  or  sanitary 
purposes,  cellulose  wadding  and 
webs of cellulose fibres, whether or 
not creped, crinkled embossed, per-
forated,  surfact-coloured,  surface 
decorated  or  printed,  in  rolls  of  a 
width  exceeding  36  cms.  or  in 
rectangular 
square) 
least  one  side 
sheets  with  at 
exceeding 36 cms. in unfolded state. 

(including 

Kraft  paper  supplied  to  a  Braille 
press against an indent placed by the 
National 
for  Visually 
Handicapped, 

Institute 

 Dehradun 

Kraft paper and paperboard 
used in the manufacture of 
cartons for packing of 
horticultural produce 

Others 

Other uncoated paper and paper-
board, in roll or sheets, not further 
worked or processed than as 
specified in Note 2 to this Chapter. 

Grease-proof paper 

and 
Glassine 
transparent or translucent paper 

other 

glazed 

Others 

Straw  Board,  in  the  manufacture  of 
which  sun-drying  process  has  been 
employed. 

Straw  paper  and  other  straw  board, 
whether  or  not  covered  with  paper 
other than straw paper. 

Other 

Carbon or similar copying papers 

Self-copy paper 

Others 

4803.00 

4804.10 

4804.20 

4804.90 

4805.00 

4806.10 

4806.20 

4806.90 

4807.91 

4807.92 

4807.99 

4809.10 

4809.20 

4809.90 

875 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
S. No. 

Activity or article or thing 

Excise classification 

Sub-class under National Industrial 
Classification (NIC), 1998 

Paper and paperboard of a kind used 
for writing, printing or other graphic 
purposes. 

Kraft  paper  and  paperboard  other 
than that of a kind used for writing, 
printing or other graphic purposes. 
Other paper and paperboard 

Tarred,  bituminized  or  asphalted 
paper and paperboard. 
Gummed  or  adhesive  paper  and 
paperboard 

Paper 
coated, 
and  paperboard 
impregnated or covered with plastic 
(excluding adhesives). 

Products consisting of sheets of 
paper or paperboard, impregnated, 
coated or covered with plastics 
(including thermoset resins or 
mixtures thereof or chemical 
formulations containing melamine, 
phenol, urea formaldehyde with or 
without curing agents or catalysts), 
compressed together in one or more 
operations; Products known 
commercially as decorative 
laminates. 
Others 

Paper  and  paperboard,  coated, 
impregnated  or  covered  with  wax, 
paraffin wax, stearin, oil or glycerol. 
Other 
Cigarette  paper,  whether  or  not  cut 
to size or in the form of booklets or 
tubes.] 

4810.10 

4810.20 

4810.90 

4811.10 

4811.20 

4811.31 

4811.39 

4811.40 

4811.90 
4813.00 

20. 

Plastics and articles thereof 

39.09 to 39.15] 

1[PART C 
FOR THE STATE OF JAMMU AND KASHMIR 

Article or thing 

Cigarettes/cigars of tobacco, manufactured tobacco and substitutes 

Distilled/brewed alcoholic drinks 

Aerated branded beverages and their concentrates.] 

S. No. 

1.  

2. 

3. 

1. Ins. by 23 of 2004, s. 64 (w.e.f. 1-4-2005). 

876 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
THE FOURTEENTH SCHEDULE 

[See section 80-IC(2)] 

LIST OF ARTICLES OR THINGS OR OPERATIONS 

PART A 

_______ 

FOR THE NORTH-EASTERN STATES 

  1. Fruit and Vegetable Processing industries manufacturing or producing— 

(i) Canned or bottled products; 

(ii) Aseptic packaged products; 

(iii) Frozen products; 

(iv) De-hydrated products; 

(v) Oleoresins. 

  2. Meat and Poultry Product industries manufacturing or producing— 

(i) Meat Products (buffalo, sheep, goat and pork); 

(ii) Poultry production; 

(iii) Egg Powder Plant. 

  3. Cereal Based Product industries manufacturing or producing— 

(i) Maize Milling including starch and its derivatives; 

(ii) Bread, Biscuits, Breakfast Cereal. 

  4. Food and Beverage industries manufacturing or producing— 

(i) Snacks; 

(ii) Non-alcoholic beverages; 

(iii) Confectionery including chocolate; 

(iv) Pasta products; 

(v) Processed spices, etc.; 

(vi) Processed pulses; 

(vii) Tapioca products. 

  5. Milk and milk based product industries manufacturing or producing— 

(i) Milk powder; 

(ii) Cheese; 

(iii) Butter/ghee; 

(iv) Infant food; 

(v) Weaning food; 

(vi) Malted milk food. 

  6. Food packaging industry. 

  7. Paper products industry. 

  8. Jute and mesta products industry. 

  9. Cattle or poultry or fishery feed products industry. 

10. Edible Oil processing or vanaspati industry. 

877 

11. Processing of essential oils and fragrances industry. 
12. Processing and raising of plantation crops—tea, rubber, coffee, coconuts, etc. 
13. Gas based Intermediate Products Industry manufacturing or producing— 

(i) Gas exploration and production; 
(ii) Gas distribution and bottling; 
(iii) Power generation; 
(iv) Plastics; 
(v) Yarn raw materials; 
(vi) Fertilizers; 
(vii) Methanol; 
(viii) Formaldehyde and FR resin melamine and MF resin; 
(ix) Methylamine, Hexamethylenetetramine, Ammonium bi-carbonate; 
(x) Nitric Acid and Ammonium Nitrate; 
(xi) Carbon black; 
(xii) Polymer chips. 
14. Agro forestry based industry. 
15. Horticulture industry. 
16. Mineral based industry. 
17. Floriculture industry. 
18. Agro-based industry. 

PART B 
FOR THE STATE OF SIKKIM 

Activity or article or thing or operation 

Eco-Tourism including Hotels, Resorts, Spa, Amusement Parks and Ropeways. 
Handicrafts and handlooms. 

S. No. 
1. 
2. 
3.  Wool and silk reeling, weaving and processing, printing, etc. 
4. 
5. 

Floriculture. 
Precision Engineering including watch making. 

6. 

7. 

Electronics  including  computronics  hardware  and  software  and  Information  Technology  (IT)  related 
industries. 

Food processing including Agro-based industries. Processing, preservation and packaging of fruits and 
vegetables (excluding conventional grinding/extraction units). 

8.  Medicinal and aromatic Herbs—Plantation and Processing. 

9. 

Raising and processing of plantation crops, i.e., tea, oranges and cardamom. 

10.  Mineral based industry. 

11. 

12. 

13. 

Pharma products. 

Honey. 

Biotechnology. 

878 

 
 
PART C 
FOR THE STATE OF HIMACHAL PRADESH AND THE STATE OF UTTARANCHAL 

S. 

 Activity or article or 

N
o
. 

thing or 
operation 

4/6 digit 
excise 
classificatio
n 

Sub-class under NIC 

classification on 1998 

ITC(HS) classification 4/6 

digit 

- 

- 

- 

- 

- 

- 

0603 or 060120 or 06029020 

or 06024000 

-040900 

21.03 

 15135 to 15137 and 15139 

2202.40 

 20.01 

1. 

Floriculture  

2. 

3. 

4. 

Medicinal  herbs  and 
aromatic  herbs, 
etc., processing 

 Honey 

 Horticulture 

and 

agro-based 
industries 
as 

such 

(a)  Sauces,  ketchup, 

etc. 

(b)  Fruit  juices  and 

(c) 

fruit pulp 
Jams, 

jellies, 
vegetable  juices, 
puree, 
pickles, 
etc. 

(d)  Preserved  fruits 
and vegetables 
(e)  Processing  of 
fresh  fruits  and 
vegetables 
including 
packaging 

(f) 

Processing, 

preservation, 
packaging 
mushrooms 

of 

5.  

 Food 
Processing 
Industry excluding those 
included 
the 
Thirteenth Schedule 

in 

19.01 
19.04 

to 

6.  Sugar 

and 

its  by-

- 

 - 

17019100 

products 

7.  Silk and silk products 

8.  Wool 

and 

wool 

products 

50.04 
50.05 

51.01 
51.12 

 17116 

to 

 17117 

879 

 
 
 
 
 
 
 
  
  
 
 
  
 
 
 
S. 
No. 

 Activity or article or 
thing or operation 

4/6 digit excise 
classification 

Sub-class under NIC 

classification on 1998 

ITC(HS) classification 

4/6 digit 

9.  Woven fabrics (Excisable 

- 

- 

garments) 

6101 to 6117 

9506.00 

equipment 

10.  Sports  goods  and  articles 
for 
and 
general 
physical 
exercise  and  equipment 
for 
adventure 
sports/activities,  tourism 
(to  be  specified,  by 
notification, 
the 
Central Government) 

by 

11.  Paper and paper products 
excluding  those  in  the 
Thirteenth  Schedule  (as 
per excise classification) 

 12.  Pharma products 

30.03 to 30.05 

13. 

and 

84.71 

 30006/7 

Information 
Communication 
Technology 
Computer 
Call Centres 

Industry, 
hardware, 

14.  Bottling of mineral water 

2201 

resorts, 

including 
spa, 

15.  Eco-tourism 
hotels, 
entertainment/ 
amusement  parks  and 
rope-ways 

16. 

Industrial gases (based on 
atmospheric fraction) 

17.  Handicrafts 

18.  Non-timber 

forest 

product-based 
industries.] 

- 

 55101 

880 

  
 
 
  
  
  
 
 
  
 
  
 
  
  
 
  
  
 
  
  
 
